1
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
WITH
PVC CONTAINER CORPORATION,
NOVATEC PLASTICS CORPORATION,
NOVAPAK CORPORATION,
AIROPAK CORPORATION,
MARPAC INDUSTRIES, INC.,
MARPAC SOUTHWEST, INC.
AND
PVC CONTAINER INTERNATIONAL SALES CORPORATION
(BORROWERS)
August 31, 2000
2
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated August 31, 2000
among PVC CONTAINER CORPORATION, a corporation organized under the laws of the
State of Delaware ("PVC"), NOVATEC PLASTICS CORPORATION, a corporation organized
under the laws of the State of Delaware ("Novatec"), NOVAPAK CORPORATION, a
corporation organized under the laws of the State of Delaware ("Novapak"),
AIROPAK CORPORATION, a corporation organized under the laws of the State of
Delaware ("Airopak"), MARPAC INDUSTRIES, INC., a corporation organized under the
laws of the State of New York ("MI"), MARPAC SOUTHWEST, INC., a corporation
organized under the laws of the State of Oklahoma ("MS"), and PVC CONTAINER
INTERNATIONAL SALES CORPORATION, a corporation organized under the laws of the
U.S. Virgin Islands ("PVCCISC") (PVC, Novatec, Novapak, Airopak, MI, MS and
PVCCISC, each a "Borrower" and collectively "Borrowers"), the financial
institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended June 30,
1999.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Advances" shall mean and include the Revolving Advances and Letters
of Credit, as well as the Term Loan and the Equipment Loans.
"Advance Rates" shall have the meaning set forth in Section 2.1(a)
hereof.
"Affiliate" of any Person shall mean (a) any Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such Person, or (b) any Person
1
3
who is a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 5% or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in the
preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"Borrowing Base Certificate" shall mean a certificate duly executed
by an officer of Borrowing Agent appropriately completed and in substantially
the form of Exhibit A hereto.
"Borrowers' Account" shall have the meaning set forth in Section
2.8.
"Borrowing Agent" shall mean PVC.
"Business Day" shall mean any day other than Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required by law to be
closed for business in East Brunswick, New Jersey and, if the applicable
Business Day relates to any Eurodollar Rate Loans, such day must also be a day
on which dealings are carried on in the London interbank market.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601
et seq.
"Change of Control" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in a transfer of control of
any Borrower to a Person who is not an Original Owner or (b) any merger or
consolidation of or with any Borrower or sale of all or substantially all of the
property or assets of any Borrower. For purposes of this definition, "control of
Borrower" shall mean the power, direct or indirect (x) to vote 50% or more of
the securities having ordinary voting power for the election of directors of any
Borrower or (y) to
2
4
direct or cause the direction of the management and policies of any Borrower by
contract or otherwise.
"Change of Ownership" shall mean (a) 50% or more of the common stock
of any Borrower is no longer owned or controlled by (including for the purposes
of the calculation of percentage ownership, any shares of common stock into
which any capital stock of any Borrower held by an Original Owner is convertible
or for which any such shares of the capital stock of any Borrower or of any
other Person may be exchanged and any shares of common stock issuable to an
Original Owner upon exercise of any warrants, options or similar rights which
may at the time of calculation be held by such Original Owner) a Person who is
an Original Owner or an Affiliate of an Original Owner or (b) any merger,
consolidation or sale of substantially all of the property or assets of any
Borrower.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property
taxes, custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, any Borrower or
any of its Affiliates.
"Closing Date" shall mean August 31, 2000 or such other date as may
be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Investment Property;
(f) all Real Property;
(g) all Subsidiary Stock;
3
5
(h) the Leasehold Interests;
(i) all Molds;
(j) all of each Borrower's right, title and interest in and to
(i) its respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Borrower's rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to any Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of each Borrower's contract rights,
rights of payment which have been earned under a contract right, instruments,
documents, chattel paper, warehouse receipts, deposit accounts and money; (vi)
if and when obtained by any Borrower, all real and personal property of third
parties in which such Borrower has been granted a lien or security interest as
security for the payment or enforcement of Receivables; and (vii) any other
goods, personal property or real property now owned or hereafter acquired in
which any Borrower has expressly granted a security interest or may in the
future grant a security interest to Agent hereunder, or in any amendment or
supplement hereto or thereto, or under any other agreement between Agent and any
Borrower;
(k) all of each Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by any Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f),
(g), (h), (i) or (j) of this Paragraph; and
(l) all proceeds and products of (a), (b), (c), (d), (e), (f),
(g), (h), (i), (j) and (k) in whatever form, including, but not limited to:
cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the payment of
money, chattel paper, security agreements, documents, eminent domain proceeds,
condemnation proceeds and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 16.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form
of Exhibit 16.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's business, including, without limitation, any Consents required
under all applicable federal, state or other applicable law.
4
6
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"Debt Payments" shall mean and include all cash actually expended by
Borrowers to make (a) interest payments on any Advances hereunder, plus (b)
scheduled principal payments on the Term Loan and the Equipment Loans, plus (c)
payments for all fees, commissions and charges set forth herein and with respect
to any Advances, with the exception of the closing fee defined in the Fee
Letter, plus (d) capitalized lease payments, plus (e) payments with respect to
any other Indebtedness for borrowed money.
"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Defaulting Lender" shall have the meaning set forth in Section
2.16(a) hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Rate Loan" shall mean any Advance that bears interest
based upon the Base Rate.
"Earnings Before Interest and Taxes" shall mean for any period the
sum of (i) net income (or loss) of Borrowers on a consolidated basis for such
period (excluding extraordinary gains and losses), plus (ii) all interest
expense of Borrowers on a consolidated basis for such period, plus (iii) all
charges against income of Borrowers on a consolidated basis for such period for
federal, state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses for such
period, plus (iii) amortization expenses for such period, plus non-cash deferred
management fees which are expensed during such period. Each calculation of
EBITDA for purposes of this Agreement shall exclude any
5
7
initial charge resulting from any change in the Borrower's basis of inventory
valuation from the "last-in-first-out" to the "first-in-first-out" basis of
valuation.
"Eligible Inventory" shall mean and include Inventory excluding work
in process, with respect to each Borrower valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not, in Agent's
opinion, obsolete, slow moving or unmerchantable and which Agent, in its sole
discretion, shall not deem ineligible Inventory, based on such considerations as
Agent may from time to time deem appropriate including, without limitation,
whether the Inventory is subject to a perfected, first priority security
interest in favor of Agent and whether the Inventory conforms to all standards
imposed by any governmental agency, division or department thereof which has
regulatory authority over such goods or the use or sale thereof. Eligible
Inventory shall include all Inventory in-transit for which title has passed to a
Borrower, which is insured to the full value thereof and for which Agent shall
have in its possession (a) all negotiable bills of lading properly endorsed and
(b) all non-negotiable bills of lading issued in Agent's name.
"Eligible Molds Inventory" shall mean and include Molds which are
not, in Agent's opinion, obsolete or unmerchantable and which Agent, in its sole
discretion, shall not deem ineligible Molds, based on such considerations as
Agent may from time to time deem appropriate including, without limitation,
whether the Molds are subject to a perfected, first priority security interest
in favor of Agent and whether the Molds conform to all standards imposed by any
governmental agency, division or department thereof which has regulatory
authority over such Molds or the use or sale thereof.
"Eligible Receivables" shall mean and include with respect to each
Borrower, each Receivable of such Borrower arising in the ordinary course of
such Borrower's business and which Agent, in its sole credit judgment, shall
deem to be an Eligible Receivable, based on such considerations as Agent may
from time to time deem appropriate. A Receivable shall not be deemed eligible
unless such Receivable is subject to Agent's first priority perfected security
interest and no other Lien (other than Permitted Encumbrances), and is evidenced
by an invoice or other documentary evidence satisfactory to Agent. In addition,
no Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to an Affiliate of
any Borrower or to a Person controlled by an Affiliate of any Borrower;
(b) it is due or unpaid more than ninety (90) days after the
original invoice date;
(c) fifty percent (50%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder (if this clause (c) is
violated, none of the Receivables owing from such Customer shall be Eligible
Receivables);
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
6
8
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United States
of America and Canada, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a ββββ-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper, except when the Customer has stated in
writing (a copy of which shall have been delivered to Agent) that title to the
goods has passed to the Customer and that the goods are being held by the
applicable Borrower as an accommodation to the Customer;
(h) Agent believes, in its sole reasonable judgment, that collection
of such Receivable is insecure or that such Receivable may not be paid by reason
of the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the applicable
Borrower assigns its right to payment of such Receivable to Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et
seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been shipped
to the Customer or the services giving rise to such Receivable have not been
performed by the applicable Borrower or the Receivable otherwise does not
represent a final sale;
(k) the Receivables of the Customer exceed twenty-five percent (25%)
of the aggregate Receivables of the Borrowers;
(l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, the Customer is also a creditor or supplier of a
Borrower or the Receivable is contingent in any respect or for any reason;
(m) the applicable Borrower has made any agreement with any Customer
for any deduction therefrom, except for discounts or allowances made in the
ordinary course of
7
9
business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the face value of each respective invoice related thereto;
(n) any return, rejection or repossession of the merchandise has
occurred or the rendition of services has been disputed;
(o) such Receivable is not payable to a Borrower; or
(p) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include as to each Borrower all of such
Borrower's goods (other than Inventory and Molds) whether now owned or hereafter
acquired and wherever located including, without limitation, all equipment,
machinery, apparatus, motor vehicles, fittings, furniture, furnishings,
fixtures, parts, accessories and all replacements and substitutions therefor or
accessions thereto.
"Equipment Loans" shall have the meaning set forth in Section 2.4(b)
hereof.
"Equipment Note" shall mean, collectively, the promissory notes
referred to in Section 2.4(b) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the
then current Interest Period relating thereto the interest rate per annum
determined by PNC by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest
determined by PNC in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the average of the London
interbank offered rates for U.S. Dollars quoted by the British Bankers'
Association as set forth on Dow βββββ Markets Service (formerly known as
Telrate) (or appropriate successor or, if British Banker's Association or its
successor ceases to provide such quotes, a comparable replacement determined by
PNC) display page 3750 (or such other display page on the Dow βββββ Markets
Service system as may replace display page 3750) two (2) Business Days prior to
the first day of such Interest Period for
8
10
an amount comparable to such Eurodollar Rate Loan and having a borrowing date
and a maturity comparable to such Interest Period by (ii) a number equal to 1.00
minus the Reserve Percentage. The Eurodollar Rate may also be expressed by the
following formula:
Average of London interbank offered rates quoted by BBA as
shown on Eurodollar Rate
=Dow βββββ Markets Service display page 3750 or appropriate successor
---------------------------------------------------------------------
1.00 - Reserve Percentage
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Event of Default" shall have the meaning set forth in Article X
hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three Federal funds brokers of recognized
standing selected by PNC.
"Fee Letter" shall mean the fee letter dated August 31, 2000 among
Borrowers and PNC.
"Fixed Charge Coverage Ratio" shall mean and include, with respect
to any fiscal period, the ratio of (a) EBITDA minus unfinanced capitalized
expenditures made and taxes paid in cash during such period to (b) all Debt
Payments during such period (excluding all principal payments made to Fleet Bank
during such fiscal period).
"Fleet Letters of Credit" shall mean (a) the Letter of Credit issued
by Fleet Bank in connection with the $5,500,000 original aggregate principal
amount of Economic Development Revenue Bonds (PVC Container Corporation Project)
Series 1996 issued by the South Carolina Jobs - Economic Development Authority,
and (b) the Letter of Credit issued by Fleet Bank in connection with the
$7,250,000 ββββββββ Area Industrial Development Authority Revenue Note (PVC
Container Corporation Project) Series of 1998.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include as to each Borrower all
of such Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions,
9
11
designs, patents, patent applications, equipment formulations, manufacturing
procedures, quality control procedures, trademarks, service marks, trade
secrets, goodwill, copyrights, design rights, registrations, licenses, other
intellectual property, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower to secure payment of any of
the Receivables by a Customer all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Hazardous Discharge" shall have the meaning set forth in Section
4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"IDRB Letters of Credit" shall mean the letters of credit to be
issued pursuant to Section 2.9(b) to replace the Fleet Letters of Credit.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Ineligible Security" shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
10
12
"Intellectual Property Assignment" shall mean the Assignment of
Security Interest in Intellectual Property executed by the Borrowers in favor of
Agent for its benefit and for the ratable benefit of Lenders, substantially in
the form of Exhibit 1.2 (ii) hereto, as amended, supplemented or modified from
time to time.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean and include as to each Borrower all of such
Borrower's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, leased by such Borrower as lessor or to be furnished
under any contract of service or held for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Borrower's business
or used in selling or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Investment Property" shall mean and include as to each Borrower,
all of such Borrower's now owned or hereafter acquired securities (whether
certificated or uncertificated), securities entitlements, securities accounts,
commodities contracts and commodities accounts.
"Issuer" shall mean any Person who issues a Letter of Credit and/or
accepts a draft pursuant to the terms hereof.
"Leasehold Interests" shall mean all of (a) PVC's right, title and
interest in and to the premises located at βββ ββββββββββ βββ ββββ, βββββββββ,
βββ ββββββ βββββ and (b) Aeropak's right, title and interest in and to the
premises located at β βββββ βββββ, ββββ ββββββββββ ββββββββ, ββββ, ββββββββββββ
βββββ.
"Lender" and "Lenders" shall have the meaning ascribed to such term
in the preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Letter Agreement" shall mean the letter agreement dated the date
hereof between Agent and Fleet Bank, including the Consent and Agreement of
Borrowers annexed thereto.
"Letter of Credit Fees" shall have the meaning set forth in Section
3.2.
"Letters of Credit" shall mean, collectively, the Revolving Credit
Letters of Credit and the IDRB Letters of Credit.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or
11
13
encumbrance, or preference, priority or other security agreement or preferential
arrangement held or asserted in respect of any asset of any kind or nature
whatsoever including, without limitation, any conditional sale or other title
retention agreement, any lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the condition, operations, assets, business or prospects of the applicable
Person or Persons, (b) any Borrower's ability to pay the Obligations in
accordance with the terms thereof, (c) the value of the Collateral, or Agent's
Liens on the Collateral or the priority of any such Lien or (d) the practical
realization of the benefits of Agent's and each Lender's rights and remedies
under this Agreement and the Other Documents.
"Maximum Equipment Loan Amount" shall mean $2,000,000 less
repayments of the Equipment Loans.
"Maximum Loan Amount" shall mean $43,375,000 less repayments of the
Term Loan and Equipment Loans.
"Maximum Revolving Advance Amount" shall mean $25,000,000.
"Molds" shall mean all molds owned by the Borrowers.
"Molds Advance Rate" shall have the meaning set froth in Section
2.1(a)(y)(iii) hereof.
"Monthly Advances" shall have the meaning set forth in Section 3.1
hereof.
"Mortgage" shall mean, collectively, each mortgage on a portion of
the Real Property identified as owned by any Borrower on Schedule 4.19 hereto,
securing the original principal amount set forth therein, in favor of Agent for
its benefit and for the ratable benefit of Lenders, substantially in the
respective forms contained in Exhibit 1.2(i) hereto, together with all
extensions, renewals, amendments, supplements, modifications, substitutions and
replacements thereto and thereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Net Worth" at a particular date, shall mean all amounts which would
be included under shareholders' equity on a balance sheet of the Borrowers on a
consolidated basis determined in accordance with GAAP as at such date.
"Note" shall mean, collectively, the Term Note, the Equipment Note
and the Revolving Credit Note.
12
14
"Obligations" " shall mean and include any and all loans, advances,
debts, liabilities, obligations, covenants and duties owing by Borrowers to
Lenders or Agent or to any other direct or indirect subsidiary or affiliate of
Agent or any Lender of any kind or nature, present or future (including, without
limitation, any interest accruing thereon after maturity, or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to any Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
whether or not evidenced by any note, guaranty or other instrument, whether
arising under any agreement, instrument or document, (including, without
limitation, this Agreement and the Other Documents) whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
of a letter of credit, loan, equipment lease or guarantee, under any interest or
currency swap, future, option or other interest rate protection or similar
agreement, or in any other manner, whether arising out of overdrafts or deposit
or other accounts or electronic funds transfers (whether through automated
clearing houses or otherwise) or out of the Agent's or any Lenders non-receipt
of or inability to collect funds or otherwise not being made whole in connection
with depository transfer check or other similar arrangements, whether direct or
indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, regardless of how
such indebtedness or liabilities arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument, including,
but not limited to, any and all of any Borrower's Indebtedness and/or
liabilities under this Agreement, the Other Documents or under any other
agreement between Agent or Lenders and any Borrower and any amendments,
extensions, renewals or increases and all costs and expenses of Agent and any
Lender incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including but
not limited to reasonable attorneys' fees and expenses and all obligations of
any Borrower to Agent or Lenders to perform acts or refrain from taking any
action.
"Original Owner" shall mean, with respect to each Borrower, the
owner(s) of a majority of the shares of such Borrower on the date of this
Agreement, which in the case of PVC is Kirtland Capital Partners II L.P. and
Kirtland Capital Company II LLC.
"Other Documents" shall mean the Mortgage, the Note, the
Questionnaire, the Parent Pledge Agreement, the Intellectual Property
Assignment, the Letter Agreement, and any and all other agreements, instruments
and documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, and all other writings heretofore, now or hereafter executed
by any Borrower and/or delivered to Agent or any Lender in respect of the
transactions contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
13
15
"Parent Pledge Agreement" shall mean, collectively, each Stock
Pledge Agreement executed by PVC and MI, respectively, in favor of Agent for its
benefit and for the ratable benefit of Lenders, substantially in the respective
forms contained in Exhibit 1.2(iii) hereto, as amended, supplemented or modified
from time to time.
"Participant" shall mean each Person who shall be granted the right
by any Lender to participate in any of the Advances and who shall have entered
into a participation agreement in form and substance satisfactory to such
Lender.
"Payment Office" shall mean initially βββ βββββ ββββββ βββββββββ,
ββββ βββββββββ, βββ ββββββ βββββ; thereafter, such other office of Agent, if
any, which it may designate by notice to Borrowing Agent and to each Lender to
be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for
the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing; (d) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of any Borrower's business; (f)
judgment Liens that have been stayed or bonded and mechanics', workers',
materialmen's or other like Liens arising in the ordinary course of any
Borrower's business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other property
of the Borrowers and (y) the aggregate amount of Indebtedness secured by such
Liens incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7.6; (h) other Liens incidental to the
conduct of Borrowers' business or the ownership of its property and assets which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit, and which do not in the aggregate materially detract from
Agent's or Lenders' rights in and to the Collateral or the value of Borrowers'
property or assets or which do not materially impair the use thereof in the
operation of Borrowers' business; and (i) Liens disclosed on Schedule 1.2.
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
14
16
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Borrowers or any member of
the Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"Pro Forma Balance Sheet" shall have the meaning set forth in
Section 5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section 5.5(b)
hereof.
"Purchasing Lender" shall have the meaning set forth in Section 16.3
hereof.
"Questionnaire" shall mean the Documentation Information
Questionnaire and the responses thereto provided by Borrowers and delivered to
Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of each Borrower's right, title and
interest in and to the owned and leased premises identified on Schedule 4.19
hereto.
"Receivables" shall mean and include, as to each Borrower, all of
such Borrower's accounts, contract rights, instruments (including those
evidencing indebtedness owed to Borrowers by their Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and acceptances,
and all other forms of obligations owing to such Borrower arising out of or in
connection with the sale or lease of Inventory or the rendition of services, all
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least sixty-six and
two-thirds percent (66-2/3%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding sixty-six and two-thirds percent
(66-2/3%) of the Commitment Percentages.
15
17
"Reserve Percentage" shall mean the maximum effective percentage in
effect on any day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including,
without limitation, supplemental, marginal and emergency reserve requirements)
with respect to eurocurrency funding.
"Revolving Advances" shall mean Advances made other than Letters of
Credit, the Term Loan and Equipment Loans.
"Revolving Credit Letters of Credit" shall mean the letters of
credit to be issued pursuant to Section 2.9(a) hereof, which shall exclude the
IDRB Letters of Credit.
"Revolving Credit Note" shall mean , collectively, the promissory
note[s] referred to in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per annum
equal to (a) the Base Rate with respect to Domestic Rate Loans, and (b) the sum
of the Eurodollar Rate plus two and one-quarter (2.25%) percent with respect to
Eurodollar Rate Loans. On the date the audited financial statements of Borrowers
for the fiscal year ended June 30, 2001 are due pursuant to Section 9.7 hereof,
and thereafter on each date quarterly financial statements of Borrowers are due
pursuant to Section 9.8 hereof, the foregoing margin of two and one-quarter
percent (2.25%) shall be adjusted for each Eurodollar Rate Loan, based on the
Fixed Charge Coverage Ratio for the four fiscal quarters ending on the last date
covered by such financial statements, to be the following applicable margin
percentage:
---------------------------------------------------------------------------------
IF FIXED CHARGE COVERAGE RATIO IS: APPLICABLE PERCENTAGE MARGIN IS:
---------------------------------- --------------------------------
Equal to or Less than 1.50:1.00 2.25%
Greater than 1.50:1.00 but less than 2.00%
or equal to 1.90:1.00
Greater than 1.90:1.00 1.75%
---------------------------------------------------------------------------------
"Section 20 Subsidiary" shall mean the Subsidiary of the bank
holding company controlling PNC, which Subsidiary has been granted authority by
the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
"Settlement Date" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"Subsidiary" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean all of the issued and outstanding
shares of stock of
16
18
Novatek, Novapak, Airopak, MI and PVCCISC, owned by PVC, and all of the issued
and outstanding shares of stock of MS owned by MI.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean the Advances made pursuant to Section 2.4(a)
hereof.
"Term Loan Rate" shall mean an interest rate per annum equal to (a)
Base Rate with respect to Domestic Rate Loans, and (b) the sum of the Eurodollar
Rate plus two and three-quarters percent (2.75%) percent with respect to
Eurodollar Rate Loans. On the date the audited financial statements of Borrowers
for the fiscal year ended June 30, 2001 are due pursuant to Section 9.7 hereof,
and thereafter on each date quarterly financial statements of Borrowers are due
pursuant to Section 9.8 hereof, the foregoing margin of two and three-quarters
percent (2.75%) shall be adjusted for each Eurodollar Rate Loan, based on the
Fixed Charge Coverage Ratio for the four fiscal quarters ending on the last date
covered by such financial statements, to be the following applicable margin
percentage:
---------------------------------------------------------------------------------
IF FIXED CHARGE COVERAGE RATIO IS: APPLICABLE PERCENTAGE MARGIN IS:
---------------------------------- --------------------------------
Equal to or Less than 1.50:1.00 2.75%
Greater than 1.50:1.00 but less than 2.50%
or equal to 1.90:1.00
Greater than 1.90:1.00 2.25%
---------------------------------------------------------------------------------
"Term Note" shall mean , collectively, the promissory notes
described in Section 2.4(a) hereof.
"Termination Event" shall mean (i) a Reportable Event with respect
to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any
member of the Controlled Group from a Plan or Multiemployer Plan during a plan
year in which such entity was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan
in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Plan or Multiemployer
Plan; (v) any event or condition (a) which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or Multiemployer Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of any Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. Sections 2601 et
seq., applicable state law, or any other applicable Federal or state laws now in
force or hereafter enacted relating to toxic substances. "Toxic Substance"
includes but is not
17
19
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Transactions" shall have the meaning set forth in Section 5.5
hereof.
"Transferee" shall have the meaning set forth in Section 16.3(b)
hereof.
"Undrawn Availability" at a particular date shall mean an amount
equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Revolving
Advances plus (ii) all amounts due and owing to Borrowers' trade creditors which
are outstanding beyond sixty (60) days from due date, plus (iii) fees and
expenses for which Borrowers are liable but which have not been paid or charged
to Borrowers' Account.
"Week" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New York shall have the
meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and conditions set forth
in this Agreement including, without limitation, Section 2.1(b), each Lender,
severally and not jointly, will make Revolving Advances to Borrowers in
aggregate amounts outstanding at any time equal to such Lender's Commitment
Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the
aggregate amount of outstanding Revolving Credit Letters of Credit or (y) an
amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(c) hereof ("Receivables Advance Rate") of Eligible
Receivables, plus
(ii) up to the lesser of (A) 65%, of the value of the
Eligible Inventory, subject to the provisions of Section
2.1(c) hereof ("Inventory Advance Rate") or (B) $10,000,000 in
the aggregate at any one time, plus
18
20
(iii) up to the lesser of (A) 60% of the appraised
orderly liquidated value of Eligible Molds Inventory, subject
to the provisions of Section 2.1(c) hereof ("Molds Advance
Rate", and the Receivables Advance Rate, the Inventory Advance
Rate and the Molds Advance Rate shall be referred to,
collectively, as the "Advance Rates") or (B) $1,000,000 in the
aggregate at any one time, minus
(iv) such reserves as Agent may reasonably deem proper
and necessary from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1 (a)(y)(iv) at any time and from time to time shall
be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by one or more secured promissory notes (collectively, the "Revolving
Credit Note") substantially in the form attached hereto as Exhibit 2.1(a).
(b) Individual Revolving Advances. Each Lender, severally and not
jointly, will make Revolving Advances to each Borrower in aggregate amounts
outstanding at any time not greater than such Lender's Commitment Percentage of
the lesser of (x) the Maximum Revolving Advance Amount less the aggregate amount
of outstanding Revolving Credit Letters of Credit or (y) the Formula Amount less
the aggregate amount of outstanding Revolving Credit Letters of Credit.
(c) Discretionary Rights. Subject to the provisions of Section 16.2
hereof, the Advance Rates may be increased or decreased by Agent at any time and
from time to time in the exercise of its reasonable discretion due to any
appraisal of assets or market effect on the value of assets, including, without
limitation, any adjustment made to the Inventory Advance Rate, based on any
Inventory appraisal, so that Revolving Advances with respect to Eligible
Inventory will not exceed 85% of the appraised net recovery value of Eligible
Inventory. Each Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing the reserves may
limit or restrict Advances requested by Borrowing Agent. Agent shall give
Borrowing Agent five (5) days prior written notice of its intention to decrease
the Advance Rates.
2.2. Procedure for Borrowing Advances.
(a) Borrowing Agent on behalf of any Borrower may notify Agent prior
to 11:00 a.m. on a Business Day of a Borrower's request to incur, on that day, a
Revolving Advance hereunder. Subject to the satisfaction of the conditions set
forth in Section 8.3 hereof, in the event any Borrower desires an Equipment
Loan, Borrowing Agent shall give Agent at least three (3) Business Days' prior
written notice. Should any amount required to be paid as interest
19
21
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or Lenders, or with respect to any other Obligation, become
due, same shall be deemed a request for a Revolving Advance as of the date such
payment is due, in the amount required to pay in full such interest, fee, charge
or Obligation under this Agreement or any other agreement with Agent or Lenders,
and such request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event any
Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall give
Agent at least three (3) Business Days' prior written notice, specifying (i) the
date of the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be in a minimum amount of $500,000 and in integral multiples of
$100,000 thereafter, and (iii) the duration of the first Interest Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for one, two or
three months; provided, if an Interest Period would end on a day that is not a
Business Day, it shall end on the next succeeding Business Day unless such day
falls in the next succeeding calendar month in which case the Interest Period
shall end on the next preceding Business Day. No Eurodollar Rate Loan shall be
made available to Borrower during the continuance of a Default or an Event of
Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrowing Agent may elect as set forth in subsection (b)(iii) above provided
that the exact length of each Interest Period shall be determined in accordance
with the practice of the interbank market for offshore Dollar deposits and no
Interest Period shall end after the last day of the Term.
Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrowing Agent shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrowing Agent,
Borrowers shall be deemed to have elected to convert to a Domestic Rate Loan
subject to Section 2.2(d) hereinbelow.
(d) Provided that no Event of Default shall have occurred and be
continuing, any Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar Rate Loan. If
a Borrower desires to convert a loan, Borrowing Agent shall give Agent not less
than three (3) Business Days' prior written notice to convert from a Domestic
Rate Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written
notice to convert from a Eurodollar Rate Loan to a Domestic Rate Loan,
specifying the date of such conversion, the loans to be converted and if the
conversion is from a Domestic Rate Loan to any other type of loan, the duration
of the first
20
22
Interest Period therefor. After giving effect to each such conversion, there
shall not be outstanding more than five (5) Eurodollar Rate Loans, in the
aggregate.
(e) At its option and upon three (3) Business Days' prior written
notice, any Borrower may prepay the Eurodollar Rate Loans in whole at any time
or in part from time to time, without premium or penalty, but with accrued
interest on the principal being prepaid to the date of such repayment. Such
Borrower shall specify the date of prepayment of Advances which are Eurodollar
Rate Loans and the amount of such prepayment. In the event that any prepayment
of a Eurodollar Rate Loan is required or permitted on a date other than the last
Business Day of the then current Interest Period with respect thereto, such
Borrower shall indemnify Agent and Lenders therefor in accordance with Section
2.2(f) hereof.
(f) Each Borrower shall indemnify Agent and Lenders and hold Agent
and Lenders harmless from and against any and all losses or expenses that Agent
and Lenders may sustain or incur as a consequence of any prepayment, conversion
of or any default by any Borrower in the payment of the principal of or interest
on any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing
of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given, including, but not limited to, any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrowing Agent shall be conclusive absent manifest error.
(g) 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 Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans to make or maintain its
Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans
hereunder shall forthwith be cancelled and Borrowers shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Agent,
either pay all such affected Eurodollar Rate Loans or convert such affected
Eurodollar Rate Loans into loans of another type. If any such payment or
conversion of any Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall
pay Agent, upon Agent's request, such amount or amounts as may be necessary to
compensate Lenders for any loss or expense sustained or incurred by Lenders in
respect of such Eurodollar Rate Loan as a result of such payment or conversion,
including (but not limited to) any interest or other amounts payable by Lenders
to lenders of funds obtained by Lenders in order to make or maintain such
Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall
be conclusive absent manifest error.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers'
21
23
Account on Agent's books. During the Term, Borrowers may use the Revolving
Advances by borrowing, prepaying and reborrowing, all in accordance with the
terms and conditions hereof. The proceeds of each Revolving Advance requested by
Borrowers or deemed to have been requested by Borrowers under Section 2.2(a)
hereof shall, with respect to requested Revolving Advances to the extent Lenders
make such Revolving Advances, be made available to the applicable Borrower on
the day so requested by way of credit to such Borrower's operating account at
PNC, or such other bank as Borrowing Agent may designate following notification
to Agent, in immediately available federal funds or other immediately available
funds or, with respect to Revolving Advances deemed to have been requested by
any Borrower, be disbursed to Agent to be applied to the outstanding Obligations
giving rise to such deemed request.
2.4. (a) Term Loan. Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will make a Term Loan to Borrowers in
the sum equal to such Lender's Commitment Percentage of $12,183,000. The Term
Loan shall (i) be advanced on the Closing Date, (ii) with respect to principal
be payable in fifty nine (59) consecutive monthly installments of one hundred
forty five thousand thirty six dollars ($145,036) each, and a final payment on
the last day of the Term of the entire unpaid principal balance thereof, subject
to acceleration upon the occurrence of an Event of Default under this Agreement
or termination of this Agreement and (iii) shall be evidenced by one or more
secured promissory notes (collectively, the "Term Note") in substantially the
form attached hereto as Exhibit 2.4(a). Each payment of principal with respect
to the Term Loan shall be made on the first Business Day of each month
commencing October 1, 2000. Once repaid, the Term Loan may not be reborrowed.
(b) Equipment Loans. (i) Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, shall, from time to time,
make available Advances to Borrowers (each, an "Equipment Loan" and
collectively, the "Equipment Loans") at any time during the period ending on the
first anniversary of the date of this Agreement (the "Borrowing Period") to
finance Borrowers' purchase of Equipment for use in Borrowers' business. All
such Equipment Loans shall be in such amounts as are requested by Borrowing
Agent, but in no event shall any Equipment Loan exceed eighty percent (80%) of
the net invoice cost (excluding taxes, shipping, delivery, handling,
installation, overhead and other so called "soft" costs) of the Equipment then
to be purchased by Borrowers and the total amount of all Equipment Loans
outstanding hereunder shall not exceed, in the aggregate, the sum of two million
dollars ($2,000,000). Once repaid Equipment Loans may not be reborrowed.
(ii) Advances constituting Equipment Loans shall be
accumulated during the Borrowing Period. At the end of the Borrowing Period, the
sum of all Equipment Loans made during the Borrowing Period shall amortize on
the basis of a six (6) year schedule (such amount as determined with respect to
the Borrowing Period, the "Amortization Amount"). The Equipment Loans shall be,
with respect to principal, payable in equal monthly installments based upon the
amortization schedule set forth above, commencing on October 1, 2001 and on the
first day of each month thereafter with the balance payable upon the expiration
of the Term, subject to acceleration upon the occurrence of an Event of Default
under this Agreement or termination of this Agreement, and shall be evidenced by
one or more secured promissory notes
22
24
(collectively, the "Equipment Note"), executed by Borrowers in substantially the
form annexed hereto as Exhibit 2.4(b).
2.5. Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Amount or (b) the Formula Amount.
2.6. Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on the
last day of the Term subject to earlier prepayment as herein provided. The Term
Loan shall be due and payable as provided in Section 2.4(a) hereof and in the
Term Note. The Equipment Loans shall be due and payable as provided in Section
2.4(b) and in the Equipment Note.
(b) Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrowers' Account as
of the Business Day on which Agent receives those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied by Agent on account of the Obligations one
(1) Business Day after the Business Day Agent receives such payments via wire
transfer or electronic depository check. Agent is not, however, required to
credit Borrowers' Account for the amount of any item of payment which is
unsatisfactory to Agent and Agent may charge Borrowers' Account for the amount
of any item of payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers'
Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.8. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and
23
25
amount of any Advance shall not adversely affect Agent or any Lender. Each
month, Agent shall send to Borrowing Agent a statement showing the accounting
for the Advances made, payments made or credited in respect thereof, and other
transactions between Agent and Borrowers, during such month. The monthly
statements shall be deemed correct and binding upon Borrowers in the absence of
manifest error and shall constitute an account stated between Lenders and
Borrowers unless Agent receives a written statement of Borrowers' specific
exceptions thereto within thirty (30) days after such statement is received by
Borrowing Agent. The records of Agent with respect to the loan account shall be
conclusive evidence absent manifest error of the amounts of Advances and other
charges thereto and of payments applicable thereto.
2.9. Letters of Credit. (a) Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of Revolving Credit Letters of Credit on
behalf of any Borrower; provided, however, that Agent will not be required to
issue or cause to be issued any Revolving Credit Letters of Credit to the extent
that the face amount of such Revolving Credit Letters of Credit would then cause
the sum of (i) the outstanding Revolving Advances plus (ii) outstanding
Revolving Credit Letters of Credit to exceed the lesser of (x) the Maximum
Revolving Advance Amount or (y) the Formula Amount. The maximum amount of
outstanding Revolving Credit Letters of Credit shall not exceed $5,000,000 in
the aggregate at any time. All disbursements or payments related to Revolving
Credit Letters of Credit shall be deemed to be Domestic Rate Loans consisting of
Revolving Advances and shall bear interest at the Revolving Interest Rate for
Domestic Rate Loans; Revolving Credit Letters of Credit that have not been drawn
upon shall not bear interest.
(b) Subject to the terms and conditions hereof, Agent shall issue or cause
the issuance of the IDRB Letters of Credit on behalf of the applicable Borrower
to replace the Fleet Letters of Credit, provided, however, that Agent will not
be required to issue or cause to be issued any IDRB Letters of Credit to the
extent that the aggregate face amount of such IDRB Letters of Credit would
exceed $4,192,000; and provided, further, however, such replacement of the Fleet
Letters of Credit shall be subject to and in compliance with the underlying bond
and other documentation related to the Fleet Letters of Credit. All
disbursements or payments related to IDRB Letters of Credit shall and all
payments by Agent to Fleet Bank pursuant to the Letter Agreement bear interest
at the Term Loan Rate for Domestic Rate Loans; IDRB Letters of Credit that have
not been drawn shall not bear interest.
2.10. Issuance of Letters of Credit.
(a) Borrowing Agent, on behalf of Borrowers, may request Agent to
issue or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, Agent's form of Letter of Credit Application (the "Letter of
Credit Application") completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrowing Agent, on behalf of Borrowers, also has the right to give
instructions and make agreements with respect to any application, any applicable
letter of credit and security agreement, any applicable letter of credit
reimbursement agreement and/or any other applicable agreement, any letter of
credit and the disposition of documents, disposition
24
26
of any unutilized funds, and to agree with Agent upon any amendment, extension
or renewal of any Letter of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts or acceptances of usance drafts when presented for
honor thereunder in accordance with the terms thereof and when accompanied by
the documents described therein, (ii) in the case of Revolving Credit Letters of
Credit, have an expiry date not later than six (6) months after such Letter of
Credit's date of issuance and in no event later than the last day of the Term,
and (iii) in the case of IDRB Letters of Credit, have an expiry date in no event
later than the last day of the Term. Each Letter of Credit shall be subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, and any amendments or
revision thereof adhered to by the Issuer and, to the extent not inconsistent
therewith, the laws of the State of New Jersey.
(c) Agent shall use its reasonable efforts to notify Lenders of the
request by Borrowing Agent for a Letter of Credit hereunder.
2.11. Requirements For Issuance of Letters of Credit .
(a) In connection with the Letter Agreement and the issuance of any
Letter of Credit Borrowers shall indemnify, save and hold Agent, each Lender and
each Issuer harmless from any loss, cost, expense or liability, including,
without limitation, payments made by Agent, any Lender or any Issuer and
expenses and reasonable attorneys' fees incurred by Agent, any Lender or Issuer
arising out of, or in connection with, the Letter Agreement or any Letter of
Credit to be issued or created for any Borrower. Borrowers shall be bound by
Agent's or any Issuer's regulations and good faith interpretations of any Letter
of Credit issued or created for Borrowers' Account, although this interpretation
may be different from its own; and, neither Agent, nor any Lender, nor any
Issuer nor any of their correspondents shall be liable for any error,
negligence, or mistakes, whether of omission or commission, in following
Borrowing Agent's or any Borrower's instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit, except for Agent's, any Lender's, any
Issuer's or such correspondents' willful misconduct.
(b) Borrowing Agent shall authorize and direct any Issuer to name
the applicable Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrowing Agent
shall authorize and direct the Issuer to deliver to Agent all instruments,
documents, and other writings and property received by the Issuer pursuant to
the Letter of Credit and to accept and rely upon Agent's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit, the application therefor or any acceptance therefor.
(c) In connection with all Letters of Credit issued or caused to be
issued by Agent under this Agreement, each Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority (i) to sign and/or
endorse such Borrower's name upon any warehouse or other receipts, letter of
credit applications and acceptances; (ii) to sign such
25
27
Borrower's name on bills of lading; (iii) to clear Inventory through the United
States of America Customs Department ("Customs") in the name of such Borrower or
Agent or Agent's designee, and to sign and deliver to Customs officials powers
of attorney in the name of such Borrower for such purpose; and (iv) to complete
in such Borrower's name or Agent's, or in the name of Agent's designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent nor its attorneys
will be liable for any acts or omissions nor for any error of judgment or
mistakes of fact or law, except for Agent's or its attorney's willful
misconduct. This power, being coupled with an interest, is irrevocable as long
as any Letters of Credit remain outstanding.
(d) Each Lender shall to the extent of the percentage amount equal
to the product of such Lender's Commitment Percentage times the aggregate amount
of all unreimbursed reimbursement obligations arising from disbursements made or
obligations incurred with respect to the Letter Agreement and the Letters of
Credit be deemed to have irrevocably purchased an undivided participation in
each such unreimbursed reimbursement obligation. In the event that at the time a
disbursement is made (i) with respect to a Revolving Credit Letter of Credit the
unpaid balance of Revolving Advances exceeds or would exceed, with the making of
such disbursement, the lesser of the Maximum Revolving Advance Amount or the
Formula Amount or (ii) with respect the Letter Agreement and to an IDRB Letter
of Credit, and in the case of either of the foregoing clause (i) or (ii) such
disbursement is not reimbursed by Borrowers within two (2) Business Days, Agent
shall promptly notify each Lender and upon Agent's demand each Lender shall pay
to Agent such Lender's proportionate share of such unreimbursed disbursement
together with such Lender's proportionate share of Agent's unreimbursed costs
and expenses relating to such unreimbursed disbursement. Upon receipt by Agent
of a repayment from any Borrower of any amount disbursed by Agent for which
Agent had already been reimbursed by Lenders, Agent shall deliver to each Lender
that Lender's pro rata share of such repayment. Each Lender's participation
commitment shall continue until the last to occur of any of the following
events: (A) Agent ceases to be obligated to issue or cause to be issued Letters
of Credit hereunder; (B) no Letter of Credit issued hereunder remains
outstanding and uncancelled; (C) the Letter Agreement shall have expired or been
terminated; or (D) all Persons (other than the applicable Borrower) have been
fully reimbursed for all payments made under or relating to the Letter Agreement
and the Letters of Credit.
2.12. Additional Payments. Any sums expended by Agent or any Lender due to
any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' Account as a Revolving Advance and added to the
Obligations.
2.13. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders. The Term Loan shall be
advanced according to the Commitment Percentages of Lenders. Each borrowing of
Equipment Loans shall be advanced according to the applicable Commitment
Percentages of Lenders.
26
28
(b) Each payment (including each prepayment) by Borrowers on account
of the principal of and interest on the Revolving Advances, shall be applied to
the Revolving Advances pro rata according to the applicable Commitment
Percentages of Lenders. Each payment (including each prepayment) by Borrowers on
account of the principal of and interest on the Term Note, shall be made from or
to, or applied to that portion of the Term Loan evidenced by the Term Note pro
rata according to the Commitment Percentages of Lenders. Each payment (including
each prepayment) by Borrower on account of the principal of and interest on the
Equipment Note, shall be applied to that portion of the Equipment Loan evidenced
by the Equipment Note pro rata according to the Commitment Percentages of
Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by any Borrower on account of principal, interest and
fees shall be made without set off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.13(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent.
On or before 1:00 P.M., New York time, on each Settlement Date commencing with
the first Settlement Date following the Closing Date, Agent and Lenders shall
make certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds in an amount
equal to its applicable Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage of the difference between (y) such repayments and (z) such
Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Contract Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted Lender") shall at
any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefitted
Lender shall purchase for cash
27
29
from the other Lenders a participation in such portion of each such other
Lender's Advances, or shall provide such other Lender with the benefits of any
such Collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such Collateral or
proceeds ratably with each of the other Lenders; provided, however, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such benefitted Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery, but without interest.
Each Lender so purchasing a portion of another Lender's Advances may exercise
all rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
(e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrowers a corresponding amount. Agent
will promptly notify Borrowers of its receipt of any such notice from a Lender.
If such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times (iii)
the number of days from and including such Settlement Date to the date on which
such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this paragraph
(e) shall be conclusive, in the absence of manifest error. If such amount is not
in fact made available to Agent by such Lender within three (3) Business Days
after such Settlement Date, Agent shall be entitled to recover such an amount,
with interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrowers; provided, however, that Agent's
right to such recovery shall not prejudice or otherwise adversely affect
Borrowers' rights (if any) against such Lender.
2.14. Mandatory Prepayments. Subject to Section 4.3 hereof, when any
Borrower sells or otherwise disposes of any Collateral other than Inventory in
the ordinary course of business, Borrowers shall repay the Advances in an amount
equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable
costs of such sales or other dispositions), such repayments to be made promptly
but in no event more than one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be implied consent to any such
sale otherwise prohibited by the terms and conditions hereof. Such repayments up
to the first $250,000 in net proceeds in any one calendar year shall be applied
to the outstanding Revolving Advances, subject to the Borrower's ability to
reborrow Revolving Advances in accordance with the terms hereof. Such repayments
of net proceeds in excess of the first $250,000 in any one calendar year shall
be applied (i) if the Collateral disposed of is Equipment the purchase of which
was financed by an Equipment Loan, (x) first, to the outstanding principal
installments of the Equipment Loans in the inverse order of the maturities
thereof, (y) second, to the outstanding principal installments of the Term Loan
in the inverse order of the maturities thereof and (z) third, to the remaining
28
30
Advances in such order as Agent may determine, subject to Borrower's ability to
reborrow Revolving Advances in accordance with the terms hereof, or (ii) if the
Collateral disposed of is Equipment other than as set forth in (i) above, (x)
first, to the outstanding principal installments of the Term Loan in the inverse
order of the maturities thereof, (y) second, to the outstanding principal
installments of the Equipment Loans in the inverse order of the maturities
thereof and (z) third, to the remaining Advances in such order as Agent may
determine, subject to Borrower's ability to reborrow Revolving Advances in
accordance with the terms hereof, or (iii) if the Collateral disposed of is the
Real Property located in Ardmore, Oklahoma or the two houses in Kingston, New
York, (x) first to the outstanding Revolving Advances, subject to Borrower's
ability to reborrow Revolving Advances in accordance with the terms hereof and
(y) second, to the remaining Advances in such order as Agent may determine, or
(iv) if the Collateral disposed of is any other Real Property subject to a
Mortgage, (x) first, to the outstanding principal installments of the Term Loan
in the inverse order of the maturities thereof and (y) second, to the remaining
Advances in such order as Agent may determine, subject to Borrower's ability to
reborrow Revolving Advances in accordance with the terms hereof.
2.15. Use of Proceeds. Borrowers shall apply the proceeds of Advances to
(i) repay existing indebtedness owed to Fleet Bank, (ii) finance the purchase of
Equipment, (iii) pay fees and expenses relating to this transaction, and (iv) to
provide for their working capital needs.
2.16. Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein, in
the event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrowing Agent that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.16 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions
to Agent or to approve, disapprove, consent to or vote on any matters relating
to this Agreement and the
29
31
Other Documents. All amendments, waivers and other modifications of this
Agreement and the Other Documents may be made without regard to a Defaulting
Lender and, for purposes of the definition of "Required Lenders", a Defaulting
Lender shall be deemed not to be a Lender and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.16, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.16 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears on the
first day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period. Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month (the "Monthly Advances") at a rate per annum equal to (i) with respect
to Revolving Advances, the applicable Revolving Interest Rate and (ii) with
respect to the Term Loan and Equipment Loans, the applicable Term Loan Rate (as
applicable, the "Contract Rate"). Whenever, subsequent to the date of this
Agreement, the Base Rate is increased or decreased, the applicable Contract Rate
for Domestic Rate Loans shall be similarly changed without notice or demand of
any kind by an amount equal to the amount of such change in the Base Rate during
the time such change or changes remain in effect. The Eurodollar Rate shall be
adjusted with respect to Eurodollar Rate Loans without notice or demand of any
kind on the effective date of any change in the Reserve Percentage as of such
effective date. Upon and after the occurrence of an Event of Default, and during
the continuation thereof, (i) the Obligations other than Eurodollar Rate Loans
shall bear interest at the applicable Contract Rate for Domestic Loans plus two
percent (2%) per annum and (ii) Eurodollar Rate Loans shall bear interest at the
Revolving Interest Rate for Eurodollar Rate Loans plus two percent (2%) per
annum (as applicable, the "Default Rate").
3.2. Letter of Credit Fees.
Borrowers shall pay (x) to Agent, for the benefit of Lenders, fees
for each Letter of Credit and for the Letter Agreement for the period from and
excluding the date of issuance of same to and including the date of expiration
or termination, equal to the average daily face amount of each outstanding
Letter of Credit, and each outstanding Fleet Letter of Credit which is covered
by the Letter Agreement, multiplied by two percent (2%) per annum (reduced by
27.5 basis points per annum in the case of each such Fleet Letter of Credit,
until the earlier of
30
32
replacement of such Fleet Letter of Credit or the ninety-first (91st) day after
the Closing Date), such fees to be calculated on the basis of a 360-day year for
the actual number of days elapsed and to be payable monthly in arrears on the
first day of each month and on the last day of the Term and (y) to the Issuer,
(i) fees for each Letter of Credit issued by such Issuer and for the Letter
Agreement for the period from and excluding the date of issuance of same to and
including the date of expiration or termination, equal to the average daily face
amount of each outstanding Letter of Credit, and each outstanding Fleet Letter
of Credit which is covered by the Letter Agreement, multiplied by one-quarter of
one percent (0.25 %) per annum, such fees to be calculated on the basis of a
360-day year for the actual number of days elapsed and to be payable monthly in
arrears on the first day of each month and on the expiry date of such Letter of
Credit or Letter Agreement and (ii) any and all other fees and expenses as
agreed upon by the Issuer and the Borrowing Agent in connection with any Letter
of Credit, including, without limitation, in connection with the opening,
amendment or renewal of any such Letter of Credit and any acceptances created
thereunder and shall reimburse Agent for any and all fees and expenses, if any,
paid by Agent to the Issuer (all of the foregoing fees, the "Letter of Credit
Fees"). All such charges shall be deemed earned in full on the date when the
same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason. Any such charge
in effect at the time of a particular transaction shall be the charge for that
transaction, notwithstanding any subsequent change in the Issuer's prevailing
charges for that type of transaction. All Letter of Credit Fees payable
hereunder shall be deemed earned in full on the date when the same are due and
payable hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
3.3. Facility Fee. If, for any month during the Term, the average daily
unpaid balance of the Revolving Advances for each day of such month does not
equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent
for the ratable benefit of Lenders a fee at a rate equal to one-quarter of one
percent (0.25%) per annum on the amount by which the Maximum Revolving Advance
Amount exceeds such average daily unpaid balance. Such fee shall be payable to
Agent in arrears on the last day of each month.
3.4. Computation of Interest and Fees. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Contract Rate for Domestic Rate Loans during such extension.
3.5. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
31
33
3.6. Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.6, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement or any Other Document or change the basis of
taxation of payments to Agent or any Lender of principal, fees, interest or any
other amount payable hereunder or under any Other Documents (except for changes
in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, 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
Agent or any Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be , provided that the
foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowers, and such certification shall be
conclusive absent manifest error.
3.7. Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate applicable for any Interest Period; or
(b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan;
32
34
then Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify
Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior
to the proposed conversion, shall be maintained as an unaffected type of
Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans
shall be converted into a Domestic Rate Loan, or, if Borrowing Agent shall
notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business
Days prior to the last Business Day of the then current Interest Period
applicable to such affected Eurodollar Rate Loan, shall be converted into an
unaffected type of Eurodollar Rate Loan, on the last Business Day of the then
current Interest Period for such affected Eurodollar Rate Loans. Until such
notice has been withdrawn, Lenders shall have no obligation to make an affected
type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate
Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
3.8. Capital Adequacy.
(a) In the event that Agent or any Lender shall have determined that
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.8, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar Rate Loans with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent or any Lender's capital as a consequence of its
obligations hereunder to a level below that which Agent or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender may use
any reasonable averaging or attribution methods. The protection of this Section
3.8 shall be available to Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
(b) A certificate of Agent or such Lender setting forth such amount
or amounts as shall be necessary to compensate Agent or such Lender with respect
to Section 3.8(a) hereof when delivered to Borrowers shall be conclusive absent
manifest error.
33
35
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Each Borrower shall ββββ its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Each Borrower shall take all action
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of Uniform Commercial Code as adopted in the State of New York.
All charges, expenses and fees Agent may incur in doing any of the foregoing,
and any local taxes relating thereto, shall be charged to Borrowers' Account as
a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at
Agent's option, shall be paid to Agent for the ratable benefit of Lenders
immediately upon demand.
4.3. Disposition of Collateral. Each Borrower will safeguard and protect
all Collateral for Agent's general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
ordinary course of business and (b) the disposition or transfer of obsolete and
worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $250,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Agent's first priority security
interest or (ii) the proceeds of which are remitted to Agent to be applied
pursuant to Section 2.14.
4.4. Preservation of Collateral. Following the occurrence of a Default or
Event of Default in addition to the rights and remedies set forth in Section
11.1 hereof, Agent: (a) may at any time take such steps as Agent deems necessary
to protect Agent's interest in and to preserve the Collateral, including the
hiring of such security guards or the placing of other security
34
36
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of any Borrower's premises a custodian who shall have full authority to
do all acts necessary to protect Agent's interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any Borrower's owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral; and (e)
shall have, and is hereby granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and through any of
Borrower's owned or leased property. Each Borrower shall cooperate fully with
all of Agent's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent's expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrowers' Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at the time
the Collateral becomes subject to Agent's security interest: (a) each Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Agent (except that the Mortgages on the premises in
Paris, Illinois and Walterboro, South Carolina shall be a second priority Lien
thereon and the Mortgage on the premises in Hazelton, Pennsylvania shall be a
second priority Lien thereon); and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by each Borrower or delivered to Agent or
any Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of each Borrower that appear on
such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (d) each Borrower's Equipment and Inventory shall
be located as set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent except with respect to
the sale of Inventory in the ordinary course of business and Equipment to the
extent permitted in Section 4.3 hereof.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations, Agent shall have the right to take possession of
the indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this right to take
possession of the Collateral, Borrowers shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law. Each
Borrower shall, and Agent may, at its option,
35
37
instruct all suppliers, carriers, forwarders, warehousers or others receiving or
holding cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver same to Agent and/or subject to Agent's order and
if they shall come into any Borrower's possession, they, and each of them, shall
be held by such Borrower in trust as Agent's trustee, and such Borrower will
immediately deliver them to Agent in their original form together with any
necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers.
4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes
and directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
any Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower's financial status and business operations. Each Borrower hereby
authorizes all federal, state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to such Borrower, whether
made by such Borrower or otherwise; however, Agent and each Lender will attempt
to obtain such information or materials directly from such Borrower prior to
obtaining such information or materials from such accountants or such
authorities.
4.9. Compliance with Laws. Each Borrower shall comply in all material
respects with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to its respective
Collateral or any part thereof or to the operation of such Borrower's business
the non-compliance with which could reasonably be expected to have a Material
Adverse Effect on such Borrower. Each Borrower may, however, contest or dispute
any acts, rules, regulations, orders and directions of those bodies or officials
in any reasonable manner, provided that any related Lien is inchoate or stayed
and sufficient reserves are established to the reasonable satisfaction of Agent
to protect Agent's Lien on or security interest in the Collateral. The assets of
Borrowers at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the assets of
Borrowers so that such insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times Agent and each
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each
36
38
Borrower's books, records, audits, correspondence and all other papers relating
to the Collateral and the operation of each Borrower's business. Agent, any
Lender and their agents may enter upon any of each Borrower's premises at any
time during business hours and at any other reasonable time, and from time to
time, for the purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of such Borrower's business. So long as no
Event of Default shall have occurred and be continuing, Borrowers shall not be
required to pay any fees or expenses of Agent or any Lender with respect to more
than four (4) such inspections in any calendar year.
4.11. Insurance. Each Borrower shall bear the full risk of any loss of
any nature whatsoever with respect to the Collateral. At each Borrower's own
cost and expense in amounts and with carriers acceptable to Agent, each Borrower
shall (a) keep all its insurable properties and properties in which each
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption insurance, (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to such Borrower insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
and (e) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as a co-insured and loss
payee as its interests may appear with respect to all insurance coverage
referred to in clauses (a) and (c) above, and providing (A) that all proceeds
thereunder shall be payable to Agent, (B) no such insurance shall be affected by
any act or neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not be cancelled,
amended or terminated unless at least thirty (30) days' prior written notice is
given to Agent. In the event of any loss thereunder, the carriers named therein
hereby are directed by Agent and the applicable Borrower to make payment for
such loss to Agent and not to such Borrower and Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to any Borrower and
Agent jointly, Agent may endorse such Borrower's name thereon and do such other
things as Agent may deem advisable to reduce the same to cash. Agent is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) and (b) above. All loss recoveries received by Agent upon any
such insurance may be applied to the Obligations, in such order as Agent in its
sole discretion shall determine. Any surplus shall be paid by Agent to Borrowers
or applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrowers to Agent, on demand. Anything hereinabove to the contrary
notwithstanding, and subject to the fulfillment of the conditions set forth
below, Agent shall remit to Borrowers insurance proceeds received by Agent
during any calendar year under insurance policies procured and maintained by
Borrowers which insure Borrowers'
37
39
insurable properties to the extent such insurance proceeds do not exceed
$500,000 in the aggregate during such calendar year or $250,000 per occurrence.
In the event the amount of insurance proceeds received by Agent for any
occurrence exceeds $250,000, then Agent shall not be obligated to remit the
insurance proceeds to Borrowers unless Borrowers shall provide Agent with
evidence reasonably satisfactory to Agent that the insurance proceeds will be
used by Borrowers to repair, replace or restore the insured property which was
the subject of the insurable loss. In the event Borrowers have previously
received (or, after giving effect to any proposed remittance by Agent to
Borrowers would receive) insurance proceeds which equal or exceed $500,000 in
the aggregate during any calendar year, then Agent may, in its sole discretion,
either remit the insurance proceeds to Borrowers upon Borrowers providing Agent
with evidence reasonably satisfactory to Agent that the insurance proceeds will
be used by Borrowers to repair, replace or restore the insured property which
was the subject of the insurable loss, or apply the proceeds to the Obligations,
as aforesaid. The agreement of Agent to remit insurance proceeds in the manner
above provided shall be subject in each instance to satisfaction of each of the
following conditions: (x) No Event of Default or Default shall then have
occurred, and (y) Borrowers shall use such insurance proceeds to repair, replace
or restore the insurable property which was the subject of the insurable loss
and for no other purpose.
4.12. Failure to Pay Insurance. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor on behalf of
such Borrower, and charge Borrowers' Account therefor as a Revolving Advance of
a Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any tax by any governmental
authority is or may be imposed on or as a result of any transaction between any
Borrower and Agent or any Lender which Agent or any Lender may be required to
withhold or pay or if any taxes, assessments, or other Charges remain unpaid
after the date fixed for their payment, or if any claim shall be made which, in
Agent's or any Lender's opinion, may possibly create a valid Lien on the
Collateral, Agent may without notice to Borrowers pay the taxes, assessments or
other Charges and each Borrower hereby indemnifies and holds Agent and each
Lender harmless in respect thereof. Agent will not pay any taxes, assessments or
Charges to the extent that any Borrower has contested or disputed those taxes,
assessments or Charges in good faith, by expeditious protest, administrative or
judicial appeal or similar proceeding provided that any related tax lien is
stayed and sufficient reserves are established to the reasonable satisfaction of
Agent to protect Agent's security interest in or Lien on the Collateral. The
amount of any payment by Agent under this Section 4.13 shall be charged to
Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and added to
the Obligations and, until Borrowers shall furnish Agent with an indemnity
therefor (or supply Agent with evidence satisfactory to Agent that due provision
for the payment thereof has been made), Agent may hold without interest any
balance standing to Borrowers' credit and Agent shall retain its security
interest in any and all Collateral held by Agent.
38
40
4.14. Payment of Leasehold Obligations. Each Borrower shall at all
times pay, when and as due, its rental obligations under all leases under which
it is a tenant, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Agent's request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable Borrower's standard terms of
sale without dispute, setoff or counterclaim except as may be stated on the
accounts receivable schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the best of each
Borrower's knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Receivables on which the Customer is obligated in
full when due or with respect to such Customers of any Borrower who are not
solvent such Borrower has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.
(c) Locations of Borrower. Each Borrower's chief executive
office is located at the addresses set forth on Schedule 4.15(c) hereto. Until
written notice is given to Agent by Borrowing Agent of any other office at which
any Borrower keeps its records pertaining to Receivables, all such records shall
be kept at such executive office.
(d) Collection of Receivables. Until any Borrower's authority
to do so is terminated by Agent (which notice Agent may give at any time
following the occurrence of an Event of Default or a Default or when Agent in
its sole discretion deems it to be in Lenders' best interest to do so), each
Borrower will, at such Borrower's sole cost and expense, but on Agent's behalf
and for Agent's account, collect as Agent's property and in trust for Agent all
amounts received on Receivables, and shall not commingle such collections with
any Borrower's funds or use the same except to pay Obligations. Each Borrower
shall, upon request, deliver to Agent, or deposit in the Blocked Account, in
original form and on the date of receipt thereof, all checks, drafts, notes,
money orders, acceptances, cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any time
following the occurrence of an Event of Default or a Default, Agent shall have
the right to send notice of the assignment of, and Agent's security interest in,
the Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, Agent shall have the sole
right to collect the Receivables, take possession of the Collateral, or both.
Agent's actual collection expenses, including, but not limited to, stationery
and postage, telephone and
39
41
telegraph, secretarial and clerical expenses and the salaries of any collection
personnel used for collection, may be charged to Borrowers' Account and added to
the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf. Agent shall
have the right to receive, endorse, assign and/or deliver in the name of Agent
or any Borrower any and all checks, drafts and other instruments for the payment
of money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or ββββ of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; (iv) to sign such Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's interest in the Collateral and to file
same; (v) to demand payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or otherwise; (vii) to exercise all of
Borrowers' rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Receivables; (ix) to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign such Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) to prepare, file and sign such Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with the
Receivables; and (xii) to do all other acts and things necessary to carry out
this Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done maliciously or with gross (not mere) negligence; this power
being coupled with an interest is irrevocable while any of the Obligations
remain unpaid. Agent shall have the right at any time following the occurrence
of an Event of Default or Default, to change the address for delivery of mail
addressed to any Borrower to such address as Agent may designate and to receive,
open and dispose of all mail addressed to any Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom. Following the occurrence of an Event of
Default or Default, Agent may, without notice or consent from any Borrower, βββ
upon or otherwise collect, extend the time of payment of, compromise or settle
for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is authorized and empowered to accept, following the
occurrence of an Event of Default or Default, the return of the goods
represented by any of the Receivables, without notice to or consent by any
Borrower, all without discharging or in any way affecting any Borrower's
liability hereunder.
40
42
(h) Establishment of a Lockbox Account, Dominion Account. All
proceeds of Collateral shall, at the direction of Agent, be deposited by
Borrowers into a lockbox account, dominion account or such other "blocked
account" ("Blocked Accounts") as Agent may require pursuant to an arrangement
with such bank as may be selected by Borrowers and be acceptable to Agent.
Borrowers shall issue to any such bank, an irrevocable letter of instruction
directing said bank to transfer such funds so deposited to Agent, either to any
account maintained by Agent at said bank or by wire transfer to appropriate
account(s) of Agent. All funds deposited in such Blocked Account shall
immediately become the property of Agent and Borrowers shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for such
blocked account arrangement, including without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, Agent may establish depository accounts ("Depository
Accounts") in the name of Agent at a bank or banks for the deposit of such funds
and Borrowers shall deposit all proceeds of Collateral or cause same to be
deposited, in kind, in such Depository Accounts of Agent in lieu of depositing
same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without Agent's consent,
compromise or adjust any material amount of the Receivables (or extend the time
for payment thereof) or accept any material returns of merchandise or grant any
additional discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and allowances as have
been heretofore customary in the business of such Borrower.
4.16. Inventory. To the extent Inventory held for sale or lease has
been produced by any Borrower, it has been and will be produced by such Borrower
in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation. Each Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower's agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
4.19. Environmental Matters. (a) Borrowers shall ensure that the Real
Property remains in compliance with all Environmental Laws and they shall not
place or permit to be placed any
41
43
Hazardous Substances on any Real Property except as permitted by applicable law
or appropriate governmental authorities.
(b) Borrowers shall establish and maintain a system to assure
and monitor continued compliance with all applicable Environmental Laws which
system shall include periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with the use of
the Real Property appropriate technology necessary to maintain compliance with
any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property or any Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person, including any state
agency responsible in whole or in part for environmental matters in the state in
which the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and the Collateral and is not intended to create nor shall it create any
obligation upon Agent or any Lender with respect thereto.
(e) Borrowers shall promptly forward to Agent copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority regarding such claims
to Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
safeguard the health of any
42
44
Person and to avoid subjecting the Collateral or Real Property to any Lien. If
any Borrower shall fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or any Borrower shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of Lenders may, but
without the obligation to do so, for the sole purpose of protecting Agent's
interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
(g) Promptly upon the written request of Agent from time to
time, Borrowers shall provide Agent, at Borrowers' expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Agent and Lenders and
hold Agent, Lenders and their respective employees, agents, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Borrowers'
obligations under this Section 4.19 shall arise upon the discovery of the
presence of any Hazardous Substances at the Real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with the presence of any Hazardous Substances. Borrowers'
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
43
45
(i) For purposes of Section 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Borrowers' right, title and
interest in and to its owned and leased premises as described on Schedule 4.19
hereto.
4.20. Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal right
to enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement and the Other
Documents constitute the legal, valid and binding obligation of such Borrower
enforceable in accordance with their terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally. The execution, delivery and performance
of this Agreement and of the Other Documents (a) are within such Borrower's
corporate powers, have been duly authorized, are not in contravention of law or
the terms of such Borrower's by-laws, certificate of incorporation or other
applicable documents relating to such Borrower's formation or to the conduct of
such Borrower's business or of any material agreement or undertaking to which
such Borrower is a party or by which such Borrower is bound, and (b) will not
conflict with nor result in any breach in any of the provisions of or constitute
a default under or result in the creation of any Lien except Permitted
Encumbrances upon any asset of such Borrower under the provisions of any
agreement, charter document, instrument, by-law, or other instrument to which
such Borrower is a party or by which it or its property may be bound.
5.2. Formation and Qualification. (a) Each Borrower is duly
incorporated and in good standing under the laws of the state listed on Schedule
5.2(a) and is qualified to do business and is in good standing in the states
listed on Schedule 5.2(a) which constitute all states in which qualification and
good standing are necessary for such Borrower to conduct its business and own
its property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect on such Borrower. Each Borrower has delivered to
Agent true and complete copies of its certificate of incorporation and by-laws
and will promptly notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are listed on
Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All representations
and warranties of such Borrower contained in this Agreement and the Other
Documents shall be true at the time of such Borrower's execution of this
Agreement and the Other Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.
44
46
5.4. Tax Returns. Each Borrower's federal tax identification number is
set forth on Schedule 5.4. Each Borrower has filed all federal, state and local
tax returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and
payable. Federal, state and local income tax returns of each Borrower have been
examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending June 30, 1998, in the case of Federal and New Jersey income
tax returns, and June 30, 1999, in the case of Illinois income tax returns. The
New York, Oklahoma, Pennsylvania and South Carolina income tax returns of the
Borrowers have not been examined or reported on by the appropriate taxing
authority. The provision for taxes on the books of each Borrower are adequate
for all years not closed by applicable statutes, and for its current fiscal
year, and no Borrower has any knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
(a) The pro forma balance sheet of Borrowers on a consolidated
basis (the "Pro Forma Balance Sheet") furnished to Agent on the Closing Date
reflects the consummation of the transactions contemplated under this Agreement
(the "Transactions") and is accurate, complete and correct and fairly reflects
the financial condition of Borrowers on a consolidated basis as of the Closing
Date after giving effect to the Transactions, and has been prepared in
accordance with GAAP, consistently applied. The Pro Forma Balance Sheet has been
certified as accurate, complete and correct in all material respects by the
President and Chief Financial Officer of PVC. All financial statements referred
to in this subsection 5.5(a), including the related schedules and notes thereto,
have been prepared, in accordance with GAAP, except as may be disclosed in such
financial statements.
(b) The twelve-month cash flow projections of the Borrowers on
a consolidated basis and their projected balance sheets as of the Closing Date,
copies of which are annexed hereto as Exhibit 5.5(b) (the "Projections") were
prepared by the Chief Financial Officer of PVC, are based on underlying
assumptions which provide a reasonable basis for the projections contained
therein and reflect Borrowers' judgment based on present circumstances of the
most likely set of conditions and course of action for the projected period. The
cash flow Projections together with the Pro Forma Balance Sheet, are referred to
as the "Pro Forma Financial Statements".
(c) The consolidated and consolidating balance sheets of the
Borrowers, their Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of June 30, 1999 and as of May 31,
2000, and the related statements of income, changes in stockholder's equity, and
changes in cash flow for the periods ended on such dates, accompanied in the
case of such June 30, 1999 financial statements by reports thereon containing
opinions without qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared in accordance
with GAAP, consistently applied (except for, in the case of such June 30, 1999
financial statements, changes in application in which such accountants concur)
45
47
and present fairly the financial position of the Borrowers and their
Subsidiaries at such dates and the results of their operations for such periods.
Since May 31, 2000 there has been no change in the condition, financial or
otherwise, of Borrowers or their Subsidiaries as shown on the consolidated
balance sheet as of such date and no change in the aggregate value of machinery,
equipment and Real Property owned by Borrowers and their respective
Subsidiaries, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
5.6. Corporate Name. No Borrower has been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except as set forth on Schedule 5.6, nor has any Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years.
5.7. O.S.H.A. and Environmental Compliance.
(a) Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
(b) Each Borrower has been issued all required federal, state
and local licenses, certificates or permits relating to all applicable
Environmental Laws.
(c) (i) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as "Releases") of
Hazardous Substances at, upon, under or within any Real Property or any premises
leased by any Borrower; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased by any
Borrower; (iii) neither the Real Property nor any premises leased by any
Borrower has ever been used as a treatment, storage or disposal facility of
Hazardous Waste; and (iv) no Hazardous Substances are present on the Real
Property or any premises leased by any Borrower, excepting such quantities as
are handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of any Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
(a) Borrowers are, and after giving effect to the
Transactions, Borrowers will be, solvent, able to pay their debts as they
mature, have capital sufficient to carry on their business and all businesses in
which they are about to engage, and (i) as of the Closing Date, the fair present
saleable value of their assets, calculated on a going concern basis, is in
excess of the amount of their liabilities and (ii) subsequent to the Closing
Date, the fair saleable value of their assets (calculated on a going concern
basis) will be in excess of the amount of their liabilities.
46
48
(b) Except as disclosed in Schedule 5.8(b), no Borrower has
(i) any pending or threatened litigation, arbitration, actions or proceedings
which involve the possibility of having a Material Adverse Effect on such
Borrower, and (ii) any liabilities nor indebtedness for borrowed money other
than the Obligations.
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect on such Borrower, nor is any Borrower in
violation of any order of any court, governmental authority or arbitration board
or tribunal.
(d) No Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower nor any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no
Borrower nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower nor any member
of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has
engaged in a "prohibited transaction" described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR Section 2615.3 has not been waived, (xi) no
Borrower nor any member of the Controlled Group has any fiduciary responsibility
for investments with respect to any plan existing for the benefit of persons
other than employees or former employees of any Borrower and any member of the
Controlled Group, and (xii) no Borrower nor any member of the Controlled Group
has withdrawn, completely or partially, from any Multiemployer Plan so as to
incur liability under the Multiemployer Pension Plan Amendments Act of 1980.
47
49
5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service ββββ
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.9, are valid and have been duly registered or filed with
all appropriate governmental authorities and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such patent,
trademark, copyright, design right, tradename, trade secret or license and no
Borrower is aware of any grounds for any challenge, except as set forth in
Schedule 5.9 hereto. Each patent, patent application, patent license, trademark,
trademark application, trademark license, service ββββ, service ββββ
application, service ββββ license, design right, copyright, copyright
application and copyright license owned or held by any Borrower and all trade
secrets used by any Borrower consist of original material or property developed
by such Borrower or was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all software used by any Borrower, such Borrower is in possession of all
source and object codes related to each piece of software or is the beneficiary
of a source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits could have a Material
Adverse Effect on such Borrower.
5.11. Default of Indebtedness. No Borrower is in default in the payment
of the principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.
5.12. No Default. No Borrower is in default in the payment or
performance of any of its contractual obligations and no Default has occurred.
5.13. No Burdensome Restrictions. No Borrower is party to any contract
or agreement the performance of which could have a Material Adverse Effect on
such Borrower. No Borrower has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.14. No Labor Disputes. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.
48
50
5.15. Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. Investment Company Act. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by any Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrowers
or which reasonably should be known to Borrowers which Borrowers have not
disclosed to Agent in writing with respect to the transactions contemplated by
this Agreement which could reasonably be expected to have a Material Adverse
Effect on any Borrower.
5.18. Swaps. No Borrower is a party to, nor will it be a party to, any
swap agreement whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.19. Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.20. Application of Certain Laws and Regulations. No Borrower nor any
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.21. Business and Property of Borrowers. Upon and after the Closing
Date, Borrowers do not propose to engage in any business other than the
manufacture and sale of plastic bottles and the sales of compounds used in the
manufacture thereof, and activities necessary to conduct the foregoing. On the
Closing Date, each Borrower will own all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower.
49
51
5.22. Year 2000. Borrowers have reviewed the areas within their
business and operations which could be adversely affected by, and have developed
a program to address on a timely basis, the risk that certain computer
applications used by Borrowers or their respective Subsidiaries (or any of their
respective material suppliers, customers or vendors) may be unable to recognize
and perform properly date-sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem has not had,
and in the future is not expected to have, a Material Adverse Effect on
Borrowers.
5.23. Section 20 Subsidiaries. Borrowers do not intend to use and shall
not use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Accounts or Depository Accounts as provided for in Section 4.15(h). Agent may,
without making demand, charge Borrowers' Account for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower; and
(c) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect on such
Borrower.
6.3. Violations. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which could reasonably be expected to
have a Material Adverse Effect on any Borrower.
50
52
6.4. Government Receivables. Take all steps necessary to protect
Agent's interest in the Collateral under the Federal Assignment of Claims Act or
other applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.
6.5. Net Worth. Maintain at all times a Net Worth in an amount not less
than $16,800,000; provided that such amount shall be increased at the end of
each fiscal year of Borrowers, commencing with fiscal year end June 30, 2001, by
an amount equal to fifty percent (50%) of the net income, if any, of Borrowers
on a consolidated basis for such fiscal year then ended, calculated in
accordance with GAAP.
6.6. Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage
Ratio of not less than (a) 1.00 to 1.00 for the four (4) month period ending
December 31, 2000, for the seven (7) month period ending March 31, 2001 and for
the twelve (12) month period ending June 30, 2001 and (b) thereafter, 1.10 to
1.00 for each rolling period of four (4) consecutive fiscal quarters.
6.7. Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.8. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
6.9. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
51
53
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business and except
as provided in Section 4.3.
7.2. Creation of Liens. Create or suffer to exist any Lien or transfer
upon or against any of its property or assets now owned or hereafter acquired,
except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on Schedule 7.3, (b) guarantees made in the ordinary
course of business up to an aggregate amount of $250,000 and (c) the endorsement
of checks in the ordinary course of business.
7.4. Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business and (b) loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of $500,000 at any time outstanding.
7.6. Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including capitalized
leases) in any fiscal year in an aggregate amount for all Borrowers in excess of
$4,500,000; provided that up to $1,000,000 of such aggregate amount which is not
utilized in any fiscal year may be carried forward and added to the $4,500,000
amount available under this Section 7.6 for the next fiscal year, such that the
aggregate amount available in such next fiscal year may be up to, but shall in
no event exceed, $5,500,000.
7.7. Dividends. Declare, pay or make any dividend or distribution on
any shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds,
52
54
property or assets to the purchase, redemption or other retirement of any common
or preferred stock, or of any options to purchase or acquire any such shares of
common or preferred stock of any Borrower.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for capital expenditures permitted under
Section 7.6 hereof; and (iii) existing Indebtedness set forth on Schedule 7.8.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
7.10. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions in the ordinary
course of business, on an arm's-length basis on terms no less favorable than
terms which would have been obtainable from a Person other than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $2,000,000 in any one fiscal year in the aggregate for all
Borrowers.
7.12. Subsidiaries.
(a) Form any Subsidiary unless (i) such Subsidiary expressly
joins in this Agreement as a borrower and becomes jointly and severally liable
for the obligations of Borrowers hereunder, under the Notes, and under any other
agreement between any Borrower and Lenders and (ii) Agent shall have received
all documents, including legal opinions, it may reasonably require to establish
compliance with each of the foregoing conditions.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
June 30 or make any significant change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless required by law.
53
55
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of
the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of any Borrower.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to make
the initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Notes duly executed
and delivered by an authorized officer of each Borrower;
(b) Filings, Registrations and Recordings. Each document
(including, without limitation, each Mortgage and any Uniform Commercial Code
financing statement) required by this Agreement, any related agreement or under
law or reasonably requested by the Agent to be filed, registered or recorded in
order to create, in favor of Agent, a perfected security interest in or lien
upon the Collateral shall have been properly filed, registered or recorded in
each jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
54
56
(c) Corporate Proceedings of Borrowers. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of each Borrower authorizing (i) the
execution, delivery and performance of this Agreement and the Other Documents to
which such Borrower is a party (collectively the "Documents") and (ii) the
granting by each Borrower of the security interests in and liens upon the
Collateral, in each case certified by the Secretary or an Assistant Secretary of
each Borrower as of the Closing Date; and such certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrowers. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of each
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of each Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the
Articles or Certificate of Incorporation of each Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of each
Borrower and all agreements of each Borrower's shareholders certified as
accurate and complete by the Secretary of each Borrower;
(f) Good Standing Certificates. Agent shall have received good
standing certificates for each Borrower dated not more than 30 days prior to the
Closing Date, issued by the Secretary of State or other appropriate official of
each Borrower's jurisdiction of incorporation and each jurisdiction where the
conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(g) Legal Opinions. Agent shall have received (i) the executed
legal opinion of ββββ Marks & βββββ LLP in form and substance satisfactory to
Agent which shall cover such matters incident to the transactions contemplated
by this Agreement and the Other Documents and related agreements as Agent may
reasonably require and (ii) the executed legal opinion of legal counsel to
Borrowers in each jurisdiction in which Real Property covered by a Mortgage is
located, in form and substance satisfactory to Agent which shall cover such
matters with respect to such Mortgage and related matters as Agent may
reasonably require; and each Borrower hereby authorizes and directs each such
counsel to deliver such opinions to Agent and Lenders;
(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature
55
57
materially adverse to any Borrower or the conduct of its business or
inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
(i) Financial Condition Certificates. Agent shall have
received an executed Financial Condition Certificate in the form of Exhibit
8.1(k).
(j) Collateral Examination. Agent shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Inventory,
Molds, General Intangibles, Real Property, Leasehold Interests and Equipment of
each Borrower and all books and records in connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Closing Date pursuant to Article III hereof;
(l) Pro Forma Financial Statements. Agent shall have received
a copy of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;
(m) Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers' casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers' liability insurance policies, together with endorsements naming Agent
as a co-insured;
(n) Title Insurance. Agent shall have received fully paid
mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Agent's satisfaction to evidence the form of such
policies to be delivered with respect to the Mortgage), in standard ALTA form,
issued by a title insurance company satisfactory to Agent, each in an amount
equal to not less than the fair market value of the Real Property subject to the
Mortgage, insuring the Mortgage to create a valid Lien on the Real Property with
no exceptions which Agent shall not have approved in writing and no survey
exceptions;
(o) Environmental Reports. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms with respect to all Real Property owned by Borrowers (except
the Real property located in Ardmore, Oklahoma and Paris, Illinois);
(p) Payment Instructions. Agent shall have received written
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(q) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
56
58
(r) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Other Documents; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
(s) No Adverse Material Change. (i) since May 31, 2000, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;
(t) Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory is located;
(u) Mortgages. Agent shall have received in form and substance
satisfactory to Lenders (i) the executed Mortgages, (ii) title policies for the
Real Property and (iii) surveys; and
(v) Other Documents. Agent shall have received the executed
Parent Pledge Agreement, Intellectual Property Assignment, Letter Agreement and
any additional Other Documents, all in form and substance satisfactory to Agent,
not specifically referred to in this Section 8.1;
(w) Contract Review. Agent shall have reviewed all material
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(x) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct in all material
respects on and as of such date, (ii) Borrowers are on such date in compliance
with all the terms and provisions set forth in this Agreement and the Other
Documents and (iii) on such date no Default or Event of Default has occurred or
is continuing;
(y) Borrowing Base. Agent shall have received evidence from
Borrowers that the aggregate amount of Eligible Receivables and Eligible
Inventory is sufficient in value and amount to support Advances in the amount
requested by Borrowers on the Closing Date;
(z) Undrawn Availability. After giving effect to the initial
Advances hereunder, Borrowers shall have Undrawn Availability of at least
$2,000,000, as evidenced by a Borrowing Base Certificate;
57
59
(aa) Rate Protection. Fleet Bank shall have assigned to Agent
interest rate swap arrangements with Borrowers in form and substance
satisfactory to Agent for the interest to be payable on at least fifty percent
(50%) of the principal amount of the Term Loan;
(bb) Repayment of Fleet Bank. Borrowers shall have provided to
Agent evidence of cancellation of all commitments from and evidence of repayment
in full of all indebtedness to Fleet Bank and evidence of termination of all
existing liens in favor of Fleet Bank, in each case in form and substance
satisfactory to Agent; and
(cc) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent and its
counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by any Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; provided, however that Lenders,
in their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to
be made, after giving effect thereto, the aggregate Advances shall not exceed
the maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
8.3. Conditions to Each Equipment Loan. The agreement of Lenders to
make any Equipment Loan is subject to satisfaction of the following conditions
precedent: (a) receipt by Agent of (i) a copy of the invoice relating to the
Equipment being purchased, (ii) evidence that such Equipment has been shipped to
the applicable Borrower, (iii) evidence that the requested Equipment Loan does
not exceed eighty percent (80%) of the net invoice cost of such Equipment
purchased by such Borrower (which shall be exclusive of shipping, delivery,
handling, taxes, overhead, installation and all other "soft" costs), and (iv)
such other documentation and evidence
58
60
that Agent may request; and (b) after giving effect thereto, the aggregate
Equipment Loans outstanding shall not exceed the Maximum Equipment Loan Amount.
IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations and
the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.
9.2. Schedules. Deliver to Agent on or before the fifteenth (15th) day
of each month as and for the prior month (a) accounts receivable agings, (b)
accounts payable schedules and (c) Inventory reports and (d) a Borrowing Base
Certificate (which shall be calculated as of the last day of the prior month and
which shall not be binding upon Agent or restrictive of Agent's rights under
this Agreement) (in the case of (a) and (b), as reconciled to the general
ledger). In addition, each Borrower will deliver to Agent at such intervals as
Agent may require: (i) confirmatory assignment schedules, (ii) copies of
Customer's invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may require including, without limitation, trial balances and test
verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests hereunder. The items to
be provided under this Section are to be in form satisfactory to Agent and
executed by each Borrower and delivered to Agent from time to time solely for
Agent's convenience in maintaining records of the Collateral, and any Borrower's
failure to deliver any of such items to Agent shall not affect, terminate,
modify or otherwise limit Agent's Lien with respect to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of each Borrower stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent any Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any litigation,
suit or administrative proceeding affecting any Borrower, whether or not the
claim is covered by insurance, and of any suit or administrative proceeding,
which in any such case could reasonably be expected to have a Material Adverse
Effect on any Borrower.
59
61
9.5. Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower which might result in the acceleration of the maturity
of any Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (e) any other development in the business or affairs of any
Borrower which could reasonably be expected to have a Material Adverse Effect;
in each case describing the nature thereof and the action Borrowers propose to
take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year of Borrowers, financial statements of
Borrowers on a consolidating and consolidated basis including, but not limited
to, statements of income and stockholders' equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and satisfactory to Agent (the
"Accountants"). The report of the Accountants shall be accompanied by a
statement of the Accountants certifying that (i) they have caused the Loan
Agreement to be reviewed, (ii) in making the examination upon which such report
was based either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof. In addition, the reports
shall be accompanied by a certificate of each Borrower's Chief Financial Officer
which shall state that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by such Borrower
with respect to such event, and such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Agent within forty five
(45) days after the end of each fiscal quarter except the fourth fiscal quarter,
an unaudited balance sheet of
60
62
Borrowers on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Borrowers. The reports
shall be accompanied by a certificate signed by the Chief Financial Officer of
each Borrower, which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such default and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof.
9.9. Monthly Financial Statements. Furnish Agent within thirty (30)
days after the end of each month, an unaudited balance sheet of Borrowers on a
consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Borrowers. The reports
shall be accompanied by a certificate of each Borrower's Chief Financial
Officer, which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such event and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof.
9.10. Other Reports. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders.
9.11. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Other Documents have been complied with by Borrowers
including, without limitation and without the necessity of any request by Agent,
(a) copies of all environmental audits and reviews, (b) at least thirty (30)
days prior thereto, notice of any Borrower's opening of any new office or place
of business or any Borrower's closing of any existing office or place of
business, and (c) promptly upon any Borrower's learning thereof, notice of any
labor dispute to which any Borrower may become a party, any strikes or walkouts
relating to any of its plants or other facilities, and the expiration of any
labor contract to which any Borrower is a party or by which any Borrower is
bound.
61
63
9.12. Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of each Borrower's fiscal years after fiscal
year 2000, a month by month projected operating budget and cash flow of
Borrowers on a consolidated and consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by the President or Chief Financial Officer of each
Borrower to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.13. Variances From Operating Budget. Furnish Agent, concurrently with
the delivery of the financial statements referred to in Section 9.7 and each
quarterly report, a written report summarizing all material variances from
budgets submitted by Borrowers pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt notice
of (i) any lapse or other termination of any Consent issued to any Borrower by
any Governmental Body or any other Person that is material to the operation of
any Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
9.15. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of
62
64
each such letter; (vii) any Borrower or any member of the Controlled Group shall
receive a notice regarding the imposition of withdrawal liability, together with
copies of each such notice; (viii) any Borrower or any member of the Controlled
Group shall fail to make a required installment or any other required payment
under Section 412 of the Code on or before the due date for such installment or
payment; (ix) any Borrower or any member of the Controlled Group knows that (a)
a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor
of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the
PBGC has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
10.2. any representation or warranty made or deemed made by any
Borrower in this Agreement or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information when
due or when requested which is unremedied for a period of fifteen (15) days, or
(ii) permit the inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property which is not
stayed or lifted within thirty (30) days;
10.5. except as otherwise provided for in Sections 10.1 and 10.3,
failure or neglect of any Borrower to perform, keep or observe any term,
provision, condition, covenant herein contained, or contained in any other
agreement or arrangement, now or hereafter entered into between any Borrower and
Agent or any Lender except for a failure or neglect of any Borrower to perform,
keep or observe any term, provision, condition or covenant, contained in
Sections 4.6, 4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is cured
within forty five (45) days from the occurrence of such failure or neglect;
63
65
10.6. any judgment or judgments are rendered or judgment liens filed
against any Borrower for an aggregate amount in excess of $250,000 which within
forty five (45) days of such rendering or filing is not either satisfied, stayed
or discharged of record;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. any Borrower shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business;
10.9. any Affiliate or any Subsidiary of any Borrower shall (i) apply
for, consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. any change in any Borrower's condition or affairs (financial or
otherwise) which in Agent's opinion has a Material Adverse Effect;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10. 12. a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period;
10.13. any Change of Ownership or Change of Control shall occur;
10.14. any material provision of this Agreement or any Other Document
shall, for any reason, cease to be valid and binding on any Borrower, or any
Borrower shall so claim in writing to Agent;
64
66
10.15. (i) any Governmental Body shall (A) revoke, terminate, suspend
or adversely modify any license, permit, patent trademark or tradename of any
Borrower, the continuation of which is material to the continuation of any
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of any Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect on any Borrower;
10.16. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower or
any Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of litigation which might, in the opinion
of Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents;
10.17. the operations of any Borrower's manufacturing facility are
interrupted at any time for more than 72 hours during any period of five (5)
consecutive days, unless such Borrower shall (i) be entitled to receive for such
period of interruption, proceeds of business interruption insurance sufficient
to assure that its per diem cash needs during such period is at least equal to
its average per diem cash needs for the consecutive three month period
immediately preceding the initial date of interruption and (ii) receive such
proceeds in the amount described in clause (i) preceding not later than thirty
(30) days following the initial date of any such interruption; provided,
however, that notwithstanding the provisions of clauses (i) and (ii) of this
section, an Event of Default shall be deemed to have occurred if such Borrower
shall be receiving the proceeds of business interruption insurance for a period
of thirty (30) consecutive days; or
10.18. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect on any
Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; and, (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured), at
65
67
the option of Required Lenders all Obligations shall be immediately due and
payable and Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances and (iii) a filing of a
petition against Borrower in any involuntary case under any state or federal
bankruptcy laws, the obligation of Lenders to make Advances hereunder shall be
terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over any Borrower. Upon the occurrence of
any Event of Default, Agent shall have the right to exercise any and all other
rights and remedies provided for herein, under the Uniform Commercial Code and
at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process. Agent may
enter any of any Borrower's premises or other premises without legal process and
without incurring liability to any Borrower therefor, and Agent may thereupon,
or at any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Borrowers to make the Collateral available to Agent at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrowers reasonable notification of such sale or
sales, it being agreed that in all events written notice mailed to Borrowers at
least five (5) days prior to such sale or sales is reasonable notification. At
any public sale Agent or any Lender may bid for and become the purchaser, and
Agent, any Lender or any other purchaser at any such sale thereafter shall hold
the Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by each Borrower. In connection with the exercise
of the foregoing remedies, Agent is granted permission to use all of each
Borrower's trademarks, trade styles, trade names, patents, patent applications,
licenses, franchises and other proprietary rights which are used in connection
with (a) Inventory for the purpose of disposing of such Inventory and (b)
Equipment for the purpose of completing the manufacture of unfinished goods. The
proceeds realized from the sale of any Collateral shall be applied as follows:
first, to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Agent for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second, to interest due
upon any of the Obligations and any fees payable under this Agreement; and,
third, to the principal of the Obligations. If any deficiency shall arise,
Borrowers shall remain liable to Agent and Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender
66
68
shall have a right to apply any Borrower's property held by Agent and such
Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Each Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until August 31, 2005 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days' prior written notice upon payment
in full of the Obligations.
67
69
13.2. Termination. The termination of the Agreement shall not affect
any Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been paid or performed in full after the
termination of this Agreement or each Borrower has furnished Agent and Lenders
with an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, each Borrower waives any rights which it may have under Section
9-404(1) of the Uniform Commercial Code to demand the filing of termination
statements with respect to the Collateral, and Agent shall not be required to
send such termination statements to each Borrower, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates PNC to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in the Fee
Letter), charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement (including
without limitation, collection of the Note) Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements,
68
70
representations or warranties made by any Borrower or any officer thereof
contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness, due
execution, enforceability or sufficiency of this Agreement, or any of the Other
Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each Borrower. Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before
making of the Advances or at any time or times thereafter except as shall be
provided by any Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Other Document, or of the financial condition of any Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Note, the Other Documents or the financial condition of any Borrower, or the
existence of any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders
and Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and duties
of Agent, and the term "Agent" shall mean such successor agent 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. After any Agent's resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any
69
71
Other Document, Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from the Required
Lenders; and Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, Lenders shall not have any right of
action whatsoever against Agent as a result of its acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or a
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
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 in the best interests of Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
any Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
70
72
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 and the monthly
Borrowing Base Certificate from any Borrower pursuant to the terms of this
Agreement, Agent will promptly furnish such documents and information to
Lenders.
14.10. Borrowers' Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. BORROWING AGENCY.
15.1. Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Neither Agent nor
any Lender shall incur liability to Borrowers as a result thereof. To induce
Agent and Lenders to do so and in consideration thereof, each Borrower hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Agent or any Lender by any Person arising from
or incurred by reason of the handling of the financing arrangements of Borrowers
as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any
Lender with respect to this Section 15.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party.
(c) All Obligations shall be joint and several, and each
Borrower shall make payment upon the maturity of the Obligations by acceleration
or otherwise, and such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and forbearance granted
by Agent or any Lender to any Borrower, failure of Agent or any Lender to give
any Borrower notice of borrowing or any other notice, any failure of Agent or
any Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by
71
73
prior recourse by Agent or any Lender to the other Borrowers or any Collateral
for such Borrower's Obligations or the lack thereof.
15.2. Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
16.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against any Borrower with respect to any of the Obligations, this
Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New York. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Agent or any Lender to bring proceedings against any
Borrower in the courts of any other jurisdiction. Each Borrower waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. Any judicial proceeding by any Borrower against Agent or
any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in New York
County, State of New York.
16.2. Entire Understanding. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between each
Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, signed by each
Borrower's, Agent's and each Lender's respective officers. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an
72
74
agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrowers may, subject to the provisions of this
Section 16.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrowers, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage or maximum
dollar commitment of any Lender or the Maximum Revolving Advance Amount.
(ii) extend the maturity of any Note or the due date
for any amount payable hereunder, or decrease the rate of interest or reduce any
fee payable by Borrowers to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required
Lenders or alter, amend or modify this Section 16.2(b).
(iv) release any Collateral during any calendar year
(other than in accordance with the provisions of this Agreement) having an
aggregate value in excess of $1,000,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after
giving effect thereto the total of Revolving Advances outstanding hereunder
would exceed the Formula Amount for more than thirty (30) consecutive Business
Days or exceed one hundred and ten percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance
Rates in effect on the Closing Date.
(viii) release any guarantor from any obligations
under its guarantee with respect to the Obligations.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a
73
75
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to
this Section 16.2 and such Lender shall not respond or reply to Agent in writing
within ten (10) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
the then outstanding principal amount thereof plus accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrowers. In the event PNC elects to require any Lender to assign its
interest to PNC or to the Designated Lender, PNC will so notify such Lender in
writing within forty five (45) days following such Lender's denial, and such
Lender will assign its interest to PNC or the Designated Lender no later than
five (5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.
Notwithstanding the foregoing, Agent may at its discretion and without
the consent of the Required Lenders, voluntarily permit the outstanding
Revolving Advances at any time to exceed the Formula Amount by up to one hundred
and ten percent (110%) of the Formula Amount for up to thirty (30) consecutive
Business Days. For purposes of the preceding sentence, the discretion granted to
Agent hereunder shall not preclude involuntary overadvances that may result from
time to time due to the fact that the Formula Amount was unintentionally
exceeded for any reason, including, but not limited to, Collateral previously
deemed to be either "Eligible Receivables" or "Eligible Inventory", as
applicable, becomes ineligible, collections of Receivables applied to reduce
outstanding Revolving Advances are thereafter returned for insufficient funds or
overadvances are made to protect or preserve the Collateral. In the event Agent
involuntarily permits the outstanding Revolving Advances to exceed the Formula
Amount by more than ten percent (10%), Agent shall endeavor to have Borrowers
decrease such excess in as expeditious a manner as is practicable under the
circumstances and not inconsistent with the reason for such excess. Revolving
Advances made after Agent has determined the existence of involuntary
overadvances shall be deemed to be involuntary overadvances and shall be
decreased in accordance with the preceding sentence.
16.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrowers, Agent, each Lender, all future holders of the Obligations
and their respective successors and assigns, except that no Borrower may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating
74
76
interests in the Advances to other financial institutions (each such transferee
or purchaser of a participating interest, a "Transferee"). Each Transferee may
exercise all rights of payment (including without limitation rights of set-off)
with respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Transferee were the direct holder thereof
provided that Borrowers shall not be required to pay to any Transferee more than
the amount which it would have been required to pay to Lender which granted an
interest in its Advances or other Obligations payable hereunder to such
Transferee had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder and in no event shall Borrowers be required
to pay any such amount arising from the same circumstances and with respect to
the same Advances or other Obligations payable hereunder to both such Lender and
such Transferee. Each Borrower hereby grants to any Transferee a continuing
security interest in any deposits, moneys or other property actually or
constructively held by such Transferee as security for the Transferee's interest
in the Advances.
(c) Any Lender may with the consent of Agent which shall not
be unreasonably withheld or delayed sell, assign or transfer all or any part of
its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a "Purchasing
Lender"), in minimum amounts of not less than $5,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrowers, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowers or any Lender at any reasonable time and
from time to time upon reasonable prior
75
77
notice. Agent shall receive a fee in the amount of $3,500 payable by the
applicable Purchasing Lender upon the effective date of each transfer or
assignment to such Purchasing Lender.
(e) Each Borrower authorizes each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
such Borrower which has been delivered to such Lender by or on behalf of such
Borrower pursuant to this Agreement or in connection with such Lender's credit
evaluation of such Borrower.
16.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and
each of their respective officers, directors, Affiliates, employees and agents
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the willful misconduct of the party being indemnified.
16.6. Notices. Any notice, request, demand, direction or other
communication (for purposes of this Section 16.6 only, a "Notice") to be given
to or made upon any party hereto under any provision of this Agreement shall be
made by telephone or in writing (which includes by means of electronic
transmission (i.e, "e-mail") or facsimile transmission or by setting forth such
Notice on a site on the World Wide Web (a "Website Posting") if Notice of such
Website Posting (including the information necessary to access such site) has
previously been delivered to the applicable parties hereto by another means set
forth in this Section 16.6. Any such Notice must be delivered to the applicable
parties hereto at the addresses and numbers set forth below or in accordance
with any subsequent unrevoked Notice from any such party that is given in
accordance with this Section 16.6:
(A) If to Agent or PNC Bank, National Association
PNC at: βββ βββββ ββββββ βββββββββ
ββββ βββββββββ, βββ ββββββ βββββ
Attention: ββββ Peak, Vice President
76
78
Telephone: (βββ) βββ-ββββ
Telecopier: (βββ) βββ-ββββ
with a copy to: PNC Bank - Agency Services
βββ βββ βββββ, ββββ βββββ
βββ βββββ ββββββ
ββββββββββ, ββ βββββ
Attention: ββββ ββββββ
Telephone: (βββ) βββ-ββββ
Telecopier: (βββ) βββ-ββββ
and a copy to: βββββ ββββββ Radin Tischman βββββββ &
Gross
βββ ββββββββββ βββββ
ββββββ, βββ ββββββ βββββ-ββββ
Attention: ββββββ ββββββ ββββββ, Esq.
Telephone: (βββ) βββ-ββββ
Telecopier: (βββ) βββ-ββββ
(B) If to a Lender other than Agent, as specified on the signature
pages hereof
(C) If to Borrowing Agent
or any Borrower, at: PVC Container Corporation
β ββββββββββ βββ ββββ
βββββββββ, βββ ββββββ βββββ
Attention: βββββββ β. ββββββββ and
βββββββ βββββββ
Telephone: (βββ) βββ-ββββ
Telecopier: (βββ) βββ-ββββ
77
79
with a copy to: ββββ Marks & βββββ LLP
βββ βββββ ββββββ
βββ ββββ, βββ ββββ βββββ
Attention: βββββββ β. ββββββ, Esq.
Telephone: (βββ) βββ-ββββ
Telecopier: (βββ) βββ-ββββ
Any Notice shall be effective:
(a) In the case of hand-delivery, when delivered;
(b) If given by mail, four days after such Notice is
deposited with the United States Postal Service, with first-class postage
prepaid , return receipt requested;
(c) In the case of a telephonic Notice, when a party
is contacted by telephone, if delivery of such telephonic Notice is confirmed no
later than the next Business Day by hand delivery, a facsimile or electronic
transmission, a Website Posting or an overnight courier delivery of a
confirmatory Notice (received at or before noon on such next Business Day);
(d) In the case of a facsimile transmission, when
sent to the applicable party's facsimile machine's telephone number, if the
party sending such Notice receives confirmation of the delivery thereof from its
own facsimile machine;
(e) In the case of electronic transmission, when
actually received;
(f) In the case of a Website Posting, upon delivery
of a Notice of such posting (including the information necessary to access such
site) by another means set forth in this Section 16.6; and
(g) If given by any other means (including by
overnight courier), when actually received.
Any Lender giving a Notice to a Borrower shall concurrently send a copy
thereof to Agent and Agent shall promptly notify the other Lenders of its
receipt of such Notice.
16.7. Survival. The obligations of Borrowers under Sections 2.2(f),
3.6, 3.7, 3.8, 4.19(h), 14.7 and 16.5 shall survive termination of this
Agreement and the Other Documents and payment in full of the Obligations.
16.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
78
80
16.9. Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by Agent, Agent on behalf of Lenders and Lenders (a)
in all efforts made to enforce payment of any Obligation or effect collection of
any Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with any Borrower, or (e) in connection with any advice given to Agent or any
Lender with respect to its rights and obligations under this Agreement and all
related agreements, may be charged to Borrowers' Account and shall be part of
the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the event
any Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
16.11. Consequential Damages. Neither Agent nor any Lender, nor any
agent or attorney for any of them, shall be liable to any Borrower for
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations.
16.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
16.13. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15. Confidentiality; Sharing Information. (a) Agent, each Lender and
each Transferee shall hold all non-public information obtained by Agent, such
Lender or such Transferee pursuant to the requirements of this Agreement in
accordance with Agent's, such Lender's and such Transferee's customary
procedures for handling confidential information of this nature; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders,
79
81
and (c) as required or requested by any Governmental Body or representative
thereof or pursuant to legal process; provided, further that (i) unless
specifically prohibited by applicable law or court order, Agent, each Lender and
each Transferee shall use its best efforts prior to disclosure thereof, to
notify the applicable Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant
to legal process and (ii) in no event shall Agent, any Lender or any Transferee
be obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated.
(b) Each Borrower acknowledges that from time to time
financial advisory, investment banking and other services may be offered or
provided to such Borrower or one or more of its Affiliates (in connection with
this Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provision of Section
16.15 as if it were a Lender hereunder. Such authorization shall survive the
repayment of the other Obligations and the termination of the Loan Agreement.
16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent
to make appropriate announcements of the financial arrangement entered into
among Borrowers, Agent and Lenders, including, without limitation, announcements
which are commonly known as tombstones, in such publications and to such
selected parties as Agent shall in its sole and absolute discretion deem
appropriate.
80
82
Each of the parties has signed this Agreement as of the day and year
first above written.
ATTEST: PVC CONTAINER CORPORATION,
a Delaware corporation
By: By:
Name: βββββββ β. ββββββ Name: βββββββ β. ββββββββ
Title: Secretary Title: President
[Seal]
ATTEST: NOVATEC PLASTICS CORPORATION,
a Delaware corporation
By: By:
Name: βββββββ β. ββββββ Name: βββββββ β. ββββββββ
Title: Secretary Title: President
[Seal]
ATTEST: NOVAPAK CORPORATION,
a Delaware corporation
By: By:
Name: βββββββ β. ββββββ Name: βββββββ β. ββββββββ
Title: Secretary Title: President
[Seal]
ATTEST: AIROPAK CORPORATION,
a Delaware corporation
By: By:
Name: βββββββ β. ββββββ Name: βββββββ β. ββββββββ
Title: Secretary Title: President
[Seal]
83
ATTEST: MARPAC INDUSTRIES, INC.,
a New York corporation
By: By:
Name: βββββββ β. ββββββ Name: βββββββ β. ββββββββ
Title: Secretary Title: President
[Seal]
ATTEST: MARPAC SOUTHWEST, INC.,
an Oklahoma corporation
By: By:
Name: βββββββ β. ββββββ Name: βββββββ β. ββββββββ
Title: Secretary Title: President
[Seal]
ATTEST: PVC CONTAINER INTERNATIONAL SALES CORPORATION,
a U.S. Virgin Islands corporation
By: By:
Name: βββββββ β. ββββββ Name: βββββββ β. ββββββββ
Title: Secretary Title: President
[Seal]
PNC BANK, NATIONAL ASSOCIATION,
as Lender and as Agent
By:
Name:
Title:
βββ βββββ ββββββ βββββββββ
ββββ βββββββββ, βββ ββββββ βββββ
Commitment Percentage: 100%
ββ
βββββ ββ βββ ββββββ )
) SS.:
COUNTY OF ESSEX )
On the ______ day of August, in the year 2000 before me, the
undersigned, personally appeared βββββββ β. ββββββββ, to me known, who, being by
me duly sworn, did depose and say that he is the President of PVC CONTAINER
CORPORATION, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
--------------------------------------
STATE OF NEW JERSEY )
) SS.:
COUNTY OF ESSEX )
On the ______ day of August, in the year 2000 before me, the
undersigned, personally appeared βββββββ β. ββββββββ, to me known, who, being by
me duly sworn, did depose and say that he is the President of NOVATEC PLASTICS
CORPORATION, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
--------------------------------------
STATE OF NEW JERSEY )
) SS.:
COUNTY OF ESSEX )
On the ______ day of August, in the year 2000 before me, the
undersigned, personally appeared βββββββ β. ββββββββ, to me known, who, being by
me duly sworn, did depose and say that he is the President of NOVAPAK
CORPORATION, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
--------------------------------------
ββ
βββββ ββ βββ ββββββ )
) SS.:
COUNTY OF ESSEX )
On the ______ day of August, in the year 2000 before me, the
undersigned, personally appeared βββββββ β. ββββββββ, to me known, who, being by
me duly sworn, did depose and say that he is the President of AIROPAK
CORPORATION, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
--------------------------------------
STATE OF NEW JERSEY )
) SS.:
COUNTY OF ESSEX )
On the ______ day of August, in the year 2000 before me, the
undersigned, personally appeared βββββββ β. ββββββββ, to me known, who, being by
me duly sworn, did depose and say that he is the President of MARPAC INDUSTRIES,
INC., the corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the board
of directors of said corporation, and that he signed his name thereto by like
order.
--------------------------------------
STATE OF NEW JERSEY )
) SS.:
COUNTY OF ESSEX )
On the ______ day of August, in the year 2000 before me, the
undersigned, personally appeared βββββββ β. ββββββββ, to me known, who, being by
me duly sworn, did depose and say that he is the President of MARPAC SOUTHWEST,
INC., the corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the board
of directors of said corporation, and that he signed his name thereto by like
order.
--------------------------------------
ββ
βββββ ββ βββ ββββββ )
) SS.:
COUNTY OF ESSEX )
On the ______ day of August, in the year 2000 before me, the
undersigned, personally appeared βββββββ β. ββββββββ, to me known, who, being by
me duly sworn, did depose and say that he is the President of PVC CONTAINER
INTERNATIONAL SALES CORPORATION, the corporation described in and which executed
the foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the board of directors of said corporation, and that he signed his
name thereto by like order.
--------------------------------------
87
TABLE OF CONTENTS
I. DEFINITIONS 1
1.1. Accounting Terms....................................................1
1.2. General Terms.......................................................1
1.3. Uniform Commercial Code Terms......................................18
1.4. Certain Matters of Construction....................................18
II. ADVANCES, PAYMENTS 18
2.1. (a) Revolving Advances.............................................18
(b) Individual Revolving Advances..................................19
(c) Discretionary Rights...........................................19
2.2. Procedure for Borrowing Advances...................................19
2.3. Disbursement of Advance Proceeds...................................21
2.4. [(a)] Term Loan....................................................22
[(b) Equipment Loans..............................................22
2.5. Maximum Advances...................................................23
2.6. Repayment of Advances..............................................23
2.7. Repayment of Excess Advances.......................................23
2.8. Statement of Account...............................................23
2.9. Letters of Credit..................................................24
2.10. Issuance of Letters of Credit......................................24
2.11. Requirements For Issuance of Letters of Credit.....................25
2.12. Additional Payments................................................26
2.13. Manner of Borrowing and Payment....................................26
2.14. Mandatory Prepayments..............................................28
2.15. Use of Proceeds....................................................29
2.16. Defaulting Lender..................................................29
III. INTEREST AND FEES 30
3.1. Interest...........................................................30
3.2. Letter of Credit Fees..............................................30
3.3 Facility Fee.......................................................31
3.4. Computation of Interest and Fees...................................31
3.5. Maximum Charges....................................................31
3.6. Increased Costs....................................................31
3.7. Basis For Determining Interest Rate Inadequate or Unfair...........32
3.9. Capital Adequacy...................................................33
IV. COLLATERAL: GENERAL TERMS 33
4.1. Security Interest in the Collateral................................34
4.2. Perfection of Security Interest....................................34
4.3. Disposition of Collateral..........................................34
4.4. Preservation of Collateral.........................................34
4.5. Ownership of Collateral............................................35
4.6. Defense of Agent's and Lenders' Interests..........................35
4.7. Books and Records..................................................36
i
88
4.8. Financial Disclosure...............................................36
4.9. Compliance with Laws...............................................36
4.10. Inspection of Premises.............................................36
4.11. Insurance..........................................................37
4.12. Failure to Pay Insurance...........................................38
4.13. Payment of Taxes...................................................38
4.14. Payment of Leasehold Obligations...................................38
4.15. Receivables........................................................39
(a) Nature of Receivables.........................................39
(b) Solvency of Customers.........................................39
(c) Locations of Borrower.........................................39
(d) Collection of Receivables.....................................39
(e) Notification of Assignment of Receivables.....................39
(f) Power of Agent to Act on Borrowers' Behalf....................40
(g) No Liability..................................................40
(h) Establishment of a Lockbox Account, Dominion Account..........40
(i) Adjustments...................................................41
4.16. Inventory..........................................................41
4.17. Maintenance of Equipment...........................................41
4.18. Exculpation of Liability...........................................41
4.19. Environmental Matters..............................................41
4.20. Financing Statements...............................................44
V. REPRESENTATIONS AND WARRANTIES 44
5.1. Authority..........................................................44
5.2. Formation and Qualification........................................44
5.3. Survival of Representations and Warranties.........................44
5.4. Tax Returns........................................................44
5.5. Financial Statements...............................................45
5.6. Corporate Name.....................................................46
5.7. O.S.H.A. and Environmental Compliance..............................46
5.8. Solvency; No Litigation, Violation, Indebtedness or Default........46
5.9. Patents, Trademarks, Copyrights and Licenses.......................47
5.10. Licenses and Permits...............................................48
5.11. Default of Indebtedness............................................48
5.12. No Default.........................................................48
5.13. No Burdensome Restrictions.........................................48
5.14. No Labor Disputes..................................................48
5.15. Margin Regulations.................................................48
5.16. Investment Company Act.............................................49
5.17. Disclosure.........................................................49
5.19. Swaps..............................................................49
5.19. Conflicting Agreements.............................................49
5.21. Application of Certain Laws and Regulations........................49
5.21. Business and Property of Borrowers.................................49
5.23. Year 2000..........................................................49
5.24. Section 20 Subsidiaries............................................50
VI. AFFIRMATIVE COVENANTS 50
6.1. Payment of Fees....................................................50
ii
89
6.2. Conduct of Business and Maintenance of Existence and Assets........50
6.3. Violations.........................................................50
6.4. Government Receivables.............................................50
6.5. Net Worth..........................................................51
6.6. Execution of Supplemental Instruments..............................51
6. 7. Payment of Indebtedness............................................51
6. 8. Standards of Financial Statements..................................51
VII. NEGATIVE COVENANTS. 51
7.1. Merger, Consolidation, Acquisition and Sale of Assets..............51
7.2. Creation of Liens..................................................52
7.3. Guarantees.........................................................52
7.4. Investments........................................................52
7.5. Loans..............................................................52
7.6. Capital Expenditures...............................................52
7.7. Dividends..........................................................52
7.8. Indebtedness.......................................................53
7.9. Nature of Business.................................................53
7.10. Transactions with Affiliates.......................................53
7.11. Leases.............................................................53
7.12. Subsidiaries.......................................................53
7.13. Fiscal Year and Accounting Changes.................................53
7.14. Pledge of Credit...................................................53
7.15. Amendment of Articles of Incorporation, By-Laws....................53
7.16. Compliance with ERISA..............................................53
7.17. Prepayment of Indebtedness.........................................54
VIII. CONDITIONS PRECEDENT. 54
8.1. Conditions to Initial Advances.....................................54
(a) Note.........................................................54
(b) Filings, Registrations and Recordings.........................54
(c) Corporate Proceedings of Borrowers............................54
(d) Incumbency Certificates of Borrowers..........................55
(e) Certificates..................................................55
(f) Good Standing Certificates....................................55
(g) Legal Opinion.................................................55
(h) No Litigation.................................................55
(i) Financial Condition Certificates..............................55
(j) Collateral Examination........................................56
(k) Fees..........................................................56
(l) Pro Forma Financial Statements................................56
(m) Insurance.....................................................56
[(n) Title Insurance..............................................56
[(o) Environmental Reports........................................56
(p) Payment Instructions..........................................56
(q) Blocked Accounts..............................................56
(r) Consents......................................................56
(s) No Adverse Material Change....................................57
(t) Leasehold Agreements..........................................57
(u) Mortgage......................................................57
iii
90
[(v) Other Documents..............................................57
(x) Contract Review...............................................57
[(y) Closing Certificate..........................................57
[(z) Borrowing Base...............................................57
[(aa) Undrawn Availability........................................57
(bb) Other........................................................58
8.2. Conditions to Each Advance.........................................58
(a) Representations and Warranties................................58
(b) No Default....................................................58
(c) Maximum Advances..............................................58
[8.3. Conditions to Each Equipment Loan..................................58
IX. INFORMATION AS TO BORROWER 58
9.1. Disclosure of Material Matters.....................................59
9.2. Schedules..........................................................59
9.3. Environmental Reports..............................................59
9.4. Litigation.........................................................59
9.5. Material Occurrences...............................................59
9.6. Government Receivables.............................................60
9.7. Annual Financial Statements........................................60
9.8. Quarterly Financial Statements.....................................60
9.9. Monthly Financial Statements.......................................61
9.10. Other Reports......................................................61
9.11. Additional Information.............................................61
9.12. Projected Operating Budget.........................................61
9.13. Variances From Operating Budget....................................62
9.14. Notice of Suits, Adverse Events....................................62
9.15. ERISA Notices and Requests.........................................62
9.16. Additional Documents...............................................63
X. EVENTS OF DEFAULT 63
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT 65
11.1. Rights and Remedies................................................65
11.2. Agent's Discretion.................................................66
11.3. Setoff.............................................................66
11.4. Rights and Remedies not Exclusive..................................66
XII. WAIVERS AND JUDICIAL PROCEEDINGS 66
12.1. Waiver of Notice...................................................67
12.2. Delay..............................................................67
12.3. Jury Waiver........................................................67
XIII. EFFECTIVE DATE AND TERMINATION 67
13.1. Term...............................................................67
13.2. Termination........................................................68
iv
91
XIV. REGARDING AGENT 68
14.1. Appointment........................................................68
14.2. Nature of Duties...................................................68
14.3. Lack of Reliance on Agent and Resignation..........................69
14.4. Certain Rights of Agent............................................69
14.5. Reliance...........................................................69
14.6. Notice of Default..................................................70
14.7. Indemnification....................................................70
14.8. Agent in its Individual Capacity...................................70
14.9. Delivery of Documents..............................................70
14.10. Borrowers' Undertaking to Agent....................................70
XV. BORROWING AGENCY 71
15.1. Borrowing Agency Provisions........................................71
15.2. Waiver of Subrogation..............................................71
XVI. MISCELLANEOUS 72
16.1. Governing Law......................................................72
16.2. Entire Understanding...............................................72
16.3. Successors and Assigns; Participations; New Lenders................74
16.4. Application of Payments............................................76
16.5. Indemnity..........................................................76
16.6. Notice.............................................................76
16.7. Survival...........................................................78
16.8. Severability.......................................................78
16.9. Expenses...........................................................79
16.10. Injunctive Relief..................................................79
16.11. Consequential Damages..............................................79
16.12. Captions...........................................................79
16.13. Counterparts; Telecopied Signatures................................79
16.14. Construction.......................................................79
16.15. Confidentiality; Sharing Information...............................79
16.16. Publicity..........................................................80
v
92
List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) .......................................Revolving Credit Note
Exhibit 2.4(a) ...................................................Term Note
Exhibit 2.4(b) ..............................................Equipment Note
Exhibit 5.5(b) .......................................Financial Projections
Exhibit 8.1(k) .............................Financial Condition Certificate
Exhibit 16.3 ................................Commitment Transfer Supplement
Exhibit A .......................................Borrowing Base Certificate
Schedules
Schedule 1.2 ........................................Permitted Encumbrances
Schedule 4.5 .............................Equipment and Inventory Locations
Schedule 4.15(c) .............................Location of Executive Offices
Schedule 4.19 ................................................Real Property
Schedule 5.2(a) ..................States of Qualification and Good Standing
Schedule 5.2(b) ...............................................Subsidiaries
Schedule 5.4 .............................Federal Tax Identification Number
Schedule 5.6 ...................................................Prior Names
Schedule 5.7 .................................................Environmental
Schedule 5.8(b) .................................................Litigation
Schedule 5.8(d) ......................................................Plans
Schedule 5.9 ..........Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 .........................................Licenses and Permits
Schedule 5.14 ...............................................Labor Disputes
Schedule 7.3 ....................................................Guarantees