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FLEET CAPITAL CORPORATION, AS ADMINISTRATIVE AND
COLLATERAL AGENT
AND
FLEET CAPITAL CORPORATION, AS LENDER
AND
EXECUTONE INFORMATION SYSTEMS, INC., AS BORROWER
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LOAN AND SECURITY AGREEMENT
Dated: As of August 14, 1998
$30,000,000
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TABLE OF CONTENTS
SECTION 1. CREDIT FACILITY.................................................................1
1.1. REVOLVING CREDIT LOANS..................................................................1
1.1.1. Loans and Reserves..................................................................1
1.1.2. Use of Proceeds.....................................................................1
1.2. LETTERS OF CREDIT; LC GUARANTIES........................................................2
1.2.1. Request for Letter of Credit........................................................2
1.2.2. Description of Letters of Credit....................................................2
1.2.3. Indemnification.....................................................................2
1.2.4. Agent's Instructions................................................................3
1.2.5. Disbursements.......................................................................3
1.2.6. Reimbursement Obligation............................................................3
1.2.7. Lender's Reimbursement Obligations..................................................3
1.2.8. Cash Collateral.....................................................................4
1.2.9. Waiver of Liability.................................................................4
SECTION 2. INTEREST, FEES AND CHARGES.......................................................5
2.1. INTEREST................................................................................5
2.1.1. Rates of Interest...................................................................5
2.1.2. Default Rate........................................................................5
2.1.3. Maximum Interest....................................................................5
2.2. COMPUTATION OF INTEREST AND FEES........................................................6
2.3. CLOSING FEE.............................................................................6
2.4. LETTER OF CREDIT AND LC GUARANTY FEES...................................................6
2.5. UNUSED LINE FEE.........................................................................6
2.6. REIMBURSEMENT OF EXPENSES...............................................................7
2.7. BANK CHARGES............................................................................7
SECTION 3. LOAN ADMINISTRATION..............................................................7
3.1. MANNER OF BORROWING REVOLVING CREDIT LOANS..............................................8
3.1.1. Loan Requests; Payment..............................................................8
3.1.2. Disbursement.......................................................................10
3.1.3. Authorization......................................................................11
3.1.4. Eurodollar Loans and LIBOR Rate Loans..............................................11
3.1.5. Interest Periods...................................................................11
3.1.6. Conversion of Loans................................................................11
3.1.7. Continuation of Eurodollar Loans...................................................12
3.1.8. Prepayment of Eurodollar Loans.....................................................12
3.1.9. Indemnification....................................................................12
3.1.10.Inability to Make Eurodollar Loans.................................................13
3.2. PAYMENTS...............................................................................13
3.2.1. Principal..........................................................................13
3.2.2. Interest...........................................................................13
3.2.3. Costs, Fees and Charges............................................................14
3.2.4. Other Obligations..................................................................14
3.2.5. Voluntary Prepayments..............................................................14
3.3. MANDATORY PREPAYMENTS..................................................................14
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation of Collateral; Extraordinary
Receipts..................................................................................14
3.4. APPLICATION OF PAYMENTS AND COLLECTIONS................................................15
3.5. ALL LOANS TO CONSTITUTE ONE OBLIGATION.................................................15
3.6. LOAN ACCOUNT...........................................................................15
3.7. STATEMENTS OF ACCOUNT..................................................................15
3.8. INCREASED COSTS........................................................................15
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3.9. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR...............................16
3.10. CAPITAL ADEQUACY.....................................................................17
3.10.1.Certificate........................................................................17
SECTION 4. TERM AND TERMINATION............................................................18
4.1. TERM OF AGREEMENT......................................................................18
4.2. TERMINATION............................................................................18
4.2.1. Termination by Lenders.............................................................18
4.2.2. Termination by Borrower............................................................18
4.2.3. Termination Charges................................................................18
4.2.4. Effect of Termination..............................................................18
SECTION 5. SECURITY INTERESTS..............................................................19
5.1. SECURITY INTEREST IN COLLATERAL........................................................19
5.2. LIEN PERFECTION; FURTHER ASSURANCES....................................................19
SECTION 6. COLLATERAL ADMINISTRATION.......................................................20
6.1. GENERAL................................................................................20
6.1.1. Location of Collateral.............................................................20
6.1.2. Insurance of Collateral............................................................20
6.1.3. Protection of Collateral...........................................................20
6.2. ADMINISTRATION OF ACCOUNTS.............................................................20
6.2.1. Records, Schedules and Assignments of Accounts.....................................21
6.2.2. Discounts, Allowances, Disputes....................................................21
6.2.3. Taxes..............................................................................22
6.2.4. Account Verification...............................................................22
6.2.5. Maintenance of Dominion Account....................................................22
6.2.6. Collection of Accounts, Proceeds of Collateral.....................................22
6.3. ADMINISTRATION OF INVENTORY............................................................22
6.3.1. Records and Reports of Inventory...................................................22
6.3.2. Returns of Inventory...............................................................23
6.4. ADMINISTRATION OF EQUIPMENT............................................................23
6.4.1. Records and Schedules of Equipment.................................................23
6.4.2. Dispositions of Equipment..........................................................23
6.5. PAYMENT OF CHARGES.....................................................................23
6.6. ADDITIONAL PAYMENTS....................................................................23
SECTION 7. REPRESENTATIONS AND WARRANTIES..................................................23
7.1. GENERAL REPRESENTATIONS AND WARRANTIES.................................................23
7.1.1. Organization and Qualification.....................................................24
7.1.2. Power and Authority................................................................24
7.1.3. Legally Enforceable Agreement......................................................24
7.1.4. Capital Structure..................................................................24
7.1.5. Corporate Names....................................................................25
7.1.6. Business Locations; Agent for Process..............................................25
7.1.7. Title to Properties; Priority of Liens.............................................25
7.1.8. Accounts...........................................................................25
7.1.9. Equipment..........................................................................26
7.1.10.Financial Statements; Fiscal Year..................................................26
7.1.11.Full Disclosure....................................................................27
7.1.12.Solvent Financial Condition........................................................27
7.1.13.Surety Obligations.................................................................27
7.1.14.Taxes..............................................................................27
7.1.15.Brokers............................................................................27
7.1.16.Patents, Trademarks, Copyrights and Licenses.......................................27
7.1.17.Governmental Consents..............................................................27
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7.1.18.Compliance with Laws...............................................................28
7.1.19.Restrictions.......................................................................28
7.1.20.Litigation.........................................................................28
7.1.21.No Defaults........................................................................28
7.1.22.Leases.............................................................................28
7.1.23.Pension Plans......................................................................28
7.1.24.Trade Relations....................................................................29
7.1.25.Labor Relations....................................................................29
7.1.26.O.S.H.A. and Environmental Compliance..............................................29
7.2. CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES....................................30
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................30
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS.............................................30
8.1. AFFIRMATIVE COVENANTS..................................................................30
8.1.1. Visits and Inspections.............................................................30
8.1.2. Notices............................................................................30
8.1.3. Financial Statements...............................................................30
8.1.4. Landlord and Storage Agreements....................................................31
8.1.5. Credit Memoranda...................................................................32
8.1.6. Projections........................................................................32
8.1.7. Environmental Matters..............................................................32
8.1.8. License Agreements.................................................................34
8.1.9. Landlord Waivers...................................................................34
8.2. NEGATIVE COVENANTS.....................................................................35
8.2.1. Mergers; Consolidations; Acquisitions..............................................35
8.2.2. Loans..............................................................................35
8.2.3. Total Indebtedness.................................................................35
8.2.4. Affiliate Transactions.............................................................36
8.2.5. Limitation on Liens................................................................36
8.2.6. Subordinated Debt..................................................................36
8.2.7. Distributions......................................................................37
8.2.8. Capital Expenditures...............................................................37
8.2.9. Disposition of Assets..............................................................37
8.2.10.Bill-and-Hold Sales, Etc...........................................................37
8.2.11.Restricted Investment..............................................................37
8.2.12.Leases.............................................................................37
8.2.13.Tax Consolidation..................................................................37
8.2.14.Stock of Subsidiaries..............................................................37
8.3. SPECIFIC FINANCIAL COVENANTS...........................................................38
8.3.1. Minimum Net Worth..................................................................38
8.3.2. Cash Flow..........................................................................38
8.3.3. Adjusted Cash Flow.................................................................38
SECTION 9. CONDITIONS PRECEDENT............................................................38
9.1. DOCUMENTATION..........................................................................39
9.2. NO DEFAULT.............................................................................39
9.3. OTHER LOAN DOCUMENTS...................................................................39
9.4. FILINGS, REGISTRATIONS AND RECORDINGS..................................................39
9.5. PROCEEDINGS OF CORPORATE PARTIES.......................................................39
9.6. INCUMBENCY CERTIFICATES OF EACH CORPORATE PARTY........................................39
9.7. CERTIFICATES...........................................................................39
9.8. GOOD STANDING CERTIFICATES.............................................................40
9.9. LEGAL OPINION..........................................................................40
9.10. NO LITIGATION........................................................................40
9.11. INFORMATION; COLLATERAL EXAMINATION..................................................40
9.12. FEES.................................................................................40
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9.13. INSURANCE............................................................................40
9.14. PAYMENT INSTRUCTIONS.................................................................41
9.15. NO ADVERSE MATERIAL CHANGE...........................................................41
9.16. CONTRACT REVIEW......................................................................41
9.17. ENVIRONMENTAL REPORTS................................................................41
9.18. LEASEHOLD AGREEMENTS.................................................................41
9.19. CONSENTS.............................................................................41
9.20. FINANCIAL CONDITION CERTIFICATES.....................................................41
9.21. CLOSING CERTIFICATE..................................................................42
9.22. SUBSIDIARY STOCK.....................................................................42
9.23. CORPORATE STRUCTURE..................................................................42
9.24. ERISA................................................................................42
9.25. AVAILABILITY.........................................................................42
9.26. OTHER................................................................................42
9.27. CONDITIONS TO EACH LOAN..............................................................42
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT...............................43
10.1. EVENTS OF DEFAULT....................................................................43
10.1.1.Payment of Obligations.............................................................43
10.1.2.Misrepresentations.................................................................43
10.1.3.Breach of Specific Covenants.......................................................43
10.1.4.Breach of Other Covenants..........................................................43
10.1.5.Default Under Security Documents/Other Agreements..................................44
10.1.6.Other Defaults.....................................................................44
10.1.7.Insolvency and Related Proceedings.................................................44
10.1.8.Business Disruption; Condemnation..................................................44
10.1.9.ERISA..............................................................................44
10.1.10. Challenge to Agreement..........................................................44
10.1.11. Criminal Forfeiture.............................................................45
10.1.12. Judgments.......................................................................45
10.1.13. Repudiation of or Default Under Guaranty Agreement..............................45
10.2. ACCELERATION OF THE OBLIGATIONS......................................................45
10.3. OTHER REMEDIES.......................................................................45
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10.4. REMEDIES CUMULATIVE; NO WAIVER.......................................................46
SECTION 11. REGARDING AGENT.................................................................47
11.1. APPOINTMENT.........................................................................47
11.2. NATURE OF DUTIES....................................................................47
11.3. LACK OF RELIANCE ON AGENT AND RESIGNATION...........................................48
11.4. CERTAIN RIGHTS OF AGENT.............................................................48
11.5. RELIANCE............................................................................48
11.6. NOTICE OF DEFAULT...................................................................49
11.7. INDEMNIFICATION.....................................................................49
11.8. AGENT IN ITS INDIVIDUAL CAPACITY....................................................49
11.9. DELIVERY OF DOCUMENTS...............................................................49
11.10. BORROWER'S UNDERTAKING TO AGENT.....................................................50
SECTION 12. MISCELLANEOUS..................................................................50
12.1. POWER OF ATTORNEY...................................................................50
12.2. INDEMNITY...........................................................................51
12.3. MODIFICATION OF AGREEMENT...........................................................51
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12.4. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.................................52
12.5. SEVERABILITY........................................................................54
12.6. SUCCESSORS AND ASSIGNS..............................................................54
12.7. CUMULATIVE EFFECT; CONFLICT OF TERMS................................................54
12.8. EXECUTION IN COUNTERPARTS...........................................................54
12.9. NOTICE..............................................................................54
12.10. LENDERS' CONSENT....................................................................55
12.11. CREDIT INQUIRIES....................................................................55
12.12. TIME OF ESSENCE.....................................................................55
12.13. ENTIRE AGREEMENT....................................................................55
12.14. INTERPRETATION......................................................................56
12.15. GOVERNING LAW; CONSENT TO FORUM.....................................................56
12.16. WAIVERS BY BORROWER...............................................................57
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LIST OF EXHIBITS AND SCHEDULES
Exhibit 1.1 Revolving Note
Exhibit 1.3 Term Note
Exhibit 6.1.1 Location of Collateral
Exhibit 7.1.1 Authorization To Do Business Jurisdictions
Exhibit 7.1.4 Capital Structure of Borrower
Exhibit 7.1.5 Corporate Names
Exhibit 7.1.6 Business Locations of Borrower and Subsidiaries
Exhibit 7.1.10(b) Financial Projections
Exhibit 7.1.13 Surety Obligations
Exhibit 7.1.14 Tax Identification Numbers of Subsidiaries
Exhibit 7.1.15 Broker Commissions and Fees
Exhibit 7.1.16 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.19 Contracts Restricting Borrower's Right to Incur Debts
Exhibit 7.1.20 Litigation
Exhibit 7.1.22(A) Capitalized Leases
Exhibit 7.1.22(B) Operating Leases
Exhibit 7.1.23 Pension Plans
Exhibit 7.1.25 Labor Contracts
Exhibit 7.1.26 Environmental Compliance
Exhibit 8.1.3 Compliance Certificate
Exhibit 8.2.4 Affiliate Transactions
Exhibit 8.2.5 Permitted Liens
Exhibit 9.10 Litigation
Exhibit 12.4 Commitment Transfer Supplement
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made as of the 14th day of August,
1998, by and among the undersigned financial institutions and the various
financial institutions which in accordance with the provisions of SECTION
12.4(iii) become Purchasing Lenders (collectively, "Lenders" and individually, a
"Lender") and FLEET CAPITAL CORPORATION ("Fleet"), a Rhode Island corporation
with an office at 200 Glastonbury Boulevard, Glastonbury, Connecticut 06033, as
administrative and collateral agent for Lenders (Fleet, in such capacity,
"Agent") and EXECUTONE INFORMATION SYSTEMS, INC. ("Borrower"), a Virginia
corporation. Capitalized terms used in this Agreement have the meanings assigned
to them in APPENDIX A, GENERAL DEFINITIONS. Accounting terms not otherwise
specifically defined herein shall be construed in accordance with GAAP
consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, each Lender severally and not jointly agrees to make a Total Credit
Facility in an amount equal to such Lender's Commitment Percentage of up to
$30,000,000.00 available to Borrower upon request therefor, as follows:
1.1. Revolving Credit Loans.
1.1.1. Loans and Reserves. Each Lender severally and not jointly
agrees, for so long as no Default or Event of Default exists, to make Revolving
Credit Loans to Borrower from time to time, as requested by Borrower in the
manner set forth in SUBSECTIONS 3.1.1 and 3.1.4 hereof, up to a maximum
principal amount at any time outstanding equal to such Lender's Commitment
Percentage of the Borrowing Base. Notwithstanding the foregoing, Agent shall
have the right to establish reserves in such amounts and with respect to such
matters, as Agent shall deem necessary or appropriate in the exercise of its
commercially reasonable judgment, against the amount of Revolving Credit Loans
which Borrower may otherwise request hereunder, including, without limitation,
the Specified Reserve (any such sums, the "Reserves"). The Revolving Credit
Loans shall be evidenced by and subject to the terms and conditions set forth in
those certain secured promissory notes (each, a "Revolving Note" and
collectively, the "Revolving Notes"), a copy of the form of which is attached
hereto as EXHIBIT 1.1.
1.1.2. Use of Proceeds. The Revolving Credit Loans shall be used
to provide for (a) ongoing working capital requirements of Borrower in a manner
consistent with the provisions of this Agreement and all applicable laws, (b)
the general corporate purposes of Borrower in a manner consistent with the
provisions of this Agreement and all applicable laws, (c) the payment of
transaction expenses in connection herewith and (d) the Specified Capital
Contribution
1.2. Letters of Credit; LC Guaranties. Agent agrees, for so long as no
Default or Event of Default exists and if requested by Borrower to (i) issue
its, or cause to be issued its Affiliate's, Letters of Credit for the account of
Borrower or (ii) execute LC Guaranties by which Agent or its Affiliate shall
guaranty the payment or performance by Borrower of its reimbursement obligations
with respect to Letters of Credit and letters of credit issued for Borrower's
account by other Persons in support of Borrower's obligations (other than
obligations for the repayment of Money Borrowed), provided that the Aggregate LC
Amount at any time shall not exceed $10,000,000. Any amounts paid by Agent or
Lenders under any LC Guaranty or in connection with any Letter of Credit shall
be treated as Revolving Credit Loans, shall be secured by all of the Collateral
and shall bear interest and be payable at the same rate and in the same manner
as Revolving Credit Loans.
1.2.1. Request for Letter of Credit. Borrower may request Agent
to issue or cause to be issued by Bank (or such other financial institution as
may be acceptable to Agent) a Letter of Credit by delivering to Agent the
applicable commercial letter of credit application (the "Letter of Credit
Application"), completed to the reasonable satisfaction of Agent and such other
certificates, documents and other papers and information as Agent may reasonably
request.
1.2.2. Description of Letters of Credit. Each Letter of Credit
shall, among other things, (i) provide for the payment of sight or time drafts
when presented for honor thereunder in accordance with the terms thereof and
when accompanied by the documents described therein and (ii) have an expiry date
occurring not later than the earlier of (1) sixty days prior to the last day of
the Original Term or (2)(a) for standby Letters of Credit, 12 months after such
Letter of Credit's date of issuance (subject to 12 month renewal periods) and
(b) for any Letter of Credit that is not a standby Letter of Credit, 180 days
after such Letter of Credit's date of issuance. Each Letter of Credit
Application and 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 and, to the
extent not inconsistent therewith, the laws of the State of New York.
1.2.3. Indemnification. In connection with the issuance or
creation of the LC Guaranties and any Letter of Credit, Borrower hereby
indemnifies, saves and holds Agent and each Lender harmless from any loss, cost,
expense or liability, including, without limitation, payments made by Agent and
each Lender, and expenses and reasonable attorneys' fees incurred by Agent and
each Lender arising out of, or in connection with the LC Guaranties and any
Letter of Credit to be issued or created for Borrower except to the extent any
loss, cost, expense or liability is attributable to Agent's or any Lender's or
the Bank's gross negligence or willful misconduct or that of its correspondents.
Borrower shall be bound by Agent's or any Lender's or any Issuing Bank's
regulations and good faith interpretations of any Letter of Credit issued or
created for Borrower's account, although this interpretation may be different
from Borrower's own, and neither Agent, any Lender, nor the Issuing Bank, nor
any of its correspondents shall be liable for any error, negligence and/or
mistakes, whether of omission or commission, in following Borrower's
instructions or those contained in the LC Guaranties or any Letter of Credit of
any modifications, amendments or supplements thereto or in creating or paying
any Letter of Credit or the LC Guaranties, except for Agent's or any Lender's
gross negligence or willful misconduct or that of its correspondents.
2
1.2.4. Agent's Instructions. Borrower shall authorize and direct
Bank or any other bank or financial institution which issues a Letter of Credit
(an "Issuing Bank") to name Borrower as the "Account Party" therein and to
deliver to Agent, with a copy to Borrower, all instruments, documents, and other
writings and property received by the Issuing Bank 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
Letter of Credit Application therefor or any acceptance thereof.
1.2.5. Disbursements. Agent will notify Borrower promptly of any
demand for payment under the LC Guaranties and the presentment for payment under
a Letter of Credit, following receipt by it of notification from the Issuing
Bank of such presentment, together with notice of the date such payment was
made. All disbursements shall be deemed irrevocably to be a request by Borrower
for a Revolving Credit Loan on the date such disbursement was made.
1.2.6. Reimbursement Obligation. Borrower's obligation to
reimburse Agent for disbursements described in SUBSECTION 1.2.5 shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which Borrower may have against
Agent, any Lender, the Issuing Bank or the beneficiary of the Letter of Credit
(except in the event of such party's gross negligence or willful misconduct),
including, without limitation, any defense based upon any draft, demand or
certificate or other document presented under the Letter of Credit proving to be
forged, fraudulent, invalid or insufficient, the failure of any disbursement or
payment by the Issuing Bank under the Letter of Credit ("Bank Payment") to
conform to the terms of the Letter of Credit (if, in the Issuing Bank's good
faith opinion such disbursement or Bank Payment is determined to be appropriate
and other than as a consequence of Agent's or the Issuing Bank's gross
negligence or willful misconduct) or any non-application or misapplication by
the beneficiary of the proceeds of such disbursement or Bank Payment or the
legality, validity, form, regularity or enforceability of the Letter of Credit.
1.2.7. Lender's Reimbursement Obligations. 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 disbursements made with
respect to the Letters of Credit and LC Guaranties be deemed to have irrevocably
purchased an undivided participation in each Revolving Credit Loan made as a
consequence of such disbursement. In the event that at the time a disbursement
is made the unpaid balance of Revolving Credit Loans plus the Aggregate LC
Amount exceeds or would exceed, with the making of such disbursement, the
Maximum Revolving Amount, and the amount in excess of the Maximum Revolving
Amount is not reimbursed by Borrower 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 Commitment Percentage of such unreimbursed disbursement
together with such Lender's Commitment Percentage of Agent's unreimbursed costs
and expenses relating to such unreimbursed disbursement. Upon receipt by Agent
of a repayment from 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 Commitment Percentage of such repayment. Each Lender's participation
commitment with respect to Letters of Credit and LC Guaranties shall continue
until the last to occur of the following events: (A) Agent ceases to be
obligated to issue or cause the issuance of Letters of Credit and LC Guaranties;
(B) no Letter of Credit or LC Guaranty issued hereunder remains outstanding and
uncancelled and (C) all Persons including Agent (other
3
than Borrower) have been fully reimbursed for all payments made under or
relating to Letters of Credit or LC Guaranties.
1.2.8. Cash Collateral. Upon the occurrence and during the
continuation of any Event of Default, at the option of Agent, Borrower will pay
to Agent, for the ratable benefit of Lenders, cash in an amount equal to the
undrawn face amount of the Letters of Credit. Such cash shall be held by Agent
in a cash collateral account (the "Cash Collateral Account"). The Cash
Collateral Account shall be maintained at a bank designated by Agent, which
shall be (i) any domestic commercial bank having capital and surplus in excess
of $100,000,000 or (ii) an Affiliate of Agent, if an Affiliate of Agent then
maintains a presence as a bank in the United States of America, in the name of
Agent as secured party, and shall be under the sole dominion and control of
Agent and subject to the terms of this SUBSECTION 1.2.8. Borrower hereby
pledges, and grants to Agent a security interest in, all such cash and other
amounts held in the Cash Collateral Account from time to time and all earnings
thereof and proceeds thereon, as security for the payment of all Obligations.
Amounts in the Cash Collateral Account shall be invested in securities of the
type described in clauses (iii), (iv) and (v) of the definition of Restricted
Investments, and interest and earnings on the Cash Collateral Account shall be
the property of Borrower but shall be held in the Cash Collateral Account as
Collateral, provided that Agent shall release from the Cash Collateral Account
and return to Borrower any funds remaining in the Cash Collateral Account upon
satisfaction in full of the Obligations. At such time when all Events of Default
shall have been cured or waived, Agent shall return any monies then remaining in
the Cash Collateral Account. If at any time, and from time to time, the
aggregate amount of the Cash Collateral Account exceeds the maximum liability,
fixed or contingent, of Agent with respect to the aggregate face amount of all
Letters of Credit then issued and outstanding, Agent shall return any excess to
Borrower.
1.2.9. Waiver of Liability. Borrower shall assume all risks of
the acts, omissions or misuse of any Letter of Credit by the beneficiary
thereof. None of Agent, any Lender or any Issuing Bank (except in the event of
its own gross negligence or willful misconduct) shall be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of the Letter of Credit or any document submitted by any
party in connection with the application for and issuance of any Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring or assigning
or purporting to transfer or assign the Letter of Credit or the rights
or benefits thereunder or proceeds thereof in whole or in part, which
may prove to be invalid or ineffective for any reason;
(iii) errors, omissions, interruptions or delays in
transmission or delivery of any messages by mail, cable, telegraph,
telex or otherwise; or
(iv) any loss or delay in the transmission or otherwise of
any document or draft required in order to make a disbursement.
4
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted Agent hereunder. In furtherance, and not in limitation
or derogation of any of the foregoing, any action taken or omitted to be taken
by the Issuing Bank, Agent or any Lender in good faith in the absence of gross
negligence or willful misconduct, shall be binding upon Borrower and shall not
put the Issuing Bank, Agent or any Lender, as the case may be, under any
resulting liability therefor.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
2.1.1. Rates of Interest. Interest shall accrue on the principal
amount of Base Rate Loans outstanding at the end of each day (computed on the
actual days elapsed over a year of 360 days) at a fluctuating rate per annum
equal to the Base Rate plus the Applicable Margin. After the date hereof, the
foregoing rate of interest shall be increased or decreased, as the case may be,
by an amount equal to any increase or decrease in the Base Rate, with such
adjustments to be effective as of the opening of business on the day that any
such change in the Base Rate becomes effective. The Base Rate in effect on the
date hereof shall be the Base Rate effective as of the opening of business on
the date hereof, but if this Agreement is executed on a day that is not a
Business Day, the Base Rate in effect on the date hereof shall be the Base Rate
effective as of the opening of business on the last Business Day immediately
preceding the date hereof. Interest shall accrue on the principal amount of the
Eurodollar Loans outstanding at the end of each day (computed on the actual days
elapsed over a year of 360 days) at a fluctuating rate per annum equal to the
Eurodollar Rate plus the Applicable Margin. Interest shall accrue on the
principal amount of the LIBOR Rate Loans outstanding at the end of each day
(computed on the actual days elapsed over a year of 360 days) at a fluctuating
rate per annum equal to the LIBOR Rate plus the Applicable Margin.
2.1.2. Default Rate. Upon the occurrence of an Event of Default
and during the continuation thereof, the applicable interest rate on the
principal amount of all Loans and all Letter of Credit Fees shall increase by
2.0% per annum (the "Default Rate").
2.1.3. Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder and charged or collected
pursuant to the terms of this Agreement exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If any provisions of this Agreement are
in contravention of any such law, such provisions shall be deemed amended to
conform thereto.
2.2. Computation of Interest and Fees. Letter of Credit and LC Guaranty
fees and unused line fees and collection charges hereunder shall be calculated
daily and shall be computed on the actual number of days elapsed over a year of
360 days. For the purpose of computing interest hereunder, all items of payment
received by Agent shall be deemed applied by Agent on account of the Obligations
(subject to final payment of such items) on the first Business Day following the
Business Day Agent receives such items in Agent's account located at Fleet
National Bank, Hartford, Connecticut, ABA #011900571, Account #936-933-7579,
Reference: Executone.
2.3. Closing Fee. Borrower shall pay to Agent for its own account and
not for the benefit of Lenders a closing fee of $150,000, which shall be fully
earned and nonrefundable on the
5
Closing Date and shall be paid (a) $75,000 concurrently with the initial Loan
hereunder and (b) $75,000 on the six month anniversary date of the Closing Date.
2.4. Letter of Credit and LC Guaranty Fees. (a) Borrower shall pay to
Agent, for the account of Lenders, a letter of credit commission with respect to
each Letter of Credit (including those for which an LC Guaranty has been issued)
computed for the period from and including the date of issuance of such Letter
of Credit to the date such Letter of Credit is no longer outstanding, computed
at a rate per annum equal to (i) with respect to standby Letters of Credit, one
and three-quarters percent (1.75%) and (ii) with respect to documentary Letters
of Credit, one percent (1.0%), in each case on the average aggregate daily
amount available to be drawn under such Letter of Credit for the period as to
which payment of such commission is made, payable quarterly in arrears on each
Letter of Credit Fee Payment Date to occur while such Letter of Credit remains
outstanding and on the date such Letter of Credit expires or is cancelled.
(b) In addition to the foregoing fees and commissions,
Borrower shall pay to Agent all such normal and customary costs and expenses as
are incurred by Agent for issuing, causing the issuance of, negotiating,
effecting payment under, amending or otherwise administering any Letter of
Credit or LC Guaranty.
2.5. Unused Line Fee. Borrower shall pay to Agent for the ratable
benefit of Lenders a fee equal to .40% per annum of the average monthly amount
by which the Maximum Revolving Amount exceeds the sum of the outstanding
principal balance of the Revolving Credit Loans and the Aggregate LC Amount. The
unused line fee shall be payable quarterly in arrears commencing on the first
day of the first Fiscal Quarter following the Closing Date and on the first day
of each Fiscal Quarter thereafter and on the last day of the Original Term or
upon earlier termination of the Agreement. Commencing January 1, 1999 and as of
January 1 in each Fiscal Year thereafter, the unused line fee payable under this
SECTION 2.5 shall be subject to change and shall be fixed as set forth below for
such Fiscal Year based upon the Fixed Charge Coverage Ratio for the immediately
preceding Fiscal Year as set forth below:
Fixed Charge Coverage Unused Line Fee
--------------------- ---------------
Equal to or less than 1.00:1.00 .50%
-------------------------------------------- ------------------------------------------
Greater than 1.00:1.00 but less than .45%
1.25:1.00
-------------------------------------------- ------------------------------------------
Greater than or equal to 1.25:1.00 but .40%
less than 1.50:1.00
-------------------------------------------- ------------------------------------------
Greater than or equal to 1.50:1.00 but .35%
less than 2.00:1.00
-------------------------------------------- ------------------------------------------
Greater than or equal to 2.00:1.00 but .30%
less than 2.50:1.00
-------------------------------------------- ------------------------------------------
Greater than 2.50:1.00 .25%
-------------------------------------------- ------------------------------------------
6
2.6. Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Agent (in its capacity as Agent)
incurs legal or accounting expenses or any other costs or out-of-pocket expenses
in connection with (i)(a) the negotiation and preparation of this Agreement or
any of the other Loan Documents, (b) any amendment of or modification of this
Agreement or any of the other Loan Documents, or (c) any sale or attempted sale
of any interest herein by any Lender to a Purchasing Lender; (ii) the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Agent, any Lender,
Borrower or any other Person) in any way relating to the Collateral, this
Agreement or any of the other Loan Documents or Borrower's affairs; (iv) any
attempt to enforce any rights of Agent or any Lender against Borrower or any
other Person which may be obligated to Agent or any Lender by virtue of this
Agreement or any of the other Loan Documents, including, without limitation, the
Account Debtors; or (v) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then all such legal and accounting expenses, other costs and out of
pocket expenses of Agent shall be charged to Borrower. All amounts chargeable to
Borrower under this SECTION 2.6 shall be Obligations secured by all of the
Collateral, shall be payable on demand to Agent and shall bear interest from the
date such demand is made until paid in full at the rate applicable to Base Rate
Loans from time to time. Borrower shall also reimburse Agent for expenses
incurred by Agent in its administration of the Collateral to the extent and in
the manner provided in SECTION 6 hereof.
2.7. Bank Charges. Borrower shall pay to Agent, on demand, any and all
fees, costs or expenses which Agent pays to a bank or other similar institution
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of Borrower, by Agent, of proceeds of Loans made by Agent on
behalf of Lenders to Borrower pursuant to this Agreement and (ii) the depositing
for collection, by Agent, of any check or item of payment received or delivered
to Agent on account of the Obligations.
SECTION 3. LOAN ADMINISTRATION.
3.1. Manner of Borrowing Revolving Credit Loans. Borrowings under the
credit facility established pursuant to SECTION 1 hereof shall be as follows:
3.1.1. Loan Requests; Payment.
(i) A request for Revolving Credit Loans that are Base
Rate Loans shall be made, or shall be deemed to be made, in the following
manner: (1) Borrower may give Agent notice of its intention to borrow, in which
notice Borrower shall specify to Agent, the amount of the proposed borrowing and
the proposed borrowing date, no later than 11:00 A.M. New York time on the first
Business Day prior to the requested borrowing date with respect to Revolving
Credit Loans that are Base Rate Loans; provided, however, that no such request
may be made at a time when there exists an Event of Default; and (2) the
becoming due of any amount required to be paid under this Agreement, whether as
interest or for any other Obligation, shall be deemed irrevocably to be a
7
request by Borrower for a Revolving Credit Loan on the due date in the amount
required to pay such interest or other Obligation. Eurodollar Rate Loans and
LIBOR Rate Loans shall be requested in accordance with subsection 3.1.4 hereof.
As an accommodation to Borrower, Agent may permit telephonic requests for Loans
and electronic transmittal of instructions, authorizations, agreements or
reports to Agent by Borrower. Unless Borrower specifically directs Agent in
writing not to accept or act upon telephonic or electronic communications from
Borrower, Agent shall have no liability to Borrower for any loss or damage
suffered by Borrower as a result of Agent's good faith honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting to
have been sent to Agent by Borrower and Agent shall have no duty to verify the
origin of any such communication or the authority of the person sending it.
(ii) Each borrowing of Revolving Credit Loans shall be
advanced according to the Commitment Percentages of Lenders.
(iii) Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Revolving Credit
Loans shall be applied first, to Base Rate Loans, then to LIBOR Rate Loans pro
rata according to the applicable Commitment Percentages of Lenders, and then to
Eurodollar Loans pro rata according to the applicable Commitment Percentages of
Lenders.
(iv) Notwithstanding anything to the contrary contained
in the immediately preceding CLAUSES (ii) AND (iii), commencing with the first
Business Day following the Closing Date, each borrowing of Revolving Credit
Loans shall be advanced by Agent and each payment by Borrower on account of
Revolving Credit Loans shall be applied first to those Revolving Credit Loans
made by Agent. On or before 11:00 A.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 Credit Loans made by Agent during the preceding Week exceeds the
aggregate amount of repayments applied to outstanding Revolving Credit Loans
during such preceding Week, then each Lender shall provide Agent with funds in
an amount equal to its Commitment Percentage of the difference between (w) such
Revolving Credit Loans and (x) such repayments and (II) if the aggregate amount
of repayments applied to outstanding Revolving Credit Loans during such Week
exceeds the aggregate amount of new Revolving Credit Loans made during such
Week, then Agent shall provide each Lender with its Commitment Percentage of the
difference between (y) such repayments and (z) such Revolving Credit Loans.
(1) Each Lender shall be entitled to receive
disbursements of interest from Agent at the applicable rates of interest set
forth in SECTION 2.1. relating to outstanding Loans which it has funded.
(2) Promptly following each Settlement Date, Agent
shall submit to each Lender a certificate with respect to payments received and
Loans made during the Week immediately preceding such Settlement Date.
(v) If any Lender or Participating Lender (a "Benefited
Lender") shall at any time receive any payment of all or part of its Loans, 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
8
payment to and Collateral received by any other Lender, if any, in respect of
such other Lender's Loans, or interest thereon, and such greater proportionate
payment or receipt of Collateral is not expressly permitted hereunder, such
Benefited Lender shall purchase for cash from the other Lenders such portion of
each such other Lender's Loans, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefited 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 Loans 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.
(vi) 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 Commitment Percentage of the Loans available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Borrower a corresponding amount. Agent will promptly notify
Borrower of its receipt of any such notice from a Lender. If such amount is made
available to Agent on a date after a 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 (vi) 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 Credit Loans hereunder,
on demand from Borrower; provided, however, that Agent's right to such recovery
shall not prejudice or otherwise adversely affect Borrower's rights (if any)
against such Lender.
(vii) (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 Loan or (y) notifies either Agent or Borrower
that it does not intend to make available its portion of any Loan (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 SUBSECTION 3.1.1 (vii) while such Lender Default remains in
effect.
(b) Loans 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 Loans 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 Loans shall be applied to reduce the applicable Loans
of each Lender pro rata based on the aggregate of the outstanding Loans of that
type of all Lenders at the time of such application; provided that, such amount
shall not be applied to any Loans of a Defaulting
9
Lender at any time when, and to the extent that, the aggregate amount of Loans
of any Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment
Percentage of all Loans 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 Loan Documents. All amendments,
waivers and other modifications of this Agreement and the Loan Documents may be
made without regard to a Defaulting Lender and, solely for purposes of the
definition of "Required Lenders", a Defaulting Lender shall be deemed not to be
a Lender and not to have Loans outstanding.
(d) Other than as expressly set forth in this
SUBSECTION 3.1.1.(vii), 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 SUBSECTION 3.1.1(vii) shall be deemed to
release any Defaulting Lender from its obligations under this Agreement and the
Loan Documents, shall alter such obligations, shall operate as a waiver of any
default by such Defaulting Lender hereunder, or shall prejudice any rights which
Borrower, Agent or any other 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.
3.1.2. Disbursement. Borrower hereby irrevocably authorizes
Agent to disburse the proceeds of each Revolving Credit Loan requested, or
deemed to be requested, pursuant to this SUBSECTION 3.1.2 as follows: (i) the
proceeds of each Revolving Credit Loan requested under SUBSECTION 3.1.1(i)(1)
and SUBSECTION 3.1.4 shall be disbursed by Agent in lawful money of the United
States of America in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter from
Borrower, and in the case of each subsequent borrowing, by wire transfer to such
bank account as may be agreed upon by Borrower and Agent from time to time or
elsewhere if pursuant to a written direction from Borrower and (ii) the proceeds
of each Revolving Credit Loan requested under SUBSECTION 3.1.1(i)(2) shall be
disbursed by Agent by way of direct payment of the relevant interest or other
Obligation.
3.1.3. Authorization. Borrower hereby irrevocably authorizes
Agent, in Agent's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum sufficient
to pay all interest accrued on the Obligations and all principal coming due on
the Obligations during the immediately preceding month and to pay all costs,
fees and expenses at any time owed by Borrower to Agent and Lenders hereunder to
the extent such amounts are not paid when due.
3.1.4. Eurodollar Loans and LIBOR Rate Loans. Notwithstanding
the provisions of SUBSECTION 3.1.1, in the event Borrower desires to obtain a
Eurodollar Loan or LIBOR Rate Loan, Borrower shall give Agent prior written
irrevocable notice no later than 11:00 A.M. New York time on the 3rd Business
Day prior to the requested borrowing date specifying (i) Borrower's election to
obtain a Eurodollar Loan or a LIBOR Rate Loan, (ii) the date of the proposed
borrowing (which
10
shall be a Business Day) and (iii) the amount to be borrowed, which amount shall
be in a minimum principal amount of $500,000 and may increase in integral
multiples of $100,000 and (iv) with respect to a Eurodollar Loan, the applicable
Interest Period. In no event shall Borrower be permitted to have outstanding at
any one time Eurodollar Loans with more than 4 different Interest Periods.
3.1.5. Interest Periods. Each interest period of a Eurodollar
Loan shall commence on the date such Eurodollar Loan is made and shall end on
the date which is 1 month, 2 months, 3 months or 6 months later, as may then be
requested by Borrower ("Interest Period") provided that:
(i) any Interest Period which would otherwise end
on a day which is not a Business Day shall end on the next
preceding or succeeding Business Day as is the Bank's custom in
the market to which such Eurodollar Loan relates;
(ii) there remains a minimum of 1 month in the
Original Term;
(iii) all Interest Periods of the same duration
which commence on the same date shall end on the same date; and
(iv) each Interest Period which commences before,
and would otherwise end after the last day of the Original Term
shall end on the last day of the Original Term.
3.1.6. Conversion of Loans. Provided that no Event of Default
has occurred which is then continuing, Borrower may, on any Business Day,
convert any: (i) Base Rate Loan into a Eurodollar Loan. If Borrower desires to
convert a Base Rate Loan, Borrower shall give Agent not less than three (3)
Business Days' prior written notice (prior to 11:00 A.M. New York time on such
Business Day), specifying the date of such conversion and the amount to be
converted. Each conversion into or conversion of a Eurodollar Loan shall be in a
minimum principal amount of $500,000 and may increase in integral multiples of
$100,000 in excess thereof. After giving effect to any conversion of Base Rate
Loans to Eurodollar Loans, Borrower shall not be permitted to have outstanding
at any one time Eurodollar Loans with more than 4 different Interest Periods;
and (ii) Base Rate Loan into a LIBOR Rate Loan and LIBOR Rate Loan into a Base
Rate Loan. If Borrower desires such a conversion, Borrower shall give Agent not
less than three (3) Business Days prior written notice (prior to 11:00 A.M. New
York time on such Business Day) specifying the date of such conversion and the
amount to be converted. Each conversion into or conversion of a Eurodollar Loan
shall be in a minimum principal amount of $500,000 and may increase in integral
multiples of $100,000 in excess thereof.
3.1.7. Continuation of Eurodollar Loans. Borrower shall have the
right on 3 Business Days' prior irrevocable written notice given to Agent,
subject to the provisions of SUBSECTION 3.1.8, to continue any Eurodollar Loan
into a subsequent Interest Period of the same or a different permitted duration,
in each case subject to the satisfaction of the following conditions:
11
(i) in the case of a continuation of less than all
Eurodollar Loans, the Eurodollar Loans continued shall each be in
a minimum principal amount of $500,000 and may increase in
integral multiples of $100,000;
(ii) accrued interest on a Eurodollar Loan (or
portion thereof) being continued shall be paid by Borrower at the
time of continuation; and
(iii) no Eurodollar Loan (or portion thereof) may
be continued as a Eurodollar Loan if an Event of Default has
occurred which is then continuing or if, after giving effect to
such continuation, Borrower shall have outstanding more than 4
separate Eurodollar Loans in the aggregate.
If Borrower shall fail to give timely notice of its election to continue
any Eurodollar Loan or portion thereof as provided above, or if such
continuation shall not be permitted, such Eurodollar Loan or portion thereof,
unless such Eurodollar Loan shall be repaid, shall automatically be converted
into a Base Rate Loan at the end of the Interest Period then in effect with
respect to such Eurodollar Loan.
3.1.8. Prepayment of Eurodollar Loans. Subject to the provisions
of SUBSECTION 3.1.9 and SECTION 4.2, Borrower may prepay any Loan in whole at
any time or in part from time to time, without premium or penalty provided that
a Eurodollar Loan not prepaid, continued or converted on the last Business Day
of the then current Interest Period with respect thereto shall be subject to
SUBSECTION 3.1.9. Borrower shall specify the date of prepayment of Loans which
are Eurodollar Loans and the amount of Loans to be prepaid. In the event that
any prepayment of a Eurodollar Loan is made on a date other than the last
Business Day of the then current Interest Period with respect thereto, Borrower
shall indemnify Agent and Lenders therefor in accordance with SUBSECTION 3.1.9
hereof.
3.1.9. Indemnification. 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 on any date other than the last Business Day of the then current
Interest Period or any default by Borrower in the payment of the principal of or
interest on any Eurodollar Loan or failure by Borrower to complete a borrowing
of, a prepayment of or conversion of or to a Eurodollar 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 Loans hereunder, and any other loss or expense incurred by Agent
and Lenders by reason of the liquidation or reemployment of deposits or other
funds acquired by Agent and Lenders to make, continue, convert into or maintain,
a Eurodollar Loan.
3.1.10. Inability to Make Eurodollar Loans. 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 3.1.10, the
term "Lender" shall include any Lender and the office or branch where any Lender
or any corporation or bank controlling any Lender makes or maintains any
Eurodollar Loans) to make or maintain its Eurodollar Loans, or if with respect
to any Interest Period, any Lender is unable to determine the Eurodollar Rate
relating thereto, or adverse or unusual conditions
12
in or changes in applicable law relating to the London interbank Eurodollar
market make it, in the reasonable judgment of any Lender, impracticable to fund
therein any of the Eurodollar Loans or LIBOR Rate Loans or make the projected
Eurodollar Rate unreflective of the actual costs of funds therefor to any
Lender, the obligation of any Lender to make Eurodollar Loans or LIBOR Rate
Loans hereunder shall forthwith be suspended during the pendency of such
circumstances and Borrower shall, if any affected Eurodollar Loans or LIBOR Rate
Loans are then outstanding, promptly upon request from any such Lender, convert
such affected Eurodollar Loans or LIBOR Rate Loans into Base Rate Loans in which
case the provisions of subsection 3.1.9 shall not apply.
3.2. Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to Agent or any Lender specifically containing
payment provisions which are in conflict with this SECTION 3.2 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
3.2.1. Principal. Subject to the terms of SUBSECTIONS 3.2.5 AND
3.3 hereof, principal payable on account of Revolving Credit Loans shall be
payable by Borrower to Agent immediately upon the earliest of (a) the occurrence
of an Event of Default in consequence of which Agent elects to accelerate the
maturity and payment of the Obligations, or (b) termination of this Agreement
pursuant to SECTION 4 hereof; provided, however, that if an Overadvance shall
exist at any time, with respect to Borrower, Borrower shall, on demand by Agent,
repay the Overadvance.
3.2.2. Interest. Interest accrued on the Loans shall be due on
the earliest of (i)(a) for Base Rate Loans and LIBOR Rate Loans, the first
calendar day of each month (for the immediately preceding month), computed
through the last calendar day of the preceding month and (b) for Eurodollar
Loans, on the earlier of (x) the first day of each quarter for the immediately
preceding quarter or (y) at the end of each Interest Period, (ii) the occurrence
of an Event of Default in consequence of which Agent elects to accelerate the
maturity and payment of the Obligations or (iii) termination of this Agreement
pursuant to SECTION 4 hereof.
3.2.3. Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
SECTION 2 hereof, to Agent or to any other Person designated by Agent in
writing.
3.2.4. Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to Agent as
and when provided in this Agreement, the Other Agreements or the Security
Documents, or on demand, whichever is later.
3.2.5. Voluntary Prepayments. Borrower shall have the right to
prepay Loans in whole or in part, without penalty or fee except as otherwise
provided in this Agreement, at any time and from time to time on the following
terms and conditions: (i) Borrower shall give Agent written notice (or
telephonic notice promptly confirmed in writing) (each such notice, a "Notice of
Prepayment") of the intent to prepay Loans prior to 11:00 A.M. (New York time)
(a) for Base Rate Loans and LIBOR Rate Loans, at least one (1) Business Day
prior to the date of such prepayment and (b) for Eurodollar Loans, at least
three (3) Business Days prior to the date of such prepayment, the amount of such
prepayment, in the case of Eurodollar Loans, the specific borrowing(s) pursuant
to which such Eurodollar Loans were made; (ii) all partial prepayments shall be
in a minimum
13
principal amount of $250,000 or an integral multiple of $250,000 in excess
thereof; and (iii) subject to SECTION 3.1.8, prepayment of Eurodollar Loans
pursuant to this SUBSECTION 3.2.5 shall only be made the last day of the
Interest Period applicable thereto. Any such prepayment shall be applied by
Agent to Revolving Credit Advances and second, to the remaining Obligations in
such order as Agent may determine, subject to Borrower's ability to reborrow
Revolving Credit Loans in accordance with the terms hereof. Notwithstanding
anything contained in this SUBSECTION 3.2.5 to the contrary, Borrower shall be
permitted to prepay the Revolving Credit Loans at any time and in any amounts.
3.3. Mandatory Prepayments.
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral; Extraordinary Receipts. Except as provided in SUBSECTION 6.4.2
hereof, when Borrower, or any of Borrower's Subsidiaries sells or otherwise
disposes of any Collateral (other than Inventory in the ordinary course of
business), or if any of the Collateral is lost or destroyed or taken by
condemnation or if Borrower receives any Extraordinary Receipts, Borrower shall
repay the Loans in an amount equal to the net proceeds of such sale or other
disposition (i.e., gross proceeds less the reasonable costs of such sales or
other dispositions), loss, destruction or condemnation or the amount of
Extraordinary Receipts, as applicable, 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. Any such
prepayment shall be applied by Agent to the remaining Loans in such order as
Agent may determine, subject to Borrower's ability to reborrow Revolving Credit
Loans in accordance with the terms hereof.
3.4. Application of Payments and Collections. All items of payment
received by Agent by 12:00 noon, New York City time, on any Business Day shall
be deemed received on that Business Day. All items of payment received after
12:00 noon, New York City time, on any Business Day shall be deemed received on
the following Business Day. Subject to the terms of SUBSECTIONS 3.2.5 AND 3.3,
Borrower irrevocably waives the right to direct the application of any and all
payments and collections at any time or times hereafter received by Agent from
or on behalf of Borrower, and Borrower does hereby irrevocably agree that Agent
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Agent or its
agent against the Obligations, in such manner as Agent may deem advisable.
3.5. All Loans to Constitute One Obligation. The Loans shall constitute
one general Obligation of Borrower, and shall be secured by Agent's Lien upon
all of the Collateral.
3.6. Loan Account. Agent shall enter all Loans as debits to an account
evidencing such Loans ("Loan Account") and shall also record in Borrower's Loan
Account all payments made by Borrower on any Obligations and all proceeds of
Collateral which are finally paid to Agent, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to Borrower.
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3.7. Statements of Account. Agent will account to Borrower monthly with
a statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Agent shall be deemed final, binding and conclusive
upon Borrower absent manifest error or unless Agent is notified by Borrower in
writing to the contrary within 30 days of the date each accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
3.8. Increased Costs. In the event that any change, after the date of
this Agreement, in any applicable law or treaty, or in the interpretation or
application thereof, or compliance by Agent or any Lender with any new request
or directive (whether or not having the force of law) from any central bank or
other financial, monetary or other regulatory authority (other than those in
effect on the date hereof), shall:
(i) (1) subject Agent or any Lender to any tax with
respect to this Agreement (other than (a) any tax based on or measured
by net income or otherwise in the nature of a net income tax, including,
without limitation, any franchise tax or any similar tax based on
capital, net worth or comparable basis for measurement and (b) any tax
collected by a withholding on payments and which either is computed by
reference to the net income of the payee or is in the nature of an
advance collection of a tax based on or measured by the net income of
the payee) or (2) change the basis of taxation of payments to Agent or
any Lender of principal, fees, interest or any other amount payable
hereunder or under any Loan Documents (other than in respect of (a) any
tax based on or measured by net income or otherwise in the nature of a
net income tax, including, without limitation, any franchise tax or any
similar tax based on capital, net worth or comparable basis for
measurement and (b) any tax collected by a withholding on payments and
which either is computed by reference to the net income of the payee or
is in the nature of an advance collection of a tax based on or measured
by the net income of the payee);
(i) impose, modify or hold applicable any reserve (except
any reserve taken into account in the determination of the applicable
Eurodollar Rate), 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
(ii) impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to any Loan 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 Loans 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 Loans by
an amount that Agent or such Lender deems to be material, then, in any such
case, Borrower shall pay Agent or such Lender, upon its demand and certification
not later than sixty (60) days following its receipt of notice of the imposition
of such increased costs, such additional amount as will compensate Agent or such
Lender for such additional cost or such reduction, as the case may be, to the
extent Agent or such Lender has not otherwise been compensated, with respect to
a
15
particular Loan, for such increased cost as a result of an increase in the
Base Rate, Eurodollar Rate or LIBOR Rate. An officer of Agent or such Lender
shall determine the amount of such additional cost or reduced amount using
reasonable averaging and attribution methods and shall certify the amount of
such additional cost or reduced amount to Borrower, which certification shall
include a written explanation of such additional cost or reduction to Borrower.
Such certification shall be conclusive absent manifest error. If Agent or any
Lender claims any additional cost or reduced amount pursuant to this SECTION
3.8, then Agent or such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different lending office or to
file any certificate or document reasonably requested by Borrower if the making
of such designation or filing would avoid the need for, or reduce the amount of,
any such additional cost or reduced amount and would not, in the sole discretion
of Agent or such Lender, be otherwise disadvantageous to Agent or such Lender.
3.9. Basis For Determining Interest Rate Inadequate or Unfair. In the
event that Agent or the Required Lenders shall have determined that:
(i) reasonable means do not exist for ascertaining the
LIBOR Rate or the Eurodollar Rate for any Interest Period; or
(ii) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank Eurodollar
market with respect to a proposed Eurodollar Loan, or a proposed
conversion of a Base Rate Loan into a Eurodollar Loan;
Agent shall give Borrower prompt written, telephonic or telegraphic notice of
the determination of such effect. If such notice is given, (i) any such
requested Eurodollar Loan or LIBOR Rate Loan shall be made as a Base Rate Loan,
unless Borrower shall notify Agent no later than 10:00 A.M. (New York City time)
three (3) Business Days prior to the date of such proposed borrowing that the
request for such borrowing shall be canceled or made as an unaffected type of
Eurodollar Loan or LIBOR Rate Loan, and (ii) any Base Rate Loan which was to
have been converted to an affected type of Eurodollar Loan or LIBOR Rate Loan
shall be continued as or converted into a Base Rate Loan, or, if Borrower shall
notify Agent, no later than 10:00 A.M. (New York City time) three (3) Business
Days prior to the proposed conversion, shall be maintained as an unaffected type
of Eurodollar Loan or LIBOR Rate Loan.
3.10. Capital Adequacy. In the event that Agent or any Lender shall have
determined that any change in applicable law or guideline regarding capital
adequacy, 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
with any new request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency not in effect on the date hereof, has or would have the effect of
reducing the rate of return on Agent's or any Lender's capital as a consequence
of its obligations hereunder to a level below that which Agent or any 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, upon written demand not later than sixty (60) days following such
Lender's or Agent's making such determination (which demand shall be accompanied
by a certification demonstrating the calculation of such amounts in reasonable
16
detail) by Agent or such Lender, Borrower shall pay 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
3.10 shall be available to Agent or any Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law
or condition.
3.10.1. Certificate. A certificate of an officer of Agent or
such Lender setting forth such amount or amounts as shall be necessary to
compensate Agent or such Lender pursuant to SECTION 3.10 hereof and the reasons
therefor when delivered to Borrower shall be conclusive absent manifest error.
SECTION 4. TERM AND TERMINATION.
4.1. Term of Agreement. Subject to Lenders' right to cease making Loans
to Borrower upon or after the occurrence of a Default or Event of Default, this
Agreement shall be in effect for a period of five (5) years from the date
hereof, through and including August 13, 2003 (the "Original Term") unless
terminated as provided in SECTION 4.2 hereof.
4.2. Termination.
4.2.1. Termination by Lenders. Required Lenders may terminate
this Agreement (without notice thereof to Borrower) upon or after the occurrence
and during the continuance of an Event of Default.
4.2.2. Termination by Borrower. Upon at least ninety (90) days
prior written notice to Agent, Borrower may, at its option, terminate this
Agreement; provided, however, no such termination shall be effective until
Borrower has paid all of the Obligations in immediately available funds and all
Letters of Credit and LC Guaranties have expired or have been cash
collateralized to Agent's satisfaction. Any notice of termination given by
Borrower shall be irrevocable unless Required Lenders otherwise agree in
writing, and Lenders shall have no obligation to make any Loans or issue or
procure any Letters of Credit or LC Guaranties on or after the termination date
stated in such notice. Borrower may elect to terminate this Agreement in its
entirety only. No section of this Agreement or type of Loan available hereunder
may be terminated singly.
4.2.3. Termination Charges. At the effective date of termination
of this Agreement for any reason, Borrower shall pay to Agent for its own
account (in addition to the then outstanding principal, accrued interest and
other charges owing under the terms of this Agreement and any of the other Loan
Documents) as liquidated damages for the loss of the bargain and not as a
penalty, an amount equal to two percent (2.0%) of the average outstanding Loans
and Letters of Credit during such year if termination occurs during the first
Loan Year and one percent (1.0%) of the average outstanding Loans and Letters of
Credit during such year if termination occurs during the second Loan Year. If
Borrower shall terminate this Agreement after the second Loan Year, all charges
under this Section 4.2.3 shall be waived.
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4.2.4. Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination and Agent shall retain its Liens in the Collateral
and all of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Agent, in full, in
immediately available funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations, Agent shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Agent or Lenders may incur as a result of
dishonored checks or other items of payment received by Agent or Lenders from
Borrower or any Account Debtor and applied to the Obligations, Agent shall, at
its option, (i) have received a written agreement, executed by Borrower and by
any Person whose loans or other advances to Borrower are used in whole or in
part to satisfy the Obligations, indemnifying Agent and Lenders from any such
loss or damage; or (ii) have retained such monetary reserves and Liens on the
Collateral for such period of time as Agent, in its reasonable discretion, may
deem necessary to protect Agent and Lenders from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral. To secure the prompt payment and
performance to Lenders of the Obligations, Borrower hereby grants to Agent for
the ratable benefit of Lenders a continuing security interest and Lien upon all
of Borrower's assets, including all of the following Property and interests in
Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) All monies and other Property of any kind now or at
any time or times hereafter in the possession or under the control of
Agent or any Lender or a bailee or Affiliate of Agent or any Lender;
(vi) All Investment Property (as defined in the Code);
(vii) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through
(vi) above, including, without limitation, proceeds of and unearned
premiums with respect to insurance policies insuring any of the
Collateral; and
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(viii) All books and records (including, without
limitation, customer lists, credit files, computer programs, print-outs,
and other computer materials and records) of Borrower pertaining to any
of (i) through (vii) above.
5.2. Lien Perfection; Further Assurances. Borrower shall execute such
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are requested by Agent and reasonably
necessary to perfect Agent's Lien upon any of the Collateral and shall take such
other action as may be reasonably required to perfect or to continue the
perfection of Agent's Lien upon the Collateral. Unless prohibited by applicable
law, Borrower hereby authorizes Agent to execute and file any such financing
statement on Borrower's behalf. The parties agree that a carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof. At Agent's
request, Borrower shall also promptly execute or cause to be executed and shall
deliver to Agent any and all documents, instruments and agreements deemed
reasonably necessary by Agent to give effect to or carry out the terms or intent
of the Loan Documents.
SECTION 6. COLLATERAL ADMINISTRATION
6.1. General.
6.1.1. Location of Collateral. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be kept by Borrower
at one or more of the business locations set forth in Exhibit 6.1.1 hereto and
shall not, without the prior written approval of Agent, be moved therefrom
except, prior to an Event of Default and Agent's acceleration of the maturity of
the Obligations in consequence thereof, for (i) sales of Inventory in the
ordinary course of business; and (ii) removals in connection with dispositions
of Equipment that are authorized by SUBSECTION 6.4.2 hereof.
6.1.2. Insurance of Collateral. Borrower shall maintain and pay
for insurance to the extent available at commercially reasonable rates upon all
Collateral which is customarily insured wherever located and with respect to
Borrower's business, covering casualty, hazard, public liability and such other
customary risks in such amounts, with such insurance companies as are reasonably
satisfactory to Agent. Borrower shall deliver copies of such policies to Agent
with satisfactory lender's loss payable endorsements, naming Agent as loss
payee, assignee or additional insured, as appropriate. Each policy of insurance
or endorsement shall contain a clause requiring the insurer to give not less
than 30 days prior written notice to Agent in the event of cancellation of the
policy for any reason whatsoever and a clause specifying that the interest of
Agent shall not be impaired or invalidated by any act or neglect of Borrower or
the owner of the Property or by the occupation of the premises for purposes more
hazardous than are permitted by said policy. If Borrower fails to provide and
pay for such insurance, Agent may, at its option, but shall not be required to,
procure the same and charge Borrower therefor. Borrower agrees to deliver to
Agent, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies.
6.1.3. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and
19
use taxes imposed by any state, federal, or local authority on any of the
Collateral or in respect of the sale thereof shall be borne and paid by
Borrower. If Borrower fails to promptly pay any portion thereof when due, Agent
may, at its option, but shall not be required to, pay the same and charge
Borrower therefor. Neither Agent nor any Lender shall be liable or responsible
(except for reasonable care in the custody thereof while any Collateral is in
Agent's or any Lender's actual possession or under their actual control) in any
way for the safekeeping of any of the Collateral or for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default of
any warehouseman, carrier, forwarding agency, or other person whomsoever, but
the same shall be at Borrower's sole risk.
6.2. Administration of Accounts.
6.2.1. Records, Schedules and Assignments of Accounts. Borrower
shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Agent on such periodic basis as Agent
shall request a sales and collections report for the preceding period, in form
satisfactory to Agent. On or before the fifteenth day of each month from and
after the date hereof, Borrower shall deliver to Agent, in form acceptable to
Agent, accounts payable schedules and a summary aged trial balance of all
Accounts existing as of the last day of the preceding month, specifying the
names of each Account Debtor obligated on an Account so listed and the aggregate
outstanding balance of Accounts so listed ("Schedule of Accounts"), and, in the
event Availability is less than $3,000,000 and upon Agent's request therefor,
copies of proof of delivery and the original copy of all documents, including,
without limitation, repayment histories and present status reports relating to
the Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Agent shall reasonably request. In addition,
if Accounts in an aggregate face amount in excess of $250,000 become ineligible
because they fall within one of the specified categories of ineligibility set
forth in the definition of Eligible Accounts or otherwise established by Agent,
Borrower shall notify Agent of such occurrence on the first Business Day
following such occurrence and the Borrowing base shall thereupon be adjusted to
reflect such occurrence. In the event Availability is less than $3,000,000 and
if requested by Agent, Borrower shall execute and deliver to Agent formal
written assignments of all of its Accounts weekly or daily, which shall include
all Accounts that have been created since the date of the last assignment,
together with copies of invoices or invoice registers related thereto.
6.2.2. Discounts, Allowances, Disputes. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be, to Agent as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $250,000 are in dispute
between Borrower and any Account Debtor, Borrower shall provide Agent with
written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and after the occurrence and during
the continuance of an Event of Default, Agent shall have the right to settle or
adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Agent may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including attorney's fees, to
Borrower.
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6.2.3. Taxes. If an Account includes a charge for any tax
payable by Borrower to any governmental taxing authority, Agent is authorized,
in its sole discretion, to pay the amount thereof to the proper taxing authority
for the account of the Borrower and to charge Borrower's Account therefor,
unless it is (1) being contested in good faith and adequate reserves have been
set aside in accordance with GAAP, and (2) none of the Collateral has become
subject to forfeiture or loss as a result of such contest and (3) Agent has not
advised Borrower in writing that Agent reasonably believes that non-payment is
reasonably likely to have or result in a Material Adverse Effect, provided,
however that Agent shall not be liable for any taxes to any governmental taxing
authority that may be due by Borrower. The Agent shall promptly notify the
Borrower of the payment of any such amounts.
6.2.4. Account Verification. Whether or not a Default or an
Event of Default has occurred, any of Agent's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Agent, any
designee of Agent or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, telegraph or otherwise.
Borrower shall cooperate fully with Agent in an effort to facilitate and
promptly conclude any such verification process.
6.2.5. Maintenance of Dominion Account. On or prior to November
15, 1998, Borrower shall establish and maintain a Dominion Account pursuant to a
lockbox arrangement acceptable to Agent with such banks as may be selected by
Borrower and be acceptable to Agent. Borrower shall issue to any such banks an
irrevocable letter of instruction directing such banks to deposit all payments
or other remittances received in the lockbox to the Dominion Account for
application on account of the Obligations. All funds deposited in the Dominion
Account shall immediately become the property of Agent and Borrower shall obtain
the agreement by such banks in favor of Agent to waive any offset rights against
the funds so deposited. Agent assumes no responsibility for such lockbox
arrangement, including, without limitation, any claim of accord and satisfaction
or release with respect to deposits accepted by any bank thereunder.
6.2.6. Collection of Accounts, Proceeds of Collateral. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of its Accounts for Agent. All remittances received by Borrower on
account of Accounts, together with the proceeds of any other Collateral, shall
be held as Agent's property by Borrower as trustee of an express trust for
Agent's benefit and Borrower shall immediately deposit same in kind in the
Dominion Account. Agent retains the right at all times after the occurrence of a
Default or an Event of Default, if continuing, to notify Account Debtors that
Accounts have been assigned to Agent and to collect Accounts directly in its own
name and to charge the collection costs and expenses, including attorneys' fees
to Borrower.
6.3. Administration of Inventory.
6.3.1. Records and Reports of Inventory. Borrower shall keep
accurate and complete records of its inventory. Borrower shall furnish to Agent
Inventory reports in form and detail satisfactory to Agent at such times as
Agent may request, but at least once each month, not later than the twentieth
day of such month. Borrower shall conduct a physical inventory annually and
shall provide to Agent a report based on each such physical inventory promptly
thereafter, together with such supporting information as Agent shall request.
21
6.3.2. Returns of Inventory. If at any time or times hereafter
any Account Debtor returns any Inventory to Borrower the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
$250,000, Borrower shall immediately notify Agent of the same, specifying the
reason for such return and the location, condition and intended disposition of
the returned Inventory.
6.4. Administration of Equipment.
6.4.1. Records and Schedules of Equipment. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions made in accordance with SUBSECTION
6.4.2 hereof, and shall furnish Agent with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Agent. Immediately on request therefor by Agent, Borrower shall deliver to Agent
any and all evidence of ownership, if any, of any of the Equipment.
6.4.2. Dispositions of Equipment. Borrower will not sell, lease
or otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Agent; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate during
any consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $250,000 or less, provided that all proceeds thereof are
remitted to Agent for application to the Loans, or (ii) replacements of
Equipment that is substantially worn, damaged or obsolete with Equipment of like
kind, function and value, provided that the replacement Equipment shall be
acquired prior to or concurrently with any disposition of the Equipment that is
to be replaced, the replacement Equipment shall be subject to the Liens of Agent
and shall be free and clear of all other Liens other than Permitted Liens that
are not Purchase Money Liens, and Borrower shall have given Agent at least 5
days prior written notice of such disposition.
6.5. Payment of Charges. All amounts chargeable to Borrower under
SECTION 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Base Rate Loans from time to time.
6.6. Additional Payments. Any sums expended by Agent or any Lender due
to Borrower's failure to perform or comply with its obligations under this
Agreement or any other Loan Document may be charged to Borrower's account as a
Revolving Credit Loan and added to the Obligations.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties. To induce Agent and Lenders
to enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Agent and Lenders that:
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7.1.1. Organization and Qualification. It is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. It is duly qualified and is authorized to do
business and is in good standing in all states and jurisdictions where the
character of its Properties or the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. Exhibit 7.1.1 sets forth all states or
jurisdictions where Borrower or any Subsidiary is qualified and authorized to do
business as of the Closing Date.
7.1.2. Power and Authority. It is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and each of the other
Loan Documents to which it is a party. The execution, delivery and performance
of this Agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate action and do not and will not (i) require any
consent or approval of its shareholders; (ii) contravene its charter, articles
or certificate of incorporation or by-laws; (iii) violate, or cause it to be in
default under, any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to it which violation or default would likely have a Material
Adverse Effect; (iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which it is a party or by which it or its Properties may be bound
or affected which violation or default would likely have a Material Adverse
Effect; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by it.
7.1.3. Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of the Borrower enforceable against it in
accordance with its respective terms; except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceeding in equity or at law).
7.1.4. Capital Structure. Exhibit 7.1.4 hereto states (i) the
correct name of Borrower and each of Borrower's Subsidiaries, its jurisdiction
of incorporation and the percentage of its stock owned by each Person listed
thereon, (ii) the name of the corporate or joint venture Affiliates of Borrower
and of each Subsidiary of Borrower, and the nature of the affiliation, and (iii)
the number, nature and holder of all outstanding stock of Borrower and of each
Subsidiary of Borrower, in each case as of the Closing Date. Borrower has good
title to all shares of stock it purports to own of each Subsidiary of Borrower,
free and clear in each case of any Lien other than Permitted Liens. All such
shares of stock have been duly issued and are fully paid and non-assessable.
Except as set forth on Exhibit 7.1.4, there are (i) no outstanding options to
purchase, or any rights or warrants to subscribe for, or any commitments or
agreements to issue or sell, or any Securities, stock or obligations convertible
into, or any powers of attorney relating to, shares of the capital stock of
Borrower and (ii) no outstanding agreements or instruments binding upon any
stockholders of Borrower or any Subsidiary of Borrower relating to the ownership
of its shares of capital stock.
7.1.5. Corporate Names. Since 1988, neither Borrower nor any
Subsidiary of Borrower has been known as or used any corporate, fictitious or
trade names except those listed on Exhibit 7.1.5 hereto. Except as set forth on
Exhibit 7.1.5, since 1988 Borrower has not been the
23
surviving entity of a merger or consolidation or acquired all or substantially
all of the assets of any Person.
7.1.6. Business Locations; Agent for Process. The chief
executive office and other places of business of Borrower and each Subsidiary of
Borrower are as listed on Exhibit 7.1.6 hereto. During the preceding one-year
period, neither Borrower nor any Subsidiary of Borrower has had an office, place
of business or agent for service of process other than as listed on Exhibit
7.1.6. Except as shown on Exhibit 7.1.6, no Inventory is stored with a bailee,
warehouseman or similar party, nor is any Inventory consigned to any Person.
7.1.7. Title to Properties; Priority of Liens. Borrower and each
Subsidiary of Borrower has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of its
real Property, and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged all lawful claims which, if unpaid, might become
a Lien against any of its Properties that is not a Permitted Lien. The Liens
granted to Agent for the ratable benefit of Lenders under SECTION 5 hereof are
first priority Liens, subject only to Permitted Liens.
7.1.8. Accounts. Agent may rely, in determining which Accounts
are Eligible Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts. Unless otherwise indicated in writing
to Agent, with respect to each Account:
(i) It is genuine and in all respects what it purports to
be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and
delivery of goods or rendition of services by Borrower in the ordinary
course of its business and in accordance with the terms and conditions
of all purchase orders, contracts or other documents relating thereto
and forming a part of the contract between Borrower and the Account
Debtor;
(iii) It is for a liquidated amount payable on the date
stated in the duplicate invoice covering such sale or rendition of
services, a copy of which has been furnished or is available to Agent;
(iv) Such Account, and Agent's security interest therein,
is not subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition except where the amount in
controversy is deemed by Agent to be immaterial, and each such Account
is absolutely owing to Borrower and is not contingent in any respect or
for any reason;
(v) Borrower has not made any agreement with any Account
Debtor thereunder for any extension, compromise, settlement or
modification of any such Account or any deduction therefrom, except for
discounts or allowances which are granted by Borrower in the ordinary
course of its business and which are reflected in the calculation of the
net amount of each respective invoice related thereto and are reflected
in the Schedules of Accounts submitted to Agent pursuant to SUBSECTION
6.2.1 hereof or such other extensions, compromises,
24
settlements or modifications of any Account or any deduction therefrom
disclosed in writing by Borrower to Agent and consented thereto in
writing by Agent;
(vi) To the best of Borrower's knowledge, the Account
Debtor thereunder (1) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed and
(2) such Account Debtor was at such time Solvent; and
(vii) To the best of Borrower's knowledge at the time such
Account arose, there were no proceedings or actions which are threatened
or pending against any Account Debtor thereunder which might result in
any material adverse change in such Account Debtor's financial condition
or the collectability of such Account.
7.1.9. Equipment. Any Equipment used for the operation of the
Borrower's business is in good operating condition and repair, and all necessary
replacements of and repairs thereto shall be made so that the value and
operating efficiency of the Equipment shall be maintained and preserved,
reasonable wear and tear excepted. Borrower will not permit any of the Equipment
to become affixed to any real Property leased to Borrower so that an interest
arises therein under the real estate laws of the applicable jurisdiction unless
the landlord of such real Property has executed a landlord waiver or consented
to a leasehold mortgage in favor of and in form acceptable to Lender, and
Borrower will not permit any of the Equipment to become an accession to any
personal Property other than Equipment that is subject to first priority (except
for Permitted Liens) Liens in favor of Agent for the benefit of Lenders.
7.1.10. Financial Statements; Fiscal Year. (a) The balance
sheets of Borrower on a Consolidated Basis as of December 31, 1997 and the
related statements of income, changes in stockholder's equity, and changes in
financial position for the periods ended on such dates, have been prepared in
accordance with GAAP, and present fairly the financial position of Borrower on a
Consolidated Basis at such dates and the results of Borrower's operations for
such periods, subject to normally occurring year-end audit adjustments. Since
June 30, 1998, there has been no event or condition having a Material Adverse
Effect and no change in the aggregate value of Equipment (except in connection
with reasonable wear and tear of such Equipment) owned by Borrower.
(b) Projections of Borrower on a Consolidated Basis with respect to Fiscal Years
1998 and 1999, copies of which are annexed hereto as Exhibit 7.1.10 (b), were
prepared by Borrower and reviewed by its chief financial officer, treasurer or
controller and, as of the Closing Date, are based on underlying assumptions
which provide a reasonable basis for the Projections contained therein and
reflect Borrower's judgment based on present circumstances of the most likely
set of conditions and course of action for the projected period.
7.1.11. Full Disclosure. The financial statements referred to in
SUBSECTION 7.1.10 hereof do not, nor does this Agreement or any other written
statement delivered by Borrower to Agent or any Lender in connection herewith,
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not materially
misleading. There is no fact which Borrower has failed to disclose to Agent in
writing which would likely have a Material Adverse Effect.
25
7.1.12. Solvent Financial Condition. Borrower and each Guarantor
is now and, after giving effect to the Transactions, will be, Solvent.
7.1.13. Surety Obligations. Neither Borrower nor any Subsidiary
of Borrower is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
7.1.14. Taxes. Borrower's federal tax identification number is
as set forth on Exhibit 7.1.14. The federal tax identification number of each
Subsidiary of Borrower is shown on Exhibit 7.1.14 hereto. Borrower and each
Subsidiary of Borrower has filed all federal, state and local tax returns and
other reports it is required by law to file and has paid, or made provision for
the payment of, all taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties shown in such returns to be due and
payable or assessed against them by any governmental authority, unless and to
the extent any such amounts are being actively contested in good faith and by
appropriate proceedings and Borrower and each Subsidiary of Borrower, as
applicable, maintains reasonable reserves on their books therefor. The provision
for taxes on the books of Borrower and each Subsidiary of Borrower are adequate
for all years not closed by applicable statutes, and for its current fiscal year
and, for all tax years thereafter which are not closed by applicable statutes,
the provisions for taxes on the books of Borrower and each Subsidiary of
Borrower will be adequate.
7.1.15. Brokers. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement
7.1.16. Patents, Trademarks, Copyrights and Licenses. Borrower
and each Subsidiary of Borrower owns, possesses or has the right to use all the
patents, trademarks, service marks, trade names, copyrights and licenses
necessary for the present and planned future conduct of its business without any
known conflict with the rights of others. All such patents, trademarks, service
marks, tradenames, copyrights, licenses and other similar rights are listed on
Exhibit 7.1.16 hereto.
7.1.17. Governmental Consents. Borrower and each Subsidiary of
Borrower has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises materially necessary to continue to conduct its
business as heretofore or proposed to be conducted by it and to own or lease and
operate its Properties as now owned or leased by it.
7.1.18. Compliance with Laws. Borrower and each Subsidiary of
Borrower has duly complied, and its Properties, business operations and
leaseholds are in compliance in all material respects, with the provisions of
all federal, state and local laws, rules and regulations applicable to it as
applicable, its Properties or the conduct of its business and there have been no
citations, notices or orders of noncompliance issued to Borrower or any
Subsidiary of Borrower under any such law, rule or regulation. Borrower and each
Subsidiary of Borrower has established and maintains an adequate monitoring
system to insure that it remains in compliance with all federal, state and local
laws, rules and regulations applicable to it. No Inventory produced by Borrower
has been produced in violation of the Fair Labor Standards Act (29 U.S.C. 'SS'
201 et seq.), as amended.
26
7.1.19. Restrictions. Neither Borrower nor any Subsidiary of
Borrower is a party or subject to any contract, agreement, or charter or other
corporate restriction, which solely as a result of the terms thereof could
reasonably be expected to have a Material Adverse Effect. Neither Borrower nor
any Subsidiary of Borrower is a party or subject to any contract or agreement
which restricts its right or ability to incur Indebtedness, other than as set
forth on Exhibit 7.1.19 hereto, none of which prohibit the execution of or
compliance with this Agreement or the other Loan Documents by Borrower or any
Subsidiary of Borrower, as applicable.
7.1.20. Litigation. Except as set forth on Exhibit 7.1.20
hereto, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of Borrower, threatened, against or affecting Borrower or any
Subsidiary of Borrower, or the business, operations, Properties, prospects,
profits or condition of Borrower or any Subsidiary of Borrower, which could
reasonably be expected to have a Material Adverse Effect. Neither Borrower nor
any Subsidiary of Borrower is in default with respect to any order, writ,
injunction, judgment, decree or rule of any court, governmental authority or
arbitration board or tribunal which would likely have a Material Adverse Effect.
7.1.21. No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
and the other Loan Documents or Borrower's performance hereunder or thereunder,
constitute a Default or an Event of Default. Neither Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.22. Leases. Exhibit 7.1.22(A) hereto is a complete listing
of all capitalized leases of Borrower and Exhibit 7.1.22(B) hereto is a complete
listing of all operating leases of Borrower. Borrower is in compliance with all
of the terms of each of its respective capitalized and operating leases.
7.1.23. Pension Plans. Except as disclosed on Exhibit 7.1.23
hereto, neither Borrower nor any Subsidiary of Borrower has any Plan. Borrower
and each Subsidiary of Borrower is in full compliance with the requirements of
ERISA and the regulations promulgated thereunder with respect to each Plan. No
fact or situation that would likely have a Material Adverse Effect exists in
connection with any Plan. Neither Borrower nor any Subsidiary of Borrower has
any withdrawal liability in connection with a Multiemployer Plan.
7.1.24. Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any customer or any group of
customers of Borrower, the absence of whose purchases individually or in the
aggregate would likely have a Material Adverse Effect, or with any material
supplier of Borrower, the absence of whose products or services would likely
have a Material Adverse Effect. There exists no present condition or state of
facts or circumstances which would have a Material Adverse Effect on Borrower or
prevent Borrower from conducting its business after the consummation of the
transaction contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
27
7.1.25. Labor Relations. Except as described on Exhibit 7.1.25
hereto, neither Borrower nor any Subsidiary of Borrower is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any
Subsidiary of Borrower's employees or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.1.26. O.S.H.A. and Environmental Compliance. Except as set
forth on Exhibit 7.1.26:
(a) Borrower and each Subsidiary of 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 Borrower or any Subsidiary of Borrower or
relating to its business, assets, property, leaseholds or Equipment under any
such laws, rules or regulations that would have a Material Adverse Effect.
(b) Borrower and each Subsidiary of Borrower has been issued all material
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
disposals (collectively referred to as "Releases") of Hazardous Substances at,
upon, under or within any real Property or any premises leased by Borrower or
any Subsidiary of Borrower that would have a Material Adverse Effect; (ii) to
Borrower's knowledge there are no underground storage tanks or polychlorinated
biphenyls on the real Property or any premises leased by Borrower or any
Subsidiary of Borrower; (iii) Borrower has not used the real Property or any
premises leased by Borrower or any Subsidiary of Borrower as a treatment,
storage or disposal facility of Hazardous Waste; and (iv) no Hazardous
Substances are used on the real Property or any premises leased by Borrower or
any Subsidiary of 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 Borrower or any Subsidiary of Borrower
or of its tenants.
7.2. Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for those
representations and warranties which are expressly limited by their terms to a
specific date and taking into account any amendments to the Schedules and
Exhibits hereto as a result of any disclosures made by Borrower to Agent after
the Closing Date.
7.3. Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent
and Lenders and the parties thereto and the closing of the transactions
described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
28
8.1. Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or Lenders,
Borrower covenants that it shall:
8.1.1. Visits and Inspections. Permit representatives of Agent,
from time to time, as often as may be reasonably requested, but only during
normal business hours, to visit and inspect the Properties of Borrower and each
of its Subsidiaries, inspect, audit and make extracts from its books and
records, and discuss with its officers, its employees and its independent
accountants, Borrower's and each of its Subsidiaries' business, assets,
liabilities, financial condition, business prospects and results of operations.
8.1.2. Notices. Promptly notify Agent in writing of the
occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading in any material respect.
8.1.3. Financial Statements. Keep, and cause each Subsidiary to
keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP reflecting
all its financial transactions; and cause to be prepared and furnished to Agent
and Lenders the following (all to be prepared in accordance with GAAP applied on
a consistent basis, unless Borrower's certified public accountants concur in any
change therein and such change is disclosed to Agent and is consistent with
GAAP):
(i) not later than 90 days after the close of each Fiscal Year of
Borrower, audited financial statements of Borrower on a Consolidated
Basis as of the end of such Fiscal Year, reported on by a firm of
independent certified public accountants of recognized standing selected
by Borrower but acceptable to Agent (the "Accountants");
(ii) not later than thirty (30) days after the end of each Fiscal Month
hereafter, including the last Fiscal Year of Borrower's Fiscal Year
unaudited interim financial statements of Borrower as of the end of such
period and of the portion of Borrower's Fiscal Year then elapsed, on a
Consolidated Basis and consolidating basis, certified by the principal
financial officer of Borrower as prepared in accordance with GAAP and
fairly presenting the consolidating and consolidated financial position
and results of operations of Borrower for such period subject only to
changes from audit and year-end adjustments and except that such
statements need not contain notes;
(iii) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements or financial statements which Borrower or
any Subsidiary of Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which Borrower or any Subsidiary of Borrower files with the
Securities and Exchange Commission or any governmental authority which
may be substituted therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any annual report to
be filed with the Pension Benefit Guaranty Corporation (the "PBGC") in
connection with each Plan; and
29
(v) such other data and information (financial and otherwise) as Agent
or any Lender, from time to time, may reasonably request, bearing upon
or related to the Collateral or Borrower's, any Subsidiary of Borrower's
or any of their respective Subsidiaries' financial condition or results
of operations.
Concurrently with the delivery of the financial statements described in clause
(i) of this SUBSECTION 8.1.3, Borrower shall forward to Agent a copy of the
accountants' letter to Borrower's management or board of directors that is
prepared in connection with such financial statements and also shall cause to be
prepared and shall furnish to Agent a certificate of the aforesaid certified
public accountants certifying that, based upon their examination of the
financial statements of Borrower and its respective Subsidiaries performed in
connection with their examination of said financial statements, they are not
aware of any Default or Event of Default or, if they are aware of such Default
or Event of Default, specifying the nature thereof, and acknowledging, in a
manner satisfactory to Agent, that they are aware that Agent and Lenders are
relying on such financial statements in making their decisions with respect to
the Loans. Concurrently with the delivery of the financial statements described
in clauses (i) and (ii) of this SUBSECTION 8.1.3, or more frequently if
requested by Agent, Borrower shall cause to be prepared and furnished to Agent a
Compliance Certificate in the form of Exhibit 8.1.3 hereto executed by the chief
financial officer, treasurer or controller of Borrower.
8.1.4. Landlord and Storage Agreements. Provide Agent with
copies of all agreements between Borrower, each Subsidiary of Borrower or any of
their respective Subsidiaries and any landlord or warehouseman which owns any
premises at which any Inventory may, from time to time, be kept.
8.1.5. Credit Memoranda. Issue and process credit memoranda with
respect to credits, discounts or other allowances taken by Account Debtors in
the ordinary course of Borrower's business, but in no event shall such credit
memoranda be issued and processed later than three (3) months after the taking
of the applicable credit, discount or other allowance.
8.1.6. Projections. No later than 60 days after to the end of
each fiscal year of Borrower, deliver to Agent Projections of Borrower on a
Consolidated Basis for the forthcoming 3 years, year by year, and for the
forthcoming fiscal year, month by month.
8.1.7. Environmental Matters. (a) Borrower shall and shall cause
each Subsidiary of Borrower to ensure that the real Property remains in material
compliance with all applicable Environmental Laws and they shall not place or
permit to be placed any Hazardous Substances on any real Property in violation
of any applicable law or governmental regulations.
(b) Borrower shall and shall cause each Subsidiary of Borrower to 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) Borrower shall and shall cause each Subsidiary of Borrower to (i) employ in
connection with the use of the real Property appropriate technology necessary to
maintain compliance with any applicable Environmental Laws and (ii) to the
extent necessary, dispose of any and all Hazardous Waste generated at the real
Property only at facilities and with carriers that maintain valid permits
30
under RCRA and any other applicable Environmental Laws. Borrower shall and shall
cause each Subsidiary of Borrower to use its best efforts to obtain certificates
of disposal, if required, such as hazardous waste manifest receipts, from all
treatment, transport, storage or disposal facilities or operators employed by
Borrower or any Subsidiary of Borrower in connection with the transport or
disposal of any Hazardous Waste generated at the real Property.
(d) In the event Borrower or any Subsidiary of Borrower (i) 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 (ii) 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 having
a Material Adverse Effect on the real Property or Borrower's or any Subsidiary
of Borrower's interest therein from any state or local 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") (any of the foregoing is
referred to herein as an "Environmental Complaint"), then Borrower shall
promptly give written notice of same to Agent detailing facts and circumstances
of which Borrower or any Subsidiary of 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 Collateral and
is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.
(e) Borrower shall and shall cause each Subsidiary of Borrower to 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 Borrower or any Subsidiary of Borrower to
dispose of Hazardous Substances and shall continue to forward copies of
correspondence between Borrower or any Subsidiary of Borrower and the Authority
regarding such claims to Agent until the claim is settled. Borrower shall and
shall cause each Subsidiary of Borrower to promptly forward to Agent copies of
all documents and reports concerning a Hazardous Discharge at the real Property
that Borrower or any Subsidiary of Borrower is required to file under any
applicable Environmental Laws. Such information is to be provided solely to
allow Agent to protect Agent's security interest in the Collateral.
(f) Borrower shall and shall cause each Subsidiary of Borrower to respond
promptly to any Hazardous Discharge or Environmental Complaint and take all
actions reasonably required by applicable Environmental Laws in order to
safeguard the health of any Person and to avoid subjecting the Collateral or
real Property to any Lien. If Borrower or any Subsidiary of Borrower shall fail
to respond promptly to any Hazardous Discharge or Environmental Complaint or
Borrower or any Subsidiary of Borrower shall fail to comply with any of the
requirements of any applicable 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
31
or proceedings, fines and penalties, together with interest thereon from the
date expended at the Default Rate for Base Rate Loans, shall be paid upon demand
by Borrower, 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, Borrower and any Subsidiary of
Borrower.
(g) At any time following any Hazardous Discharge or Environmental Complaint
Borrower shall and shall cause each Subsidiary of Borrower, as applicable, to
provide Agent, at Borrower's expense, with any 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 if an abatement,
cleanup or removal is required under applicable Environmental Laws, 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 Borrower
or any Subsidiary of Borrower, as applicable, to post a bond, letter of credit
or other security reasonably satisfactory to Agent to secure payment of these
costs and expenses.
(h) Borrower shall and shall cause each Subsidiary of Borrower to 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
reasonable 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,
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. Borrower's and each Subsidiary of Borrower's obligations under this
Section 8.1.7 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. Borrower's and each Subsidiary of
Borrower's obligation and the indemnifications hereunder shall survive the
termination of this Agreement.
(i) For purposes of Sections 8.1.7 and 7.1.26, all references to real Property
shall be deemed to include all of Borrower's and each Subsidiary of Borrower's
right, title and interest in and to its owned and leased premises.
8.1.8. License Agreements. (a) On or prior to September 15,
1998, provide Agent copies of all license agreements to which Borrower is a
party and (b) use its best efforts to cause those licensors under such license
agreements as Agent shall specify to deliver to Agent on or prior to thirty (30)
days after Agent's request therefor (the "Specified Period") a licensor consent
letter, acceptable to Agent, pursuant to which such licensor, among other
things, consents to Agent's sale of Inventory with all licensed marks covered by
the applicable license agreement. Borrower acknowledges that in the event Agent
requests a licensor consent letter from a licensor under any of the
aforementioned license agreements and Agent shall not have received such
licensor consent letter executed by Borrower and such licensor on or prior to
the end of the Specified Period, then until such
32
time as Agent shall have received such licensor consent letter the Inventory
covered by such license agreement shall not be deemed Eligible Inventory
hereunder.
8.1.9. Landlord Waivers. Use its best efforts to cause each of
Borrower's landlords to deliver to Agent on or prior to November 15, 1998 a
landlord waiver acceptable to Agent. Borrower acknowledges that in the event
Agent shall not have received fully executed landlord waivers acceptable to
Agent for all locations where Collateral is located on or prior to November 15,
1998, then Agent may establish a Reserve in an amount equal to three months rent
for all such locations with respect to which Agent has not received a fully
executed landlord waiver acceptable to Agent.
8.1.10. Withdrawal Liability. On or prior to November 15, 1998,
deliver to Agent a statement from the applicable trustees of each of the
Borrower's Multiemployer Plans specifying whether Borrower is subject to any
withdrawal liability under any such Multiemployer Plan.
8.2. Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lenders, Borrower
covenants that, it will not:
8.2.1. Mergers; Consolidations; Acquisitions.
(i) Merge or consolidate, or permit any Subsidiary of Borrower
to merge or consolidate, with any Person; or
(ii) Acquire, or permit any of its Subsidiaries to acquire, all
or substantially all of the Properties of any Person.
8.2.2. Loans. Make, or permit any Subsidiary of Borrower to
make, any loans or other advances of money (other than (a) loans to employees of
Borrower in connection with Borrower's 1994 Executive Stock Incentive Plan, (b)
Specified Permitted Investments, (c) for salary, (d) travel advances, (e)
advances against commissions and other similar advances in the ordinary course
of business) to any Person.
8.2.3. Total Indebtedness. Create, incur, assume, or suffer to
exist, or permit any Subsidiary of Borrower to create, incur or suffer to exist,
any Indebtedness, except:
(i) Obligations owing to Agent and/or Lenders;
(ii) Subordinated Debt existing on the date of this Agreement;
(iii) Indebtedness of Borrower to any Subsidiary of Borrower;
(iv) accounts payable to trade creditors and current operating expenses
(other than for Money Borrowed) which are not aged more than 90 days
from billing date or more than 30 days from the due date, in each case
incurred in the ordinary course of business and paid within such time
period, unless the same are being actively contested in good faith and
by appropriate and lawful proceedings; and Borrower or such Subsidiary
shall have set aside such reserves, if
33
any, with respect thereto as are required by GAAP and deemed adequate by
Borrower or such Subsidiary and its independent accountants;
(v) Obligations to pay Rentals permitted by subsection 8.2.12;
(vi) Purchase Money Indebtedness in an aggregate amount not to exceed
$200,000 (excluding capitalized leases);
(vii) contingent liabilities arising out of endorsements of checks and
other negotiable instruments for deposit or collection in the ordinary
course of business; and
(viii) Indebtedness not included in paragraphs (i) through (vii) above
which does not exceed at any time, in the aggregate, the sum of
$1,000,000.
8.2.4. Affiliate Transactions. Enter into, or be a party to, or
permit any Subsidiary of Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower or any Subsidiary, except (a) in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to Borrower or such Subsidiary than
would obtain in a comparable arm's length transaction with a Person not an
Affiliate or stockholder of Borrower or such Subsidiary and so long as no
Default or Event of Default shall then be in existence (b) capital contributions
made by Borrower to UniStar, not to exceed an aggregate amount equal to (i)
$3,000,000 during the period commencing on July 1, 1998 and ending on December
31, 1998 and (ii) $6,000,000, upon consummation of the Spinoff.
8.2.5. Limitation on Liens. Create or suffer to exist, or permit
any Subsidiary of Borrower or any Guarantor to create or suffer to exist, any
Lien upon any of its Property (including the Subsidiary Stock and the capital
stock of Borrower), income or profits, whether now owned or hereafter acquired,
except:
(i) Liens at any time granted in favor of Agent for the benefit of
Lenders;
(ii) Liens for taxes (excluding any Lien imposed pursuant to any of the
provisions of ERISA) not yet due, or being contested in the manner
described in SUBSECTION 7.1.14 hereto, but only if in Agent's judgment
such Lien does not adversely affect Agent's rights or the priority of
Agent's Lien in the Collateral;
(iii) Liens arising in the ordinary course of business by operation of
law or regulation, but only if payment in respect of any such Lien is
not at the time required or if such payment is being contested in good
faith by appropriate proceedings diligently conducted, and such Liens do
not (1) have any material effect on the priority of the Liens in favor
of the Agent for the benefit of Lenders or (2) in the aggregate,
materially detract from the value of the Property or materially impair
the use thereof in the operation of Borrower's or any Subsidiary's
business;
(iv) Purchase Money Liens securing Purchase Money Indebtedness permitted
under SUBSECTION 8.2.3(vi) hereof;
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(v) Liens securing Indebtedness of Borrower's or a Subsidiary of
Borrower to Borrower or another such Subsidiary; and
(vi) such other Liens as appear on Exhibit 8.2.5 hereto.
8.2.6. Subordinated Debt. Make, or permit any Subsidiary of
Borrower to make, any payment or prepayment of any part or all of any
Subordinated Debt except as permitted by the terms of the Indenture.
8.2.7. Distributions. Except in connection with rights to
purchase capital stock of UniStar distributed to Borrower's shareholders in
connection with the Spinoff, declare, pay or make any distribution on shares of
its capital stock or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any shares of its capital stock, or of any
options to purchase or acquire any capital stock of Borrower.
8.2.8. Capital Expenditures. Make Capital Expenditures
(including, without limitation, by way of capitalized leases) which, in the
aggregate, as to Borrower and its Subsidiaries, exceed (a) during the period
commencing on July 1, 1998 and ending on December 31, 1998, $3,000,000 and (b)
$5,000,000 during any fiscal year of Borrower thereafter.
8.2.9. Disposition of Assets. Sell, lease or otherwise dispose
of any of its Properties, including any disposition of Property as part of a
sale and leaseback transaction, to or in favor of any Person, except (i) sales
of Inventory in the ordinary course of business, (ii) a transfer of Property to
Borrower by a Subsidiary of Borrower, (iii) dispositions expressly authorized by
this Agreement or (iv) so long as no Default or Event of Default shall then be
in existence, Borrower shall be permitted to consummate the Spinoff.
8.2.10. Bill-and-Hold Sales, Etc. Make a sale to any customer on
a bill-and-hold, guaranteed sale, sale and return, sale on approval or
consignment basis, or any sale on a repurchase or return basis.
8.2.11. Restricted Investment. Make or have, or permit any
Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.12. Leases. Become, or permit any of its Subsidiaries to
become, a lessee under any operating lease (other than a lease under which
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of 12 consecutive months
under the lease in question and all other leases under which Borrower or any of
its Subsidiaries is then lessee would exceed $6,000,000. The term "Rentals"
means, as of the date of determination, all payments which the lessee is
required to make by the terms of any lease.
8.2.13. Tax Consolidation. File or consent to the filing of any
Consolidated income tax return with any Person other than a Subsidiary of
Borrower.
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8.2.14. Stock of Subsidiaries. Permit any of its Subsidiaries to
issue any additional shares of its capital stock except director's qualifying
shares.
8.3. Specific Financial Covenants. During each period commencing on the
day Availability is less than $7,500,000 and ending on the last day of the first
Fiscal Quarter thereafter during which Availability has been greater than or
equal to $7,500,000 during each day of such Fiscal Quarter, and for so long as
there are any Obligations to Lenders, Borrower covenants that, unless otherwise
consented to by Lenders in writing, it shall:
8.3.1. Minimum Net Worth. Maintain a Net Worth of Borrower on a
Consolidated Basis as of the end of each Fiscal Year of not less than (i)
$60,000,000 for the Fiscal Year ending December 31, 1998 (the "Base Amount") and
(ii) for each Fiscal Year thereafter the sum of (a) the Base Amount and (b) 75%
of the positive Adjusted Net Earnings from Operations of Borrower for each such
Fiscal Year. For purposes of calculating the Base Amount under this SUBSECTION
8.3.1, upon consummation of the Spinoff, the Base Amount shall be decreased by
an amount equal to the net adjustment to Borrower's equity as reflected on
Borrower's Statement of Shareholders Equity for the Fiscal Year in which the
Spinoff occurs.
8.3.2. Cash Flow. Maintain Cash Flow of not less than (a)
negative $2,000,000 for the five months ending December 31, 1998, (b) negative
$1,000,000 for the eight months ending March 31, 1999 and (c) for each fiscal
quarter end, commencing with the fiscal quarter ending June 30, 1999 and each
fiscal quarter end thereafter (calculated in each case on a rolling four quarter
basis) the amounts indicated below.
Period Amount
- ------ ------
Four quarters ending June 30, 1999 ($ 500,000)
Four quarters ending September 30, 1999 $ 500,000
Four quarters ending December 31, 1999 and each
four quarter period ending thereafter $1,000,000
8.3.3. Adjusted Cash Flow.
Maintain for each fiscal quarter end set forth below an Adjusted Cash Flow of
not less than (a) negative $2,250,000 for the five months ending December 31,
1998, (b) negative $1,250,000 for the eight months ending March 31, 1999 and (c)
for each fiscal quarter end, commencing with the fiscal quarter ending June 30,
1999 and each fiscal quarter ending thereafter (calculated in each case on a
rolling four quarter basis) the amounts indicated below.
Period Amount
------ ------
Four quarters ending June 30, 1999 ($750,000)
Four quarters ending September 30, 1999 $250,000
Four quarters ending December 31, 1999 and each
four quarter period ending thereafter $500,000
SECTION 9. CONDITIONS PRECEDENT
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Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Agent
and Lenders under the other sections of this Agreement, Lenders shall not be
required to make the initial Loans under this Agreement unless and until each of
the following conditions has been and continues to be satisfied or has been
waived in writing by Required Lenders:
9.1. Documentation. Agent shall have received, in form and substance
satisfactory to Agent and its counsel and its local counsel, a duly executed
copy of this Agreement and the other Loan Documents, together with such
additional documents, instruments and certificates as Lenders and their counsel
shall require in connection therewith from time to time, all in form and
substance satisfactory to Lenders and their counsel.
9.2. No Default. No Default or Event of Default shall exist.
9.3. Other Loan Documents. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
9.4. Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
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.
9.5. Proceedings of Corporate Parties. Agent shall have received a copy
of the resolutions in form and substance reasonably satisfactory to Agent, of
the Board of Directors of Borrower authorizing, as applicable (i) the execution,
delivery and performance of this Agreement, and any other Loan Documents
(collectively the "Documents") and (ii) the granting by Borrower of the security
interests in and liens upon the Collateral certified by the Secretary or an
Assistant Secretary of the applicable party 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.
9.6. Incumbency Certificates of Each Corporate Party. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower,
dated the Closing Date, as to the incumbency and signature of the officers of
Borrower executing this Agreement or any other Loan Document, any certificate or
other documents to be delivered by it pursuant hereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary.
9.7. Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation of Borrower, and all amendments thereto, certified
by the Secretary of State or other appropriate official of its jurisdiction of
formation together with copies of the By-laws of Borrower and all agreements of
Borrower's shareholders certified as accurate and complete by the Secretary or
Assistant Secretary of Borrower and all such agreements shall be satisfactory to
Agent.
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9.8. Good Standing Certificates. Agent shall have received good standing
certificates for Borrower dated not more than 30 days prior to the Closing,
issued by the Secretary of State or other appropriate official of Borrower's
jurisdiction of formation and each jurisdiction where the conduct of Borrower's
business activities or the ownership of its properties necessitates
qualification.
9.9. Legal Opinion. Agent shall have received the executed legal opinion
of Hunton & Williams in form and substance satisfactory to Agent which shall
cover such matters incident to the transactions contemplated by this Agreement,
the Transactions and related agreements as Agent may reasonably require.
9.10. No Litigation. Except as described on Exhibit 9.10, (i) no
litigation, investigation or proceeding before or by any arbitrator or
governmental body shall be continuing or threatened against Borrower, any
Subsidiary of Borrower or against the officers or directors of Borrower or any
Subsidiary of Borrower (A) in connection with the Loan Documents or the
Acquisition Agreement or any of the transactions contemplated hereby or thereby
and which, in the reasonable opinion of Agent, is deemed material or (B) which
if adversely determined, could, in the reasonable opinion of Agent, have a
Material Adverse Effect; (ii) no injunction, writ, restraining order or other
order of any nature materially adverse to Borrower or any Subsidiary of Borrower
or the conduct of its business or inconsistent with the due consummation of the
transactions shall have been issued by any governmental body and (iii) no
material adverse change has occurred in the financial status of Borrower or its
Subsidiaries from the information previously disclosed to Agent in writing prior
to the Closing Date.
9.11. Information; Collateral Examination. Agent shall have received all
financial, business, and other information regarding Borrower, its Subsidiaries
and their respective Properties as Agent shall have reasonably requested. 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, General Intangibles and Equipment of Borrower and all
books and records in connection therewith.
9.12. Fees. Agent shall have received payment of all fees and expenses
of Agent and the Lenders on or prior to the Closing Date pursuant to this
Agreement.
9.13. Insurance. Agent shall have received in form and substance
satisfactory to Agent certified copies of Borrower's 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
Borrower's liability insurance policies, together with endorsements naming Agent
as a co-insured.
9.14. Payment Instructions. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Loans made pursuant to this Agreement.
9.15. No Adverse Material Change. (i) Since June 30, 1998, there shall
have occurred (x) no event or condition having a Material Adverse Effect, (y) no
material damage or destruction to any of the Collateral nor any material
depreciation in the value thereof and (z) no event, condition
38
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.
9.16. Contract Review. Agent shall have reviewed all material contracts
of Borrower including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be reasonably satisfactory in
all material respects to Agent.
9.17. Environmental Reports. Agent shall have received all environmental
studies and reports prepared by independent environmental engineering firms with
respect to all real Property owned or leased by Borrower and Agent shall have
received evidence satisfactory to Agent (i) that the operations of Borrower and
its Subsidiaries comply with applicable Environmental Laws; (ii) that such
operations are not the subject of any federal, state or local investigation
evaluating the need for remedial action, involving a material expenditure, to
respond to a release or threatened release of any toxic or hazardous waste or
substance into the environment; (iii) that neither the Borrower nor the
Guarantor has or could reasonably be expected to have any contingent liability
deemed material by the Lenders in connection with any release of any toxic or
hazardous waste or substance into the environment.
9.18. Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrower at which material amounts of Inventory are located.
9.19. Consents. Agent shall have received any and all Consents necessary
to permit the effectuation of the Transactions and all other transactions
contemplated by this Agreement and the other Loan Documents (without the
imposition of any conditions that are not acceptable to Agent or Lenders); 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.
9.20. Financial Condition Certificates. Agent shall have received
executed Officer's Certificates satisfactory in form and substance to it,
certifying that Borrower on a Consolidated Basis is Solvent immediately prior to
and after giving effect to the Transactions and the Indebtedness contemplated
hereby and as to the financial resources of Borrower on a Consolidated Basis and
its ability to meet its obligations and liabilities as they become due.
9.21. Closing Certificate. Agent shall have received a closing
certificate signed by an authorized officer of Borrower dated as of the date
hereof, stating that (i) all representations and warranties set forth in this
Agreement and the other Loan Documents are true and correct in all material
respects immediately prior to and after giving effect to the making of the
initial Loans hereunder, (ii) Borrower is on such date in compliance with all
the terms and provisions set forth in this Agreement and the other Loan
Documents and (iii) on such date no Default or Event of Default has occurred or
is continuing.
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9.22. Subsidiary Stock. Agent shall have received evidence that all
issued and outstanding capital stock of each of Borrower's Subsidiaries shall be
owned by Borrower or one or more of Borrower's Subsidiaries.
9.23. Corporate Structure. Agent shall be satisfied with the corporate
and legal structure and capitalization of Holdings, Borrower and its
Subsidiaries including, each class of capital stock of such Person and each
instrument or agreement relating to such structure or capitalization.
9.24. ERISA. Agent shall be satisfied that (i) Borrower and its
Subsidiaries will be able to meet their respective obligations under all
employee and retiree welfare plans, (ii) the employee benefit plans of Borrower
and its Subsidiaries are, in all material respects, funded in accordance with
the minimum statutory requirements, (iii) no material "reportable event" (as
defined in ERISA, but excluding events for which reporting has been waived) has
occurred as to any such employee benefit plan and (iv) no termination of, or
withdrawal from, any such employee benefit plan has occurred or is contemplated
that could reasonably be expected to result in a material liability.
9.25. Availability. Agent shall have determined that after giving effect
to the Transactions (including, without limitation, the initial Loans, Letters
of Credit and LC Guaranties contemplated hereby), and the payment of all closing
costs incurred in connection with the Transactions, Closing Availability shall
not be less than $9,000,000.
9.26. 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.
9.27. Conditions to Each Loan. The agreement of Lenders to make any
Loans or cause to be opened any Letters of Credit requested to be made or opened
on any date (including, without limitation, the initial Loans), is subject to
the satisfaction of the following conditions precedent as of the date such Loan
is made or Letter of Credit opened:
(i) Representations and Warranties. Each of the representations and
warranties made by 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, except for those
representations and warranties limited by their terms to a specified date.
(ii) 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 Loans
requested to be made, on such date and, in the case of the initial Loan, after
giving effect to the consummation of the transaction contemplated by the
Acquisition Agreement; provided, however, that Agent in its sole discretion, may
continue to make Loans notwithstanding the existence of an Event of Default or
Default and that any Loans so made shall not be deemed a waiver of any such
Event of Default or Default; and
(iii) Maximum Loans. In the case of any Loans requested to be made,
after giving effect thereto, the aggregate Loans shall not exceed the maximum
Loans permitted under this Agreement.
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Each request for a Loan by Borrower hereunder shall constitute a representation
and warranty by Borrower as of the date of such Loan that the conditions
contained in this subsection shall have been satisfied.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1. Payment of Obligations. Borrower shall fail to pay any
of the Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
10.1.2. Misrepresentations. Any representation, warranty or
other statement made or furnished to Agent or any Lender by or on behalf of
Borrower or any Subsidiary of Borrower in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
SECTION 7.2 hereof.
10.1.3. Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in SECTIONS 5.2,
6.1.1, 6.2, 6.3, 8.1.1, 8.1.3, 8.2 OR 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
10.1.4. Breach of Other Covenants. Borrower or any Subsidiary of
Borrower shall fail or neglect to perform, keep or observe any covenant
contained in this Agreement (other than a covenant which is dealt with
specifically elsewhere in SECTION 10.1 hereof) and the breach of such other
covenant is not cured to Agent's satisfaction within fifteen (15) days after the
sooner to occur of Borrower's or Subsidiary of Borrower's receipt of notice of
such breach from Agent or the date on which such failure or neglect first
becomes known to any senior officer of Borrower or Subsidiary of Borrower.
10.1.5. Default Under Security Documents/Other Agreements. Any
event of default shall occur under, or Borrower or any Subsidiary of Borrower
shall default in the performance or observance of any term, covenant, condition
or agreement contained in, any of the Security Documents or the Other Agreements
and such default shall continue beyond any applicable grace period.
10.1.6. Other Defaults. There shall occur any default or event
of default on the part of Borrower under any agreement, document or instrument
to which Borrower is a party or by which Borrower or any of its Property is
bound, creating or relating to any Indebtedness in excess of $100,000 if the
payment or maturity of such Indebtedness is accelerated in consequence of such
event of default or demand for payment of such Indebtedness is made.
10.1.7. Insolvency and Related Proceedings. Borrower or any
Subsidiary of Borrower shall cease to be Solvent or shall suffer the appointment
of a receiver, trustee, custodian
41
or similar fiduciary, or shall make an assignment for the benefit of creditors,
or any petition for an order for relief shall be filed by or against Borrower or
any Subsidiary of Borrower under the Bankruptcy Code (if against Borrower, the
continuation of such proceeding for more than 30 days), or Borrower or any
Subsidiary of Borrower shall make any offer of settlement, extension or
composition to its unsecured creditors generally.
10.1.8. Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower for a period which
significantly affects Borrower's capacity to continue its business, on a
profitable basis; or Borrower shall suffer the loss or revocation of any license
or permit now held or hereafter acquired by Borrower which is necessary to the
continued or lawful operation of Borrower's business; or Borrower shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which Borrower leases,
uses or occupies any Property shall be canceled or terminated prior to the
expiration of its stated term; or any part of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
10.1.9. ERISA. A Reportable Event shall occur which Agent, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the PBGC of any Plan or for the appointment by the appropriate
United States district court of a trustee for any Plan, or any Plan shall be
terminated or any such trustee shall be requested or appointed, or if Borrower
or any Subsidiary of Borrower is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from
Borrower's or such Subsidiary's complete or partial withdrawal from such Plan.
10.1.10. Challenge to Agreement. Borrower or any Subsidiary of
Borrower, or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Agent for the
benefit of Lenders.
10.1.11. Criminal Forfeiture. Borrower shall be criminally
indicted or convicted under any law that could lead to a forfeiture of any
material Property of Borrower.
10.1.12. Judgments. Any money judgment, writ of attachment or
similar process is filed against Borrower or any Subsidiary of Borrower, or any
of their respective Property, if the amount thereof not covered by insurance is
in excess of $250,000 and such judgment, attachment or process remains unstayed,
unpaid, undischarged or unbonded (but only to the extent the issuance of such
bond stays all related judgment enforcement proceedings) for 30 consecutive
days.
10.1.13. Repudiation of or Default Under Guaranty Agreement. Any
Guarantor shall revoke or attempt to revoke any Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability hereunder or
thereunder or shall be in default under the terms thereof.
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10.2. Acceleration of the Obligations. Without in any way limiting the
right of Agent or the Lenders to demand payment of any portion of the
Obligations payable on demand in accordance with SECTION 3.2 hereof, upon or at
any time after the occurrence of an Event of Default, all or any portion of the
Obligations shall, at the option of the Required Lenders and without
presentment, demand, protest or further notice by Agent or any Lender, become at
once due and payable and Borrower shall forthwith pay to Agent for the ratable
benefit of Lenders, the full amount of such Obligations, provided, that upon the
occurrence of an Event of Default specified in SUBSECTION 10.1.7 hereof, all of
the Obligations shall become automatically due and payable without declaration,
notice or demand by Agent or any Lender.
10.3. Other Remedies. Upon the occurrence of an Event of Default, Agent
shall have and may exercise from time to time the following rights and remedies:
10.3.1. All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable rights
to which Agent may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2. The right to take immediate possession of the
Collateral, and to (i) require Borrower to assemble the Collateral, at
Borrower's expense, and make it available to Agent and Lenders at a place
designated by Agent which is reasonably convenient to both parties, and (ii)
enter any premises where any of the Collateral shall be located and to keep and
store the Collateral on said premises until sold (and if said premises be the
Property of Borrower, Borrower agrees not to charge Agent or any Lender for
storage thereof).
10.3.3. The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Agent, in
its sole discretion, may deem advisable. Borrower agrees that ten (10) days
written notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Agent may designate in said notice. Agent shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Agent shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, in a commercially reasonable manner, for cash,
credit or any combination thereof, and Agent or any Lender may purchase all or
any part of the Collateral at public or, if permitted by law, private sale and,
in lieu of actual payment of such purchase price, may set off the amount of such
price against the Obligations. The proceeds realized from the sale of any
Collateral may be applied, after allowing two (2) Business Days for collection,
first to the costs, expenses and attorneys' fees incurred by Agent in collecting
the Obligations, in enforcing the rights of Agents and Lenders under the Loan
Documents and in collecting, retaking, completing, protecting, removing,
storing, advertising for sale, selling and delivering any Collateral, second to
the interest due upon any of the Obligations; and third, to the principal of the
Obligations. If any deficiency shall arise, Borrower shall remain liable to
Agent and Lenders therefor.
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10.3.4. Agent is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Agent's benefit.
10.3.5. Agent may, at its option, require Borrower to deposit
with Agent funds equal to the Aggregate LC Amount and, if Borrower fails to
promptly make such deposit, Lenders may advance such amount as a Revolving
Credit Loan (whether or not an Overadvance is created thereby). Any such deposit
or advance shall be held by Agent as a reserve to fund future payments on
outstanding LC Guaranties and future drawings against outstanding Letters of
Credit. At such time as all LC Guaranties have been paid or terminated and all
Letters of Credit have been drawn upon or expired, any amounts remaining in such
reserve shall be applied against any outstanding Obligations, or, if all
Obligations have been indefeasibly paid in full, returned to Borrower.
10.4. Remedies Cumulative; No Waiver. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrower
contained in this Agreement and the other Loan Documents, or in any document
referred to herein or contained in any agreement supplementary hereto or in any
schedule given to Agent or Lenders or contained in any other agreement between
or among Agent, Lenders and Borrower, heretofore, concurrently, or hereafter
entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Agent or any Lender to
require strict performance by Borrower of any provision of this Agreement or to
exercise or enforce any rights, Liens, powers, or remedies hereunder or under
any of the aforesaid agreements or other documents or security or Collateral
shall not operate as a waiver of such performance by Borrower, and all such
requirements, Liens, rights, powers, and remedies shall continue in full force
and effect until all Loans and all other Obligations owing or to become owing
from Borrower to Agent or Lenders shall have been fully satisfied. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or any of the other Loan Documents and no Event of
Default by Borrower under this Agreement or any other Loan Documents shall be
deemed to have been suspended or waived by Agent or any Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Agent (with the
consent of Lenders or Required Lenders, as applicable, in accordance with the
terms of SUBSECTION 12.3) and directed to Borrower.
SECTION 11. REGARDING AGENT
11.1. Appointment. Each Lender hereby designates Fleet to act as Agent
for such Lender under this Agreement and the other Loan Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the other Loan 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 SECTION
2.3), charges and collections (without giving effect
44
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, 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 Loan Documents or
applicable law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.
11.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan 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 negligence (but not mere
negligence) or willful misconduct or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by Borrower or any
officer thereof contained in this Agreement or in any other Loan 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 Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any of the other Loan
Documents or for any failure of Borrower to perform its obligations hereunder or
thereunder. 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 Loan
Documents, or to inspect the properties, books or records of Borrower. The
duties of Agent as respects the Loans to Borrower 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.
11.3. 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 Borrower in connection with the making and the
continuance of the Loans hereunder and the taking or not taking of any action in
connection herewith, and (ii) its own appraisal of the creditworthiness of
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
Loans or at any time or times thereafter except as shall be provided by 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,
collectability or sufficiency of this Agreement or any of the other Loan
Documents, or of the financial condition of 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 or any of the other Loan Documents or
the financial condition of Borrower, or the existence of any Event of Default or
any Default.
45
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrower. The Required Lenders will promptly designate a successor Agent which
in the absence of an Event of Default shall be reasonably satisfactory to
Borrower; provided that such resignation shall not be effective until a
successor Agent has been designated and approved by Borrower, which such
approval shall not be unreasonably withheld.
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 SECTION 11
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
11.4. 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, any Other Agreement or any Security 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.
11.5. 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 in good faith 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 Loan 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.
11.6. 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 Loan Documents, unless Agent has received notice from a Lender or
Borrower referring to this Agreement or the other Loan 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.
11.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Loans (or, if no Loans are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits,
46
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 Loan 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
negligence (but not mere negligence) or willful misconduct.
11.8. Agent in its Individual Capacity. With respect to the obligation
of Agent to lend under this Agreement, the Loans 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 Borrower
("Other Transactions") as if it were not performing the duties specified herein,
and may accept fees and other consideration from Borrower for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders; provided, however, Agent shall not exercise any rights of
set-off under this Agreement with respect to Borrower's obligations to Agent
arising out of any Other Transactions.
11.9. Delivery of Documents. To the extent Agent receives documents and
information from Borrower pursuant to the terms of this Agreement, Agent will
promptly furnish such documents and information to Lenders.
11.10. Borrower's Undertaking to Agent. Without prejudice to its
obligations to the Lenders under the other provisions of this Agreement,
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 the 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 Borrower's obligations to make payments for the account of the Lenders
or the relevant one or more of them pursuant to this Agreement.
SECTION 12. MISCELLANEOUS
12.1. Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Agent (and all Persons designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact) and Agent, or Agent's
agent, may, without notice to Borrower and in Borrower's or Agent's name, but at
the cost and expense of Borrower:
12.1.1. At such time or times upon the occurrence and during the
continuance of an Event of Default as Agent or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Agent or any Lender or under
Agent's or any Lender's control.
12.1.2. At such time or times upon the occurrence and during the
continuance of an Event of Default as Agent in its sole discretion may
determine: (a) demand payment of the
47
Accounts from the Account Debtors, enforce payment of the Accounts by legal
proceedings or otherwise, and generally exercise all of Borrower's rights and
remedies with respect to the collection of the Accounts; (b) settle, adjust,
compromise, discharge or release any of the Accounts or other Collateral or any
legal proceedings brought to collect any of the Accounts or other Collateral;
(c) sell or assign any of the Accounts and other Collateral upon such terms, for
such amounts and at such time or times as Agent deems advisable; (d) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (e) prepare, file and sign Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (f) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Agent may designate; (g) endorse the name of Borrower
upon any of the items of payment or proceeds relating to any Collateral and
deposit the same to the account of Agent on account of the Obligations; (h)
endorse the name of Borrower upon any chattel paper, document, instrument,
invoice, freight bill, bill of lading or similar document or agreement relating
to the Accounts, Inventory and any other Collateral; (i) use Borrower's
stationery and sign the name of Borrower to verifications of the Accounts and
notices thereof to Account Debtors; (j) use the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to the Accounts, Inventory, Equipment and any other Collateral; (k)
make and adjust claims under policies of insurance; and (l) do all other acts
and things necessary, in Agent's determination, to fulfill Borrower's
obligations under this Agreement.
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12.2. Indemnity. Borrower will indemnify and hold harmless Agent, each
Lender and each of their Affiliates and their officers, directors, employees,
agents and advisors (each an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with (a) the Transactions and any of the other
transactions contemplated by this Agreement, (b) any acquisition or proposed
acquisition or similar business combination or proposed business combination by
Borrower or any Subsidiary of Borrower or any of their Subsidiaries or
Affiliates of all or any portion of the shares of capital stock or substantially
all of the Property and assets of any other Person, (c) the Loans and any use
made or proposed to be made with the proceeds thereof or (d) the actual or
alleged presence of Hazardous Materials on any Property of Borrower or any
Subsidiary of Borrower or any of their Subsidiaries or any environmental action
or proceeding relating in any way to Borrower or any Subsidiary of Borrower or
any of their Subsidiaries or any of their respective Properties, in each case,
whether or not such investigation, litigation or proceeding is brought by
Borrower or any Subsidiary of Borrower or any of their shareholders or creditors
or an Indemnified Party, or an Indemnified Party is otherwise a party thereto
and whether or not the Transactions are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross (not mere) negligence or willful misconduct. Borrower
further agrees that no Indemnified Party will have any liability (whether direct
or indirect, in contract or tort or otherwise) to Borrower or any Subsidiary of
Borrower or any of their respective security holders or creditors arising out
of, related to or in connection with the Transactions, except for direct (as
opposed to consequential) damages determined in a final nonappealable judgment
by a court of competent jurisdiction to have resulted from such Indemnified
Party's gross (not mere) negligence or willful misconduct. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this
SECTION 12.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
12.3. Modification of Agreement. The Required Lenders and Borrower may,
subject to the provisions of this SECTION 12.3, from time to time enter into
written supplemental agreements to this Agreement or the other Loan Documents
executed by Borrower, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of the Lenders,
the Agent or Borrower thereunder or the conditions, provisions or terms thereof
or 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 the Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the final maturity of any Note or any scheduled installment
due date under SECTION 1.3 hereof, or decrease the rate of interest or reduce
any fee payable by Borrower to any such Lender pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter, amend
or modify this SECTION 12.3.
49
(iv) release any Collateral during any calendar year having an aggregate
value in excess of $100,000.
(v) change the rights and duties of Agent.
(vi) increase the Total Credit Facility.
Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Borrower, the Lenders and the Agent and all future holders
of the Obligations. In the case of any waiver, Borrower, the Agent and the
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 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 resulting from such subsequent
Event of Default.
12.4. Successors and Assigns; Participations; New Lenders.
(i) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent, each Lender, all future holders of the Notes and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(ii) 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 interests in the Loans to other financial institutions (each such
transferee or purchaser of a participating interest, a "Transferee"). Each
Lender shall provide written notice to Agent and Borrower of any sales of
participating interests made by each Lender. Each Transferee may exercise all
rights of payment (including without limitation rights of set-off) with respect
to the portion of such Loans held by it or other Obligations payable hereunder
as fully as if such Transferee were the direct holder thereof provided that
Borrower 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 Loans or other Obligations payable hereunder to such Transferee had such
Lender retained such interest in the Loans hereunder or other Obligations
payable hereunder and in no event shall Borrower be required to pay any such
amount arising from the same circumstances and with respect to the same Loans or
other Obligations payable hereunder to both such Lender and such Transferee.
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 Loans. No such
participation shall create a direct contractual relationship between Borrower
and such participant, and no participant shall be given (i) the right to
instruct the Lender to take or to refrain from taking any action hereunder, or
(ii) any voting rights hereunder (other than for reductions or postponements of
any amounts payable hereunder or the release of all or substantially all of the
Collateral).
(iii) Any Lender may sell, assign or transfer its rights under this
Agreement and the other Loan Documents to one or more additional banks or
financial institutions reasonably acceptable to Agent and Borrower (such
acceptance not to be unreasonably withheld or delayed) which additional
50
banks or financial institutions may commit to make Loans hereunder (each
a "Purchasing Lender"), pursuant to a Commitment Transfer Supplement,
executed by a Purchasing Lender, the transferor Lender, and Agent in the
form annexed hereto as Exhibit 12.4 and delivered to Agent for recording
provided, however, that any transfer of less than all of any Lender's rights
hereunder or any transfer to a Person who is not a Lender hereunder shall be in
minimum amounts of not less than $2,500,000. 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 Loan Documents. Borrower hereby consents to the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender in accordance with the terms
of SUBSECTION 12.4(iii) of all or a portion of the rights and obligations of
such transferor Lender under this Agreement and the other Loan Documents.
Borrower shall execute and deliver such further documents and do such further
acts and things in order to effectuate the foregoing at such transferring
Lender's expense.
(iv) 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 each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and Borrower, Agent and Lenders may treat each Person whose name is recorded in
the Register as the owner of the Loan recorded therein for the purposes of this
Agreement. The Register shall be available for inspection by Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice. Agent shall receive a fee in the amount of $3,000 payable by the
applicable Purchasing Lender upon the effective date of each transfer or
assignment to such Purchasing Lender.
(v) 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 Borrower which
has been delivered to such Lender by or on behalf of Borrower pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrower,
subject to such prospective Transferee's agreeing to maintain the
confidentiality of such information pursuant to an agreement reasonably
acceptable to Borrower.
(vi) Borrower agrees to take all actions that Agent may reasonably
request in attempting to sell, transfer or assign any of its rights or interest
under this Agreement. Such actions include, but are not limited to, (a) Borrower
causing senior management and representatives of Borrower and its Subsidiaries
to be available to participate in information meetings with prospective
Purchasing Lenders at such times and places as Agent may reasonably request, (b)
Borrower using its reasonable efforts to ensure that Agent's attempt to sell,
transfer or assign any of its rights or interest under this Agreement benefit
from Borrower lending relationships and (c) Borrower providing Agent with all
information reasonably requested by Agent in order to accomplish such sale,
transfer or assignment.
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(vii) Notwithstanding anything to the contrary in this Section 12.4,
without Agent's prior written consent, no Lender (other than Fleet) may assign
or sell any of its rights or interests hereunder, provided, however, any Lender
hereunder may assign all or any of its rights hereunder without the consent of
Borrower or Agent to (a) the Federal Reserve Bank as collateral or (b) any
Affiliate of such Lender.
(viii) Upon at least 60 days prior written notice to Agent, any Lender
may terminate its commitment to make Loans hereunder as of the last day of the
Original Term.
12.5. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.6. Successors and Assigns. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lenders permitted under SECTION 12.4
hereof.
12.7. Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in SECTION 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
12.8. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
12.9. Notice. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one (1)
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
If to Agent: FLEET CAPITAL CORPORATION
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Northeast Loan Administrator
Facsimile No.: (860) 657-7759
52
With a copy to: HAHN & HESSEN LLP
350 Fifth Avenue
New York, New York 10118
Attention: Daniel J. Krauss, Esq.
Facsimile No.: (212) 594-7167
If to Borrower: Executone Information Systems, Inc.
478 Wheelers Farm Road
Milford, Connecticut
Attention: Chief Financial Officer and
General Counsel
Facsimile No.: (203) 882-2729
or to such other address as each party may designate for itself by notice given
in accordance with this SECTION 12.9; provided, however, that any notice,
request or demand to or upon Agent pursuant to SUBSECTION 3.1.1 OR 4.2.2 hereof
shall not be effective until received by Agent.
12.10. Lenders' Consent. Whenever Agent's, Required Lenders' or Lenders'
consent is required to be obtained under this Agreement, any of the Other
Agreements or any of the Security Documents as a condition to any action,
inaction, condition or event, Agent, Required Lenders and Lenders, as the case
may be, shall be authorized to give or withhold such consent in their sole and
absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
12.11. Credit Inquiries. Borrower and each Subsidiary of Borrower hereby
authorize and permit Agent and Lenders to respond to usual and customary credit
inquiries from third parties concerning Borrower or any Subsidiary of Borrower.
12.12. Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
12.13. Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
12.14. Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
12.15. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
NEW YORK, NEW YORK. THIS AGREEMENT SHALL BE
53
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK:
PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY
JURISDICTION OTHER THAN NEW YORK, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE
METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF LENDERS' LIEN UPON SUCH
COLLATERAL AND THE ENFORCEMENT OF LENDERS' OTHER REMEDIES IN RESPECT OF SUCH
COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM
OR INCONSISTENT WITH THE LAWS OF NEW YORK. AS PART OF THE CONSIDERATION FOR NEW
VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL
PLACE OF BUSINESS OF BORROWER OR LENDERS, BORROWER HEREBY CONSENTS AND AGREES
THAT ANY FEDERAL OR STATE COURT SITTING IN THE STATE OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
BORROWER AND LENDERS PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT
OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDERS OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.16. WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH AGENT AND LENDERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL: (ii) OTHER THAN NOTICES EXPRESSLY
PROVIDED TO BE GIVEN TO BORROWER HEREIN, PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY
54
LENDERS ON WHICH ANY LOAN PARTY MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND
CONFIRMS WHATEVER LENDERS MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO TAKING
POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE
REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDERS TO EXERCISE ANY OF LENDERS'
REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO LENDERS' ENTERING INTO THIS AGREEMENT AND
THAT LENDERS ARE RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH
BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
[SIGNATURE LINES ON FOLLOWING PAGE]
55
IN WITNESS WHEREOF, this Agreement has been duly executed on the
day and year specified at the beginning of this Agreement.
EXECUTONE INFORMATION SYSTEMS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
FLEET CAPITAL CORPORATION
("Agent" and "Lender")
By:________________________________
Name:______________________________
Title:_____________________________
Commitment Percentage: 100%
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of August
14, 1998, by and among the financial institutions party thereto and the various
financial institutions which become parties thereto ("Lenders"), Fleet Capital
Corporation as administrative and collateral agent for Lenders (in such
capacity, "Agent") and Execution Information Systems, Inc. ("Borrower"), the
following terms shall have the following meanings (terms defined in the singular
to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated under
or on account of an Account.
Accounts - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or acquired by
Borrower or in which Borrower now has or hereafter acquired any interest.
Adjusted Cash Flow - for any fiscal period, means (i) Adjusted
Net Earnings From Operations for such period, plus (ii) depreciation and
amortization and any other non-cash expenses of Borrower (iii) plus increases
and minus decreases in deferred taxes of Borrower for such period, all as
determined in accordance with GAAP less (iv) non-financed Capital Expenditures,
less (v) the sum of the aggregate payments of regularly scheduled principal with
respect to Indebtedness for Money Borrowed (other than the Revolving Credit
Loans) made during such period and less (vi) the sum of the aggregate Specified
Permitted Investments made during such period.
Adjusted Net Earnings From Operations - with respect to any
fiscal period, means the net earnings (or loss) after provision for income taxes
for such fiscal period of Borrower on a Consolidated Basis, as reflected on the
Consolidated financial statement of Borrower supplied to Agent pursuant to
SUBSECTION 8.1.3 of the Agreement, but excluding:
(i) any gain or loss arising from the sale of capital
assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings or losses of any Subsidiary of Borrower
accrued prior to the date it became a Subsidiary;
(iv) earnings or losses of any corporation or Person,
substantially all the assets of which have been acquired in any manner by
Borrower, realized by such corporation or Person prior to the date of such
acquisition;
(v) net earnings of any business entity (other than a
Subsidiary of Borrower) in which Borrower has an ownership interest unless such
net earnings shall have actually been received by Borrower in the form of cash
distributions;
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(vi) any portion of the net earnings of any Subsidiary of
Borrower which for any reason is unavailable for payment of dividends to
Borrower;
(vii) the earnings or losses of any Person (other than an
Affiliate of Borrower) to which any assets of Borrower shall have been sold,
transferred or disposed of, or into which Borrower shall have merged, or been a
party to any consolidation or other form of reorganization, prior to the date of
such transaction;
(viii) any gain arising from the acquisition of any
Securities of Borrower; and
(ix) any gain or non cash loss arising from extraordinary
items.
Affiliate - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of a
Person; or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by a Person or a Subsidiary of a Person.
Aggregate LC Amount - at any time, without duplication, the
aggregate undrawn face amount of all Letters of Credit and LC Guaranties then
outstanding.
Agreement - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, all Exhibits thereto and this Appendix A.
Applicable Margin - On the Closing Date the rate per annum set
forth under the relevant column heading below:
Base Rate Loans Eurodollar Loans and
- --------------- LIBOR Rate Loans
----------------
1.25% 3.00%
provided the Applicable Margin shall be subject to change as of the first day of
each Fiscal Quarter based upon the Fixed Charge Coverage Ratio for the preceding
four (4) Fiscal Quarters commencing with the four (4) Fiscal Quarters ended as
of March 31, 1999 following the delivery of the financial statements of Borrower
on a Consolidated Basis for the Fiscal Quarter then ended (so long as (i) such
statements are delivered on or before the Required Delivery Date therefor and
(ii) no Event of Default shall have occurred and be continuing) to the rates set
forth below under the relevant column heading:
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EURODOLLAR LOANS AND BASE RATE LOANS
LIBOR RATE LOANS
Fixed Charge Ratio
Less than 1.0x 3.50% 1.75%
- --------------------------------------------------------------------------------
Greater than or equal to
1.0x but less than 1.25x 3.25% 1.50%
- --------------------------------------------------------------------------------
Greater than or equal to
1.25x but less than 1.50x 3.00% 1.25%
- --------------------------------------------------------------------------------
Greater than or equal to
1.50x but less than 2.0x 2.75% 1.00%
- --------------------------------------------------------------------------------
Greater than or equal to
2.00x but less than 2.50x 2.50% .75%
- --------------------------------------------------------------------------------
Greater than 2.5x 2.25% .50%
- --------------------------------------------------------------------------------
Availability - the amount of money which Borrower is entitled to
borrow from time to time as Revolving Credit Loans, such amount being the
difference derived when the sum of the principal amount of Revolving Credit
Loans then outstanding (including any amounts which Agent may have paid for the
account of Borrower pursuant to any of the Loan Documents and which have not
been reimbursed by Borrower) and the LC Amount is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing Base,
Availability is 0.
Bank - Fleet National Bank.
Base Rate - a rate per annum equal to the higher of (i) the
Federal Funds Rate in effect on such day plus 1/2 of 1% or (ii) the rate of
interest announced or quoted by Bank from time to time as its prime rate for
commercial loans, whether or not such rate is the lowest rate charged by Bank to
its most preferred borrowers; and, if such prime rate for commercial loans is
discontinued by Bank as a standard, a comparable reference rate designated by
Bank as a substitute therefor shall be the Base Rate.
Base Rate Loans - any Loans bearing interest computed by
reference to the Base Rate.
Borrower -Executone Information Systems, Inc., a Virginia
corporation.
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(i) an amount equal to:
(a) the Maximum Revolving Amount;
MINUS
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(b) the Aggregate LC Amount;
MINUS
(c) Reserves; or
(ii) an amount equal to:
(a) up to 85% ("Accounts Advance Rate") of the net
amount of Eligible Accounts of Borrower;
PLUS
(b) the lesser of (1) $13,000,000 or (2) up to 50%
("Inventory Advance Rate") of the value of Eligible Inventory of Borrower
calculated on the basis of the lower of cost or market calculated on a first-in,
first-out basis;
MINUS
(c) Reserves.
For purposes hereof, the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts less any and all
returns, rebates, discounts (which may, at Agent's option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at any time
issued, owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time.
Business Day - means, with respect to Eurodollar Loans, any day
on which commercial banks are open for domestic and international business
including dealings in Dollar deposits in London, England and New York, New York
and with respect to all other Loans, any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of New York or is a day
on which banking institutions located in such state are closed.
Capital Expenditures - expenditures made or liabilities incurred
by Borrower for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life of
more than one year and capitalized under GAAP, including, with duplication, the
total principal portion of Capitalized Lease Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
the principal portion of obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
Cash Flow - for any fiscal period, means (i) Adjusted Net
Earnings From Operations for such period, plus (ii) depreciation and
amortization and any other non-cash expenses of Borrower (iii) plus increases
and minus decreases in deferred taxes of Borrower for such period, all as
determined in accordance with GAAP less (iv) non-financed Capital Expenditures
and less (v)
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the sum of the aggregate payments of regularly schedule principal with respect
to Indebtedness for Money Borrowed (other than the Revolving Credit Loans) made
during such period.
CERCLA - shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. 'SS''SS'9601
et seq.
Closing Availability - Availability minus all sums then due and
owing by Borrower to trade creditors beyond normal trade terms.
Closing Date - the date on which all of the conditions precedent
in SECTION 9 of the Agreement are satisfied and the initial Loan is made or the
initial Letter of Credit or LC Guaranty is issued under the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the
State of New York, as from time to time in effect.
Collateral - all of the Property and interests in Property
described in SECTION 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of the
Obligations.
Commitment Percentage - of any Lender means the percentage set
forth below such Lender's name on the signature page of the Agreement as same
may be adjusted upon any assignment by a Lender pursuant to SECTION 12.4
thereof.
Commitment Transfer Supplement - a document in the form of
Exhibit 12.4 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 Loans under the Agreement.
Consents - all material filings and all material licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, domestic or foreign, necessary
to carry on Borrower's business, including, without limitation, any Consents
required under all applicable federal, state or other applicable law.
Consolidated Basis - the consolidation in accordance with GAAP of
the accounts or other items of Borrower and its Subsidiaries.
Consolidated Interest Expense - shall mean, for any period to the
extent actually paid, the interest expense (net of interest income) of Borrower
on a Consolidated Basis during such period determined in accordance with GAAP
consistently applied, and shall in any event include, without limitation,
interest on Capitalized Lease Obligations and shall exclude original issue
discount amortization to the extent it is required to be included in accordance
with GAAP.
Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets shown
on a balance sheet at such date in
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accordance with GAAP except that amounts due from Affiliates and investments in
Affiliates shall be excluded therefrom.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - as defined in SUBSECTION 2.1.2 of the Agreement.
Dividend Payment - as defined in subsection 8.2.7 of the
Agreement.
Dollar - and the sign $ shall mean lawful money of the United
States of America.
Dominion Account - a special account of Agent established by
Borrower pursuant to the Agreement at a bank selected by Borrower, but
acceptable to Agent in its reasonable discretion, and over which Agent shall
have sole and exclusive access and control for withdrawal purposes.
EBITDA - with respect to any fiscal period, means the sum of
Adjusted Net Earnings From Operations before interest expense, taxes,
depreciation and amortization for said period as determined in accordance with
GAAP of Borrower on a Consolidated Basis.
Eligible Account - an Account arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services which Agent,
in its sole credit judgment, deems to be an Eligible Account. Without limiting
the generality of the foregoing, no Account shall be an Eligible Account if:
(i) it arises out of a sale made by Borrower to a
Subsidiary or an Affiliate of Borrower or to a Person controlled by an Affiliate
of Borrower; or
(ii) it is unpaid for more than (a) with respect to
Accounts from Account Debtors other than the United States of America or any
state or municipality thereof or Account Debtors invoiced by Borrower's
healthcare division (the "Specified A Account Debtors"), 60 days after the
original due date shown on the invoice and (b) with respect to Accounts from the
United States of America or any state or municipality thereof or Accounts from
Account Debtors invoiced by Borrower's healthcare division (the "Specified B
Account Debtors"), 90 days after the original due date shown on the invoice,
provided that the aggregate amount of Eligible Accounts under this clause "(b)"
shall not exceed $1,500,000 at any time; or
(iii) it is due or unpaid more than (a) with respect to
Accounts from Specified A Account Debtors, 90 days after the original invoice
date and (b) with respect to Accounts from Specified B Account Debtors, 120 days
after the original invoice date, provided that the aggregate amount of Eligible
Accounts under this clause "(b)" shall not exceed $1,500,000 at any time; or
(iv) 50% or more of the Accounts from the Account Debtor
are not deemed Eligible Accounts hereunder; or
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(v) (a) the total unpaid Accounts of the Account Debtor
(other than Claricom, Inc.) exceed 15% of the net amount of all Eligible
Accounts, to the extent of such excess or (b) the total unpaid Accounts of
Claricom, Inc. exceed 25% of the amount of all Accounts, to the extent of such
excess; or
(vi) any covenant, representation or warranty contained in
the Agreement with respect to such Account has been breached to the extent it
affects the collectability of such Account ; or
(vii) the Account Debtor is also Borrower's creditor or
supplier, or the Account Debtor has disputed liability with respect to such
Account, or the Account Debtor has made any claim with respect to any other
Account due from such Account Debtor to Borrower, or the Account otherwise is or
may become subject to any right of setoff by the Account Debtor to the extent
such amount owed is, subject to set-off by or disputed with such Account Debtor;
or
(viii) the Account Debtor has commenced a voluntary case
under the federal bankruptcy laws, as now constituted or hereafter amended, or
made an assignment for the benefit of creditors, or a decree or order for relief
has been entered by a court having jurisdiction in the premises in respect of
the Account Debtor in an involuntary case under the federal bankruptcy laws, as
now constituted or hereafter amended, or any other petition or other application
for relief under the federal bankruptcy laws has been filed against the Account
Debtor, or if the Account Debtor has failed, suspended business, ceased to be
Solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs; or
(ix) it arises from a sale to an Account Debtor outside
the United States to the extent the aggregate amount of such Accounts exceeds
$25,000, unless the sale is on letter of credit, guaranty or acceptance terms,
in each case acceptable to Agent in its sole discretion; or
(x) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or
any other repurchase or return basis; or
(xi) the Account Debtor is the United States of America or
any department, agency or instrumentality thereof unless Borrower assigns its
right to payment of such Account to Agent, in a manner satisfactory to Agent, so
as to comply with the Assignment of Claims Act of 1940 (31 U.S.C. 'SS'.203 et
seq., as amended); or
(xii) the Account is subject to a Lien other than a
Permitted Lien; or
(xiii) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving rise to
such Account have not been performed by Borrower and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; or
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(xiv) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or
(xv) Borrower has made any agreement with the Account
Debtor for any deduction therefrom, except for discounts or allowances which are
made in the ordinary course of business and which discounts or allowances are
reflected in the calculation of the face value of each invoice related to such
Account.
Eligible Inventory - such Inventory of Borrower (other than
packaging materials and supplies) which Agent, in its sole credit judgment,
deems to be Eligible Inventory. Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory if:
(i) it is not finished goods or raw materials;
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all material standards imposed by
any governmental agency or authority; or
(v) it does not conform in all respects to the warranties
and representations set forth in the Agreement,
(vi) it is not at all times subject to Agent's duly
perfected, first priority security interest and no other Lien except a Permitted
Lien; or
(vii) it is not situated at a location in compliance with
the Agreement or is in transit.
Environmental Complaint - shall have the meaning set forth in
Section 8.1.7(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 - with respect to Borrower, all machinery, apparatus,
equipment, fittings, furniture, fixtures, motor vehicles and other tangible
personal Property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower, or in which Borrower has an
interest, whether now owned or hereafter acquired by Borrower and wherever
located, and all parts, accessories and special tools and all increases and
accessions thereto and substitutions and replacements therefor.
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ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated thereunder.
Eurodollar Loan - any Loan bearing interest computed by reference
to the Eurodollar Rate.
Eurodollar Rate - for any Eurodollar Loan, for the then current
Interest Period relating thereto, the rate per annum equal to the quotient of
(a) LIBOR, divided by (b) a number equal to 1.00 minus the aggregate of the
rates (expressed as a decimal) of reserve requirements current on the day that
is two (2) Business Days prior to the beginning of the Interest Period
(including without limitation basic, supplemental, marginal and emergency
reserves) under any regulation promulgated by the Board of Governors of the
Federal Reserve System (or any other governmental authority having jurisdiction
over the Bank) as in effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve requirements with
respect to "Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System.
Event of Default - as defined in SECTION 10.1 of the Agreement.
Extraordinary Receipts - means the net proceeds received by
Borrower in connection with (a) the sale of the capital stock of Borrower or (b)
a public offering of securities issued by Borrower.
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 the Bank from three Federal funds brokers of recognized
standing selected by the Bank.
Financial Statement - the audited financial statements of
Borrower on a Consolidated Basis for each Fiscal Year.
Fiscal Month - each monthly accounting period during any Fiscal
Year.
Fiscal Quarter - each quarterly accounting period during any
Fiscal Year.
Fiscal Year - the accounting period beginning on January 1 of
each year and ending on December 31 of each year.
Fixed Charge Coverage - means, for any period, the ratio of (i)
(A) EBITDA of Borrower on a Consolidated Basis for such period minus (B) actual
unfinanced Capital Expenditures of Borrower during such period minus (C) cash
taxes actually paid during such period to (ii) the sum of
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the aggregate of payments of interest and regularly scheduled principal with
respect to Indebtedness for Money Borrowed (other than the Revolving Credit
Loans) made during such period.
General Intangibles - with respect to Borrower all general
intangibles and other personal property of Borrower (including things in action)
other than goods, Accounts, chattel paper, documents, instruments and money,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to Borrower to secure payment of any of the
Accounts by an Account Debtor all rights of indemnification, all deposit
accounts of Borrower and all other intangible property of every kind and nature.
Guarantor - means each Person that shall execute and deliver a
Guaranty to Agent.
Guaranty - means the guaranty of the obligations of Borrower
executed by each Guarantor in favor of Agent and Lenders and each related
guaranty security agreement, as applicable.
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, 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.
Indebtedness - as applied to a Person means, without duplication
(i) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness is to be
determined, including, without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person
has guaranteed,
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties issued for the account of such
Person, and
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(iv) in the case of Borrower, the Obligations.
Indenture - the Indenture dated as of March 1, 1986 between
Borrower (f/k/a Vodavi Technology Corporation) and United States Trust Company
of New York, as Trustee, as in effect on the Closing Date.
Interest Period - as defined in SUBSECTION 3.1.5.
Inventory - with respect to Borrower, all of Borrower's
inventory, whether now owned or hereafter acquired including, but not limited
to, all goods intended for sale or lease by Borrower, or for display or
demonstration; all work in process; all raw materials and other materials and
supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
Borrower's business; and all documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter acquired by
Borrower.
Issuing Bank - as defined in section 1.2.4.
LC Guaranty - any guaranty pursuant to which Agent or any
Affiliate of Agent shall guaranty the payment or performance by Borrower of its
reimbursement obligation under any letter of credit.
Lender and Lenders - the meaning ascribed to such terms in the
Preamble to the Agreement and each person which is a transferee, successor or
assign of any Lender.
Letter of Credit - any letter of credit issued by Agent or any of
Agent's Affiliates for the account of Borrower.
Letter of Credit Fee Payment Date - the last Business Day of each
March, June, September and December and on the last day of the Original Term.
LIBOR - for any Eurodollar Loan for the then current Interest
Period, the rate of interest equal to the average (rounded upwards, if necessary
to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Bank in the London interbank
eurodollar market as at 11:00 A.M. London time two (2) Business Days prior to
the beginning of such Interest Period, for delivery on the first day of such
Interest Period, and in an amount approximately equal to the amount of such
Eurodollar Loan for a period approximately equal to such Interest Period.
LIBOR Rate - the rate per annum for the one month LIBOR rate as
published in The Wall Street Journal, averaged monthly on a calendar month
basis.
LIBOR Rate Loan - a Revolving Credit Loan at any time that bears
interest based on the LIBOR Rate.
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Lien - any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall also
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose of the Agreement, Borrower
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the Property has been retained by or vested in some other Person for
security purposes.
Loan Account - the loan account established on the books of Agent
pursuant to and as defined in SECTION 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loan Year - the applicable year during the Term calculated
initially from the Closing Date (i.e. the Closing Date through the day prior to
the one year anniversary of the Closing Date, "Loan Year 1", the one year
anniversary date through the day prior to the two year anniversary of the
Closing Date, "Loan Year 2", etc.)
Loans - all loans and advances of any kind made by Lenders
pursuant to the Agreement.
Material Adverse Effect - a material adverse effect on (a) the
condition (financial or otherwise), operations, performance, properties, assets
or business of Borrower and its Subsidiaries, taken as a whole, (b) Borrower's
or any Subsidiary of Borrower's ability to pay or perform the Obligations in
accordance with the terms thereof, (c) the value of the Collateral, the Liens on
the Collateral or the priority of any such Lien, (d) the practical realization
of the benefits of Agent's or any Lender's rights and remedies under this
Agreement or the other Loan Documents or (e) any of the Transactions.
Maximum Revolving Amount - $30,000,000
Money Borrowed - means (i) Indebtedness arising from the lending
of money by any Person to Borrower; (ii) Indebtedness, whether or not in any
such case arising from the lending by any Person of money to Borrower, (A) which
is represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit and (v) Indebtedness of Borrower under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (i) through (iii) hereof, if owed directly by Borrower.
Monthly Financial Statement - the monthly consolidated financial
statements of Borrower with respect to each Fiscal Month.
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Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Net Income - for any period, shall mean, the net income of
Borrower on a Consolidated Basis for such period as determined in accordance
with GAAP as of the Closing Date.
Net Worth - at a particular date, all amounts which would be
included under shareholders' equity (including preferred stock whether or not
categorized as part of shareholders' equity in accordance with GAAP) on a
balance sheet of Borrower on a Consolidated Basis determined in accordance with
GAAP as at such date.
Notes - the Revolving Notes.
Obligations - all Loans and all other advances, debts,
liabilities, obligations, covenants and duties, together with all interest, fees
and other charges thereon, owing, arising, due or payable from Borrower to Agent
or Lenders of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, arising under the Agreement or any of
the other Loan Documents whether direct or indirect, absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however created.
Original Term - as defined in SECTION 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents), heretofore, now
or hereafter executed by Borrower, any Subsidiary of Borrower, any Guarantor or
any other third party and delivered to Agent and Lenders in respect of the
Transactions.
Overadvance - as to Borrower, the amount, if any, by which the
outstanding principal amount of Revolving Credit Loans plus the LC Amount
exceeds the Borrowing Base.
Participating Lender - each Person who shall be granted the right
by any Lender to participate in any of the Loans described in the Agreement and
who shall have entered into a participation agreement in form and substance
satisfactory to Lenders.
Permitted Liens - any Lien of a kind specified in SUBSECTION
8.2.5 of the Agreement.
Person - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Projections - Borrower's forecasted Consolidated and
consolidating (a) balance sheets, (b) profit and loss statements, (c) cash flow
statements (d) capitalization statements and (e) Accounts and Inventory
valuations all prepared on a consistent basis with Borrower's historical
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financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
(including Capitalized Lease Obligations) (other than the Obligations) for the
payment of all or any part of the purchase price of any fixed assets, (ii) any
Indebtedness (including Capitalized Lease Obligations) (other than the
Obligations) incurred at the time of or within 10 days prior to or after the
acquisition of any fixed assets for the purpose of financing all or any part of
the purchase price thereof, and (iii) any renewals, extensions or refinancings
thereof, but not any increases in the principal amounts thereof outstanding at
the time.
Purchase Money Lien - a Lien upon fixed assets which secures
Purchase Money Indebtedness, but only if such Lien shall at all times be
confined solely to the fixed assets the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien
including Liens securing Capitalized Lease Obligations.
Purchasing Lender - as defined in SECTION 12.4(III) of the
Agreement.
Quarterly Financial Statement - the quarterly consolidated
financial statements of Borrower with respect to each Fiscal Quarter.
RCRA - shall mean the Resource Conservation and Recovery Act, 42
U.S.C. 'SS''SS'6901 et seq., as same may be amended from time to time.
Rentals - as defined in SUBSECTION 8.2.12 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b)
of ERISA.
Required Lenders - Lenders holding at least fifty-one percent
(51%) of the Loans as of the most recent Settlement Date and, if no Loans are
then outstanding, Lenders holding at least fifty-one percent (51%) of the
Commitment Percentages.
Required Delivery Date - each date of required delivery of a
Financial Statement or a Monthly Financial Statement.
Reserves - as defined in SUBSECTION 1.1.1 of the Agreement.
Restricted Investment - any investment made in cash or by
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or capital
contribution, or otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of Borrower to
the extent existing on the Closing Date;
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(ii) rights to payment arising from the sale of goods and
services in the ordinary course of business of Borrower and its Subsidiaries;
(iii) investments in direct obligations of the United
States of America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one year from
the date of acquisition thereof;
(iv) investments in certificates of deposit maturing
within one year from the date of acquisition issued by a bank or trust company
organized under the laws of the United States or any state thereof having
capital surplus and undivided profits aggregating at least $100,000,000;
(v) investments in commercial paper given the highest
rating by a national credit rating agency and maturing not more than 270 days
from the date of creation thereof; and
(vi) Specified Permitted Investments.
Revolving Credit Loan - a Loan made by any Lender as provided in
SECTION 1.1 of the Agreement including, without limitation, Special Advances.
Revolving Notes - shall have the meaning set forth in SUBSECTION
1.1.1.
Schedule of Accounts - as defined in SUBSECTION 6.2.1 of the
Agreement.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - all instruments and agreements now or at any
time hereafter securing the whole or any part of the Obligations.
Settlement Date - the Closing Date and thereafter on the first
day of each Week unless such day is not a Business Day in which case it shall be
the next succeeding Business Day; provided, however, if Agent so elects in its
discretion, Settlement Date shall mean each Business Day of the Week.
Solvent - as to any Person, such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts, which will be computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability), (ii) is able to pay all of its Indebtedness as such
Indebtedness matures, (iii) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage
and (iv) does not intend to, and does not believe it will, incur debts or
liabilities beyond its ability to pay as such debts and liabilities mature.
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Specified Capital Contribution - each capital contribution made
by Borrower to UniStar in accordance with the terms of SUBSECTION 8.2.4(B)
hereof
Specified Permitted Investments - loans made by Borrower to or
investments made by Borrower in one or more entities acting as distributors of
Borrower's products, not to exceed an aggregate amount outstanding at any time
in excess of $6,000,000.
Specified Reserve - a reserve in the amount of $6,000,000 against
the amount of Revolving Credit Loans which Borrower may request under the
Agreement, which such reserve shall be reduced to zero ($0) upon Borrower's
making of the Specified Capital Contribution upon consummation of the Spinoff.
Spinoff - the distribution of capital stock of UniStar to and/or
the rights to purchase capital stock of UniStar by Borrower's shareholders.
Subordinated Debt - Indebtedness of Borrower that is subordinated
to the Obligations in a manner satisfactory to Lenders.
Subsidiary - any corporation or limited liability company of
which a Person owns, directly or indirectly through one or more intermediaries,
more than 50% of the Voting Stock at the time of determination and each direct
and indirect Subsidiary of such Person.
Subsidiary Stock - all of the issued and outstanding shares of
stock owned by Borrower or any Subsidiary of Borrower of any of its
Subsidiaries.
Transactions - means the transactions contemplated by the
Agreement
Total Credit Facility - $30,000,000.
Transferee - as defined in SECTION 12.4(II) of the Agreement.
UniStar - UniStar Gaming Corporation, a Delaware corporation.
Voting Stock - Securities of any class or classes of a
corporation or membership interests of a limited liability company, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors with respect to a corporation or entitled to
elect the managers with respect to a limited liability company (or Persons
performing similar functions).
Week - the time period commencing with a Monday and ending on the
following Monday.
Other Terms. All other terms contained in the Agreement shall
have, when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein.
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Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
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WAIVER
AND
AMENDMENT NO. 1
TO
LOAN AND SECURITY AGREEMENT
THIS WAIVER AND AMDENDMENT NO. 1 ("Amendment") is entered into as of
March 29, 1999, by and between EXECUTONE INFORMATION SYSTEMS, INC., a Virginia
corporation having its principal place of business at 478 Wheelers Farms Road,
Milford, Connecticut ("Borrower") and FLEET CAPITAL CORPORATION, as lender
("Lender") and as administrative and collateral agent ("Agent").
BACKGROUND
Borrower, Agent and Lender are parties to a Loan and Security Agreement
dated as of August 14, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Loan Agreement") pursuant to which Lender provides Borrower
certain financial accommodations.
Borrower has requested that Agent and Lender waive and amend certain
provisions of the Loan Agreement and Agent and Lender are willing to do so on
the terms and conditions hereafter set forth.
NOW, THERFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrower by Lender,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the conditions
precedent set forth in Section 4 below, the Loan Agreement is hereby
amended as follows:
(a) Section 8.3.2. of the Loan Agreement is amended in its entirety
to provide as follows:
"8.3.2. Cash Flow. Maintain Cash Flow of not less than (a)
negative $2,000,000 for the five months ended December 31, 1998,
(b) negative $3,500,000 for the three months ended March 31,
1999, (c) negative $5,250,000 for the six months ended June 30,
1999, (d) negative $3,000,000 for the nine months ended
September 30, 1999, and (e) $750,000 for the twelve months ended
December 31, 1999 and on the last day of each Fiscal Quarter
thereafter calculated on a rolling four-quarter basis."
(b) Section 8.3.3 of the Loan Agreement is amended in its entirety
to provide as follows:
8.3.3 Adjusted Cash Flow. Maintain for each Fiscal Quarter end
set forth below an Adjusted Cash Flow of not less than (a)
negative $2,250,000 for the five months ended December 31, 1998,
(b) negative $3,500,000 for the three months ended March 31,
1999, (c) negative $5,250,000 for the six months ended June 30,
1999, (d) negative $3,000,000 for the nine months ended
September 30, 1999, and (e) $750,000 for the twelve months ended
December 31, 1999 and on the last day of each Fiscal Quarter
thereafter calculated on a rolling four-quarter basis.
3. Waiver. Subject to satisfaction of the conditions precedent set forth in
Section 4 below, Agent and Lender hereby waive the Events of Default
which have occurred solely as a result of Borrower's violations of (a)
Section 8.3.2 of the Loan Agreement for the five months ended December
31, 1998 and (b) Section 8.3.3 of the Loan Agreement for the five months
ended December 31, 1998.
4. Conditions of Effectiveness. This Amendment shall become effective upon
satisfaction of the following conditions precedent: Agent shall have
received (i) four (4) copies of this Amendment executed by Borrower,
(ii) an amendment fee in an amount equal to $10,000, which fee Agent may
charge to Borrower's loan account and (iii) such other certificates,
instruments, documents, agreements and opinions of counsel as may be
required by Agent or its counsel, each of which shall be in form and
substance satisfactory to Agent and its counsel.
5. Representations and Warranties. Borrower hereby represents and warrants
as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrower and
are enforceable against Borrower in accordance with their
respective terms.
(b) Upon the effectiveness of this Amendment, Borrower hereby
reaffirms all convents, representations and warranties made in
the Loan Agreement to the extent the same are not amended hereby
and agree that all such covenants, representations and
warranties shall be deemed to have been remade as of the
effective date of this Amendment.
(c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Amendment.
(d) Borrower has no defense, counterclaim or offset with respect to
the Loan Agreement.
6. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each reference in
the Loan Agreement to "this Agreement," "hereunder," "hereof",
"herein" or words of like import shall mean and be a reference
to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan Agreement, and
all other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force
and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided in Section 3 hereof,
operate as a waiver of any right, power or remedy of Agent or
Lender, nor constitute a waiver of any provision of the Loan
Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
7. Governing Law. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns and shall be governed by and construed in accordance with the
laws of the State of New York.
8. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
9. Counterparts. This Amendment may be executed by the parties hereto in
one or more counterparts, each of which shall be deemed an original and
all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year
first written above.
EXECUTONE INFORMAITON SYSTEMS, INC.,
As Borrower
By:
Name: Edward W. Stone
Title: Sr. VP and CFO
FLEET CAPITAL CORPORATION,
As Agent and Lender
By:
Name: Howard Hanoman
Title: Sr. VP