AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
by and between
HENRY COMPANY AND CERTAIN OF ITS SUBSIDIARIES
and
NATIONSBANK, N.A.
April 22, 1998
ARTICLE I DEFINITIONS 2
SECTION 1.1 CERTAIN DEFINED TERMS. 2
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. 25
ARTICLE II THE CREDIT FACILITIES 25
SECTION 2.1 THE REVOLVING CREDIT FACILITY. 25
2.1.1 Revolving Credit Facility. 25
2.1.2 Procedure for Making Advances Under the Revolving
Loan; Lender Protection Loans. 26
2.1.3 Borrowing Base. 26
2.1.4 Borrowing Base Report. 27
2.1.5 Revolving Credit Note. 28
2.1.6 Mandatory Prepayments of Revolving Loan. 28
2.1.7 Optional Prepayments of Revolving Loan. 28
2.1.8 The Collateral Account. 29
2.1.9 Revolving Loan Account. 30
2.1.10 Revolving Credit Unused Line Fee. 30
2.1.11 Early Termination Fee. 30
2.1.12 Required Availability under the Revolving Credit
Facility. 31
2.1.13 Right of Lender to Demand Payment and Terminate
Revolving Credit Facility. 32
SECTION 2.2 THE CAPITAL EXPENDITURE FACILITY. 32
2.2.1 Capital Expenditure Facility. 32
2.2.2 Procedure for Making Advances Under the Capital
Expenditure Facility. 32
2.2.3 Capital Expenditure Note. 33
2.2.4 Optional Prepayments of Capital Expenditure Loan. 33
2.2.5 Activation Fee. 34
SECTION 2.3 THE LETTER OF CREDIT FACILITY. 34
2.3.1 Letters of Credit. 34
2.3.2 Letter of Credit Fees. 34
2.3.3 Terms of Letters of Credit. 34
2.3.4 Procedure for Letters of Credit. 35
SECTION 2.4 INTEREST. 35
2.4.1 Applicable Interest Rates. 35
2.4.2 Selection of Interest Rates. 36
2.4.3 Inability to Determine LIBOR Computation Rate. 38
2.4.4 Indemnity. 38
2.4.5 Payment of Interest. 38
SECTION 2.5 GENERAL FINANCING PROVISIONS. 39
2.5.1 Borrowers' Representatives. 39
2.5.2 Use of Proceeds of the Loans. 41
2.5.3 Origination Fee. 41
2.5.4 Field Examination Fees. 41
2.5.5 Computation of Interest and Fees. 41
2.5.6 Payments. 41
2.5.7 Liens; Setoff. 42
2.5.8 Requirements of Law. 42
2.5.9 Funds Transfer Services. 43
2.5.10 No Novation. 44
ARTICLE III THE COLLATERAL 44
SECTION 3.1 DEBT AND OBLIGATIONS SECURED. 44
SECTION 3.2 MONSEY BAKOR GROUP COLLATERAL. 45
SECTION 3.3 GRANT OF LIENS. 45
SECTION 3.4 COLLATERAL DISCLOSURE LIST. 46
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SECTION 3.5 CERTAIN PERSONAL PROPERTY. 46
3.5.1 Certain Possessory Collateral. 46
3.5.2 Additional Steps to Perfect. 47
SECTION 3.6 RECORD SEARCHES. 47
SECTION 3.7 COSTS. 47
SECTION 3.8 RELEASE. 48
SECTION 3.9 INCONSISTENT PROVISIONS. 48
ARTICLE IV REPRESENTATIONS AND WARRANTIES 48
SECTION 4.1 REPRESENTATIONS AND WARRANTIES. 48
4.1.1 Subsidiaries. 48
4.1.2 Good Standing. 48
4.1.3 Good Standing - Limited Liability Company. 48
4.1.4 Power and Authority. 49
4.1.5 Binding Agreements. 49
4.1.6 No Conflicts. 49
4.1.7 No Defaults, Violations. 50
4.1.8 Compliance with Laws. 50
4.1.9 Margin Stock. 50
4.1.10 Investment Company Act; Margin Securities. 50
4.1.11 Litigation. 51
4.1.12 Financial Condition. 51
4.1.13 Full Disclosure. 51
4.1.14 Indebtedness for Borrowed Money. 52
4.1.15 Offering. 52
4.1.16 Taxes. 52
4.1.17 ERISA. 52
4.1.18 Title to Properties. 53
4.1.19 Capital Expenditure Loan Equipment. 53
4.1.20 Patents, Trademarks, Etc. 53
4.1.21 Employee Relations. 53
4.1.22 Presence of Hazardous Materials or Hazardous
Materials Contamination. 54
4.1.23 Perfection and Priority of Collateral. 54
4.1.24 Places of Business and Location of Collateral. 54
4.1.25 Business Names and Addresses. 55
4.1.26 Inventory. 55
4.1.27 Accounts. 55
4.1.28 Compliance with Eligibility Standards. 56
SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES. 56
ARTICLE V CONDITIONS PRECEDENT 56
SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE AND INITIAL
LETTER OF CREDIT. 56
5.1.1 Organizational Documents - Corporate Borrowers. 57
5.1.2 Organizational Documents - Monsey Arizona. 57
5.1.3 Opinion of Borrower's Counsel. 58
5.1.4 Consents, Licenses, Approvals, Etc. 58
5.1.5 Notes. 59
5.1.6 Financing Documents and Collateral. 59
5.1.7 Other Financing Documents. 59
5.1.8 Other Documents, Etc. 59
5.1.9 Payment of Fees. 59
5.1.10 Collateral Disclosure List. 59
5.1.11 Recordings and Filings. 59
5.1.12 Insurance Certificate. 60
5.1.13 Field Examination. 60
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5.1.14 Offering. 60
5.1.15 Life Insurance. 60
SECTION 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. 60
5.2.1 Compliance. 60
5.2.2 Borrowing Base. 60
5.2.3 Default. 61
5.2.4 Representations and Warranties. 61
5.2.5 Adverse Change. 61
5.2.6 Legal Matters. 61
ARTICLE VI COVENANTS OF THE BORROWER 61
SECTION 6.1 AFFIRMATIVE COVENANTS. 61
6.1.1 Financial Statements. 61
6.1.2 Reports to SEC and to Stockholders. 64
6.1.3 Recordkeeping, Rights of Inspection, Field Examination,
Etc. 64
6.1.4 Existence. 65
6.1.5 Compliance with Laws. 65
6.1.6 Preservation of Properties. 65
6.1.7 Line of Business. 66
6.1.8 Insurance. 66
6.1.9 Taxes. 67
6.1.10 ERISA. 67
6.1.11 Notification of Events of Default and Adverse
Developments. 67
6.1.12 Hazardous Materials; Contamination. 68
6.1.13 Disclosure of Significant Transactions. 69
6.1.14 Life Insurance Policies. 69
6.1.15 Financial Covenants. 69
6.1.16 Collection of Accounts. 69
6.1.17 Assignments of Accounts. 70
6.1.18 Government Accounts. 70
6.1.19 Notice of Returned Goods, etc. 70
6.1.20 Equipment. 71
6.1.21 Inventory. 71
6.1.22 Maintenance of the Collateral. 72
6.1.23 Defense of Title and Further Assurances. 72
6.1.24 Business Names; Locations. 73
6.1.25 Subsequent Opinion of Counsel as to Recording
Requirements. 73
6.1.26 Use of Premises and Equipment. 73
6.1.27 Protection of Collateral. 73
SECTION 6.2 NEGATIVE COVENANTS. 74
6.2.1 Capital Structure, Merger, Acquisition or Sale of
Assets. 74
6.2.2 Subsidiaries. 74
6.2.3 Issuance of Stock. 75
6.2.4 Purchase or Redemption of Securities,
Dividend Restrictions. 75
6.2.5 Indebtedness. 75
6.2.6 Investments, Loans and Other Transactions. 76
6.2.7 Operating Lease Obligations. 76
6.2.8 Capital Expenditures. 76
6.2.9 Stock of Subsidiaries. 76
6.2.10 Subordinated Indebtedness. 77
6.2.11 Liens; Confessed Judgment. 77
6.2.12 Transactions with Affiliates. 77
6.2.13 Other Businesses. 78
6.2.14 ERISA Compliance. 78
6.2.15 Prohibition on Hazardous Materials. 78
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6.2.16 Method of Accounting; Fiscal Year. 78
6.2.17 Compensation. 78
6.2.18 Transfer of Collateral. 79
6.2.19 Sale and Leaseback. 79
6.2.20 Disposition of Collateral. 79
ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES 79
SECTION 7.1 EVENTS OF DEFAULT. 79
7.1.1 Failure to Pay. 79
7.1.2 Breach of Representations and Warranties. 79
7.1.3 Failure to Comply with Covenants. 80
7.1.4 Default Under Other Financing Documents or Obligations. 80
7.1.5 Receiver; Bankruptcy. 80
7.1.6 Involuntary Bankruptcy, etc. 80
7.1.7 Judgment. 81
7.1.8 Execution; Attachment. 81
7.1.9 Default Under Other Borrowings. 81
7.1.10 Challenge to Agreements. 81
7.1.11 Material Adverse Change. 82
7.1.12 Change in Ownership. 82
7.1.13 Liquidation, Termination, Dissolution, Change in
Management, etc. 82
SECTION 7.2 REMEDIES. 82
7.2.1 Acceleration. 82
7.2.2 Further Advances. 82
7.2.3 Uniform Commercial Code. 83
7.2.4 Specific Rights With Regard to Collateral. 84
7.2.5 Application of Proceeds. 85
7.2.6 Performance by Lender. 85
7.2.7 Other Remedies. 85
ARTICLE VIII MISCELLANEOUS 86
SECTION 8.1 NOTICES. 86
SECTION 8.2 AMENDMENTS; WAIVERS. 87
SECTION 8.3 CUMULATIVE REMEDIES. 87
SECTION 8.4 SEVERABILITY. 88
SECTION 8.5 ASSIGNMENTS BY LENDER. 89
SECTION 8.6 SUCCESSORS AND ASSIGNS. 89
SECTION 8.7 CONTINUING AGREEMENTS. 89
SECTION 8.8 ENFORCEMENT COSTS. 90
SECTION 8.9 APPLICABLE LAW; JURISDICTION. 90
SECTION 8.10 DUPLICATE ORIGINALS AND COUNTERPARTS. 91
SECTION 8.11 HEADINGS. 91
SECTION 8.12 NO AGENCY. 91
SECTION 8.13 DATE OF PAYMENT. 91
SECTION 8.14 ENTIRE AGREEMENT. 92
SECTION 8.15 WAIVER OF TRIAL BY JURY. 92
SECTION 8.16 LIABILITY OF THE LENDER. 92
iv
AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this
"Agreement") is made this 22nd day of April, 1998, by and between HENRY COMPANY,
a corporation organized under the laws of the State of California (the
"Company"), and MONSEY PRODUCTS CO., a corporation organized under the laws of
the State of Pennsylvania ("Monsey Products"), KIMBERTON ENTERPRISES, INC., a
corporation organized under the laws of Delaware ("Kimberton"), MONSEY PRODUCTS
OF ARIZONA LLC, a limited liability company organized under the laws of the
State of Arizona ("Monsey Arizona") (each of the Company, Monsey Products,
Kimberton, and Monsey Arizona, a "Borrower" and collectively the "Borrowers")
and NATIONSBANK, N.A., a national banking association (the "Lender").
RECITALS
A. The Company and the Lender are parties to a Financing and Security
Agreement dated December 20, 1996 (the "Original Financing Agreement"). Under
the Original Financing Agreement, the Lender provided credit facilities
consisting of a revolving credit facility in the maximum principal amount of
$10,000,000, a capital expenditure facility in the maximum principal amount of
$4,000,000, and a term facility in the maximum principal amount of $1,000,000.
B. In connection with the sale of senior debt, the Company has requested
that the Lender agree to recast the credit facilities to consist of a revolving
credit facility in the maximum principal amount of $25,000,000, including a
letter of credit facility in the amount of $3,000,000, and a capital expenditure
facility in the maximum principal amount of $10,000,000 to be used by the
Borrowers for the Permitted Uses described in this Agreement. The Company has
also requested that the Lender secure the recast credit facilities with the
"Accounts," Inventory" and the "Capital Expenditure Loan Equipment" as described
below, release other Collateral contemplated by the Original Financing Agreement
and add the Monsey Bakor Group (as that term is defined below) as a Borrower.
C. The Lender is willing to make the recast credit facilities available
to the Borrowers upon the terms and subject to the conditions set forth in this
Agreement.
AGREEMENTS
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINED TERMS.
As used in this Agreement, the terms defined in the Preamble and Recitals
hereto shall have the respective meanings specified therein, and the following
terms shall have the following meanings:
"Account" individually and "Accounts" collectively mean all presently
existing or hereafter acquired or created accounts, accounts receivable,
contract rights, notes, drafts, instruments, acceptances, chattel paper, leases
and writings evidencing a monetary obligation or a security interest in, or a
lease of, goods, all rights to receive the payment of money or other
consideration under present or future contracts (including, without limitation,
all rights to receive payments under presently existing or hereafter acquired or
created letters of credit), or by virtue of merchandise sold or leased, services
rendered, loans and advances made or other considerations given, by or set forth
in or arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, insurance policy, instrument, document or general
intangible, and all extensions and renewals of any thereof, all rights under or
arising out of present or future contracts, agreements or general interest in
merchandise which gave rise to any or all of the foregoing, including all goods,
all claims or causes of action (whether in tort, equity or otherwise) now
existing or hereafter arising in connection with or under any agreement or
document or by operation of law or otherwise, all collateral security of any
kind (including, without limitation, real property mortgages and deeds of trust)
and letters of credit given by any Person with respect to any of the foregoing,
all books and records in whatever media (paper, electronic or otherwise)
recorded or stored, with respect to any or all of the foregoing and all
equipment and general intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and records, and all
proceeds (cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on an Account and
"Account Debtors" mean all Persons who are obligated on the Accounts.
"Adjusted Net Worth" means for the Company and its Subsidiaries the sum of
Net Worth plus deferred warranty revenue, determined on a consolidated basis.
"Affiliate" means, with respect to any designated Person, any other Person,
(i) directly or indirectly controlling, directly or indirectly controlled by, or
under direct or indirect common control with the Person designated, (ii)
directly or indirectly owning or holding five percent (5%) or more of any equity
interest in such designated Person, or (iii) five percent (5%) or more of whose
stock or other equity interest is directly or indirectly owned or held by such
designated Person. For purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
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and policies of a Person, whether through ownership of voting securities or
other equity interests or by contract or otherwise.
"Agreement" means this Financing and Security Agreement, as amended,
restated, supplemented or otherwise modified in writing in accordance with the
provisions of Section 8.2 of this Agreement.
"Applicable Interest Rate" means (i) the LIBOR Rate, or (ii) the Base Rate.
"Applicable Margin" means the applicable rate per annum added, as set forth
in Section 2.5.1, to the LIBOR Computation Rate or the Prime Rate.
"Asset Disposition" means the disposition of any or all of the Assets of
any Borrower, whether by sale, lease, transfer or other disposition (including
any such disposition effected by way of merger or consolidation) other than the
following to the extent made in the ordinary course of business: (a) sales of
Inventory, (b) licensing of Patents, Trademarks and/or Copyrights, (c)
dispositions of worn, used, surplus or obsolete equipment (other than Capital
Expenditure Loan Equipment), and (d) sales, leases, transfers or other
dispositions (including any such dispositions effected by way of merger or
consolidation) other than those described in clauses (a), (b) and (c) where the
fair market value of (or, if greater, the consideration to be paid for) the
property involved does not exceed $500,000 in the aggregate for all such sales,
leases, transfers or other dispositions in any fiscal year.
"Assets" means at any date all assets that, in accordance with GAAP
consistently applied, should be classified as assets on a consolidated balance
sheet of the Borrowers and their Subsidiaries.
"Assignment of Life Insurance" and "Assignments of Life Insurance as
Collateral" mean the collective reference to those certain assignments of life
insurance as collateral dated the date hereof from the Borrower for the benefit
of the Lender, which Assignments of Life Insurance assign to the Lender all of
the right, title and interest of the Company in, and to, the Life Insurance
Policies, as those assignments are amended, restated, reissued, supplemented or
otherwise modified in writing at any time and from time to time.
"Assignment of Trademarks" means those certain patent and trademark
assignment and security agreements from the Borrowers for the benefit of the
Lender, as amended, restated, supplemented or otherwise modified in writing at
any time and from time to time, covering such patents and trademarks necessary
or beneficial for the Lender to effect a disposition of Collateral.
"Assistance Agreement" means that certain assistance agreement dated the
date hereof by the Borrowers and Warner W. Henry for the benefit of the Lender,
as amended, restated, supplemented or otherwise modified in writing at any time
and from time to time.
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"Bankruptcy Code" means the United States Bankruptcy Code, as amended from
time to time.
"Base Rate" means the sum of the Prime Rate plus the Applicable Margin.
"Base Rate Loan" means any Loan for which interest is to be computed with
reference to the Base Rate.
"Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing
Base).
"Borrowing Base Deficiency" has the meaning described in Section 2.1.3
(Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.4
(Borrowing Base Report).
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the State are authorized or required to close.
"Capital Expenditure" means an expenditure for Fixed or Capital Assets
including, without limitation, the entering into of a Capital Lease.
"Capital Expenditure Loan" has the meaning described in Section 2.3.1
(Capital Expenditure Facility).
"Capital Expenditure Commitment Period" means the period of time from the
Closing Date to the earlier of April 1, 2003, or the Revolving Credit
Termination Date.
"Capital Expenditure Loan Commitment" means the agreement of the Lender
relating to the making of the Capital Expenditure Loan and advances thereunder
subject to and in accordance with the provisions of this Agreement.
"Capital Expenditure Loan Committed Amount" has the meaning described in
Section 2.3.1 (Capital Expenditure Facility).
"Capital Expenditure Loan Equipment" means equipment which is the subject
of an advance under the Capital Expenditure Loan and further means with respect
to such equipment all chattels, tools, parts, machine tools, furniture, fixtures
and supplies of every nature, presently existing or hereafter acquired or
created and wherever located, whether or not the same shall be deemed to be
affixed to real property, together with all accessions, additions, fittings,
accessories, special tools, and improvements thereto and substitutions therefor
and all parts and equipment which may be attached to or which are necessary or
beneficial for the operation, use and/or disposition of such personal property,
all licenses, warranties, franchises and general intangibles related thereto or
necessary or beneficial for the operation, use and/or disposition of the same,
together with all Accounts, chattel paper, instruments and other consideration
received
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by any or all of the Borrowers on account of the sale, lease or other
disposition of all or any part of the foregoing, and together with all rights
under or arising out of present or future documents and contracts relating to
the foregoing and all proceeds (cash and non-cash) of the foregoing.
"Capital Expenditure Loan Facility" has the meaning described in Section
2.3.1 (Capital Expenditure Facility).
"Capital Expenditure Note" has the meaning described in Section 2.3.3
(Capital Expenditure Note).
"Capital Expenditure Loan Optional Prepayment" has the meaning described in
Section 2.3.4 (Optional Prepayments of Capital Expenditure Loan).
"Capital Lease" means any lease of real or personal property, for which the
related Lease Obligations have been or should be, in accordance with GAAP
consistently applied, capitalized on the balance sheet.
"Cash Equivalents" means (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit with
maturities of one (1) year or less from the date of acquisition of, or money
market accounts maintained with, the Lender, any Affiliate of the Lender, or any
other domestic commercial bank having capital and surplus in excess of One
Hundred Million Dollars ($100,000,000.00) or such other domestic financial
institutions or domestic brokerage houses to the extent disclosed to, and
approved by, the Lender and (c) commercial paper of a domestic issuer rated at
least either A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors
Service, Inc. with maturities of six (6) months or less from the date of
acquisition.
"Closing Date" means the Business Day, in any event not later than April
23, 1998, on which the Lender shall be satisfied that the conditions precedent
set forth in Section 5.1 (Conditions to the Initial Advance) have been
fulfilled.
"Collateral" means all property of the Borrowers subject from time to time
to the Liens of this Agreement, any of the Security Documents and/or any of the
other Financing Documents, together with any and all cash and non-cash proceeds
and products thereof.
"Collateral Account" has the meaning described in Section 2.1.8 (The
Collateral Account).
"Collateral Disclosure List" has the meaning described in Section 3.4
(Collateral Disclosure List).
"Commitment" means the collective reference to the Revolving Credit
Commitment and the Capital Expenditure Loan Commitment.
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"Committed Amount" means the Revolving Credit Committed Amount or the
Capital Expenditure Loan Committed Amount, as the case may be, and "Committed
Amounts" means collectively the Revolving Credit Committed Amount and the
Capital Expenditure Loan Committed Amount.
"Compliance Certificate" means a periodic Compliance Certificate described
in Section 6.1.1 (Financial Statements).
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of Section
414(b) or (c) of the Internal Revenue Code.
"Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's rights, title and interest in and to
the following as they relate to the Borrowers (a) all copyrights, rights and
interests in copyrights, works protectable by copyright, copyright
registrations, copyright applications, and all renewals of any of the foregoing,
(b) all income, royalties, damages and payments now or hereafter due and/or
payable under any of the foregoing, including, without limitation, damages or
payments for past, current or future infringements of any of the foregoing, (c)
the right to sue for past, present and future infringements of any of the
foregoing, and (d) all rights corresponding to any of the foregoing throughout
the world.
"Credit Facility" means the Revolving Credit Facility, the Capital
Expenditure Facility, or the Letter of Credit Facility , as the case may be, and
"Credit Facilities" means collectively the Revolving Credit Facility, the
Capital Expenditure Facility and the Letter of Credit Facility and any and all
other credit facilities now or hereafter extended under or secured by this
Agreement.
"Current Assets" means at any date, the amount which, in accordance with
GAAP consistently applied, would be set forth opposite the caption "total
current assets" (or any like caption) on a consolidated balance sheet of the
Company and its Subsidiaries, excluding, however, all amounts due from
Affiliates.
"Current Liabilities" means at any date, the amount which, in accordance
with GAAP consistently applied, would be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet of
the Company and its Subsidiaries, excluding, however, the principal balance of
the Revolving Loan.
"Current Ratio" means for the date of any determination thereof the ratio
of (a) Current Assets to (b) Current Liabilities.
"Debt Service" means for any period of determination thereof an amount
equal to the total of the aggregate amount of all payments of principal and
interest with respect to Indebtedness for Borrowed Money of the Company and its
Subsidiaries on a consolidated basis scheduled to be due and payable during such
period.
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"Default" means an event which, with the giving of notice or lapse of time,
or both, could or would constitute an Event of Default under the provisions of
this Agreement.
"Early Termination Fee" has the meaning described in Section 2.1.11 (Early
Termination Fee).
"EBITDA" means as to the Company and its Subsidiaries on a consolidated
basis for any period of determination thereof, the sum of (a) net income (or
loss) after deduction of interest expenses and taxes for such period, plus (b)
interest expense and taxes deducted for such period, plus (c) the aggregate
amount of depreciation and amortization expense deducted in determining such net
income, all calculated in accordance with GAAP consistently applied.
"Eligible Foreign Receivable" and "Eligible Foreign Receivables" mean, at
any time of determination thereof, the unpaid portion of each account receivable
which meets each and every requirement for inclusion in Eligible Receivables
other than requirement (n).
"Eligible Inventory" means the collective reference to all Inventory of
each Borrower held for sale in the ordinary course of business, valued at the
lowest of (i) net purchase cost or net manufacturing cost, (ii) any ceiling
prices which may be established by any applicable Law, or (iii) prevailing
market value, excluding, however, any Inventory which consists of:
(a) any goods located outside of the United States,
(b) any goods located outside of a state in which the
Lender has perfected (beyond any preference period) its security
interests by filing in that state, free and clear of all other Liens,
(c) except as allowed under requirement (d) or
requirement (e), any goods not in the actual possession of a
Borrower,
(d) any goods in the possession of a bailee,
warehouseman, consignee or similar third party, other than a
warehouseman (i) who is identified in the Company's Collateral
Disclosure List or, after the date of this Agreement, in a notice from
a Borrower to the Lender and (ii) (A) from whom the Lender has
received a waiver and consent, in form and substance satisfactory to
the Lender, to the extent required by the Lender, or (B) (without
implying any limitation on the Lender's other rights and remedies)
with respect to whose potential claims the Lender has established
reserves satisfactory to the Lender,
(e) except as provided in Section 6.1.23(a) with
respect to leases existing on the date of this Agreement, any goods
located on premises leased or rented to a Borrower or otherwise not
owned by a Borrower,
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unless the Lender has received a waiver and consent from the lessor,
landlord and/or owner, in form and substance satisfactory to the
Lender and from any mortgagee of such lessor, landlord or owner to the
extent required by the Lender,
(f) any goods the sale or other disposition of which
has given rise to a Receivable,
(g) any goods which fail to meet all standards and
requirements imposed by any applicable Governmental Authority over
such goods, their production, storage, use or sale,
(h) work-in-process or supplies,
(i) any goods as to which the Lender determines in the
exercise of its discretion at any time and in good faith are not in
good condition or are defective, unmerchantable, or obsolete, and
(j) any goods which are not excluded for reasons
addressed by items (a) through (i) above, but which the Lender in the
good faith exercise of its discretion has deemed to be ineligible
because the Lender otherwise considers the collateral value to the
Lender to be impaired or its ability to realize such value to be
insecure.
(k) In the event of any dispute under the foregoing
criteria, as to whether goods are, or have ceased to be, Eligible
Inventory, the decision of the Lender in the good faith exercise of
its discretion shall control.
"Eligible Life Insurance Policies" means, at any time of determination
thereof, the collective reference to each Life Insurance Policy covered by the
Assignments of Life Insurance as Collateral, provided such Life Insurance Policy
conforms and continues to conform to the following criteria to the good faith
satisfaction of the Lender:
(a) the Life Insurance Policy arose in the ordinary course
of the Company's business from a bona fide transaction between the Company and
the Life Insurance Policy issuer;
(b) the Life Insurance Policy is an issued, valid, legally
enforceable obligation of the Life Insurance Policy issuer, is in full force and
effect and requires no further act on the part of any Person under any
circumstances (other than the payment of premiums) to make cash surrender value
payable at any time, and the death benefits and other benefits payable as set
forth in the Life Insurance Policy, by the Life Insurance Policy issuer;
-8-
(c) the Life Insurance Policy issuer has not rejected or
refused to honor, or otherwise notified the Company or the Lender of any dispute
concerning with respect to, the Life Insurance Policy;
(d) all premiums have been fully paid when due, without
giving effect to and without relying on any grace period;
(e) the Life Insurance Policy is not subject to any present
or known contingent (and no facts exist which are the basis for any future)
offset, claim, deduction or counterclaim, dispute or defense in law or equity on
the part of the issuer including, without limitation, those arising on account
of a breach of any express or implied representation or warranty;
(f) the Life Insurance Policy issuer is not a Subsidiary or
Affiliate of the Company or an employee, officer, director of shareholder of the
Company or any Subsidiary or Affiliate of the Company;
(g) the Life Insurance Policy issuer is not incorporated or
primarily conducting business or otherwise located in any jurisdiction outside
of the United States of America;
(h) the Life Insurance Policy issuer with respect to such
Life Insurance Policy is not insolvent or the subject of any receivership,
conservatorship, bankruptcy or insolvency proceedings of any kind or of any
other similar proceeding or action, threatened or pending;
(i) the Life Insurance Policy issuer is not a Governmental
Authority;
(j) the Company is not indebted in any manner to the Life
Insurance Policy issuer (as creditor, lessor, supplier otherwise), with the
exception of premiums which are not past due;
(k) the title of the Company to the Life Insurance Policy
is absolute and is not subject to any prior assignment, claim, Lien, or security
interest, except Permitted Liens;
(l) the Company has the full and unqualified right and
power to assign and grant a security interest in, and Lien on, the Life
Insurance Policy to the Lender as security and collateral for the payment of the
Obligations;
(m) the Life Insurance Policy does not by its terms nor by
operation of applicable Laws, forbid or make void or unenforceable the
applicable Assignment of Life Insurance as Collateral;
-9-
(n) the Life Insurance Policy is subject to the Lien and
assignment in favor of the Lender, which Lien and assignment is perfected as to
the Life Insurance Policy by the filing of the applicable Assignment of Life
Insurance as Collateral with the Life Insurance Policy issuer and constitutes a
first priority security interest and Lien and a first assignment;
(o) the Life Insurance Policy issuer has acknowledged the
applicable Assignment of Life Insurance as Collateral; and
(p) any Life Insurance Policy which is not excluded for
reasons addressed by items (a) through (o) above, but which the Lender in the
good faith exercise of its discretion has deemed to be ineligible because of
uncertainty as to the creditworthiness of the Life Insurance Policy issuer or
because the Lender otherwise considers the collateral value of such Life
Insurance Policy to the Lender to be impaired or its ability to realize such
value to be insecure.
In the event of any dispute, under the foregoing criteria, as to whether an
account is, or has ceased to be, an Eligible Life Insurance Policy, the decision
of the Lender in the good faith exercise of its discretion shall control.
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
determination thereof, the unpaid portion of each account receivable (net of any
returns, discounts, claims, credits, charges, accrued rebates or other
allowances, offsets, deductions, counterclaims, disputes or other defenses and
reduced by the aggregate amount of all reserves, limits and deductions provided
for in this definition and elsewhere in this Agreement) in United States Dollars
by a Borrower on account the sale of Inventory or the provision of services
solely by a Borrower, provided each account receivable conforms and continues to
conform to the following criteria:
(a) the account arose in the ordinary course of a
Borrower's business from a bona fide outright sale of goods by such Borrower or
from services performed by such Borrower;
(b) the account is a valid, legally enforceable obligation
of the Account Debtor and requires no further act on the part of any Person
under any circumstances to make the account payable by the Account Debtor;
(c) the account is based upon an enforceable order or
contract, written or oral, for goods shipped or for services performed, and the
same were shipped or performed in accordance with such order or contract;
(d) if the account arises from the sale of goods, the goods
the sale of which gave rise to the account have been shipped or delivered to the
Account Debtor on an absolute sale basis and not on a bill and hold sale basis,
a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on
the basis of any other similar understanding;
-10-
(e) if the account arises from the performance of services,
such services have been fully rendered and do not relate to any warranty claim
or obligation;
(f) the account is evidenced by an invoice or other
documentation in form reasonably acceptable to the Lender, dated no later than
the date of shipment or performance and containing only terms normally offered
by the Borrower;
(g) the amount shown on the books of the Borrower and on
any invoice, certificate, schedule or statement delivered to the Lender is owing
to the Borrower and no partial payment has been received unless reflected with
that delivery;
(h) except as set forth in Schedule 1.1, the account is not
outstanding more than ninety (90) days from the date of the invoice therefor or
past due more than sixty (60) days after its due date, which shall not be later
than thirty (30) days after the invoice date;
(i) the account is not owing by any Account Debtor for
which the Lender has deemed fifty percent (50%) or more of such Account Debtor's
other accounts (or any portion thereof) due to all of the Borrowers
collectively, to be non-Eligible Receivables;
(j) the account is not owing by an Account Debtor or a
group of affiliated Account Debtors whose then existing accounts owing to the
Borrowers exceed in aggregate face amount (i) fifteen percent (15%) (or, only in
case of accounts due from Home Depot, twenty-five percent (25%)) of the
Borrowers' total Eligible Receivables, provided that this item (j) shall not be
used in the computation required by item (i) above;
(k) the Account Debtor has not returned, rejected or
refused to retain, or otherwise notified any Borrower of any dispute concerning,
or claimed nonconformity of, any of the goods or services from the sale or
furnishing of which the account arose (provided that the account shall be
excluded from Eligible Receivables only to the extent the Account Debtor is
refusing to pay because of the dispute or claim);
(l) the account is not subject to any present or contingent
(and no facts exist which are the basis for any future) offset, claim, deduction
or counterclaim, dispute or defense in law or equity on the part of such Account
Debtor, or any claim for credits, allowances, or adjustments by the Account
Debtor because of returned, inferior, or damaged goods or unsatisfactory
services, or for any other reason including, without limitation, those arising
on account of a breach of any express or implied representation or warranty
(provided that the account shall be excluded from Eligible Receivables only to
the extent the Account Debtor is refusing to pay because of those returned,
inferior, or damaged goods or unsatisfactory services);
(m) the Account Debtor is not a Subsidiary or Affiliate of
any Borrower or an employee, officer, director of shareholder or any Borrower or
any Subsidiary or Affiliate of any Borrower;
-11-
(n) the Account Debtor is not incorporated or primarily
conducting business or otherwise located in any jurisdiction outside of the
United States of America or Canada;
(o) the Account Debtor with respect to such account is not
insolvent or the subject of any bankruptcy or insolvency proceedings of any kind
or of any other similar proceeding or action;
(p) the Account Debtor is not a Governmental Authority,
unless the respective Borrower has complied with Section 6.1.18 with respect to
that Account Debtor;
(q) no Borrower is indebted in any manner to the Account
Debtor (as creditor, lessor, supplier otherwise), with the exception of
customary credits, adjustments and/or discounts given to an Account Debtor by a
Borrower in the ordinary course of its business;
(r) the account does not arise from services under or
related to any warranty obligation of a Borrower or out of service charges,
finance charges or other fees for the time value of money;
(s) the account is not evidenced by chattel paper or an
instrument of any kind and is not secured by any letter of credit, unless the
respective Borrower has assigned the letter of credit to the Lender and the
issuer of the letter of credit has acknowledged that assignment;
(t) the title of the respective Borrower to the account is
absolute and is not subject to any prior assignment, claim, Lien, or security
interest, except Permitted Liens;
(u) no bond or other undertaking by a guarantor or surety
has been or is required to be obtained, supporting the performance of any
Borrower or any other obligor in respect of any such Borrower's agreements with
the Account Debtor;
(v) the respective Borrower has the full and unqualified
right and power to assign and grant a security interest in, and Lien on, the
account to the Lender as security and collateral for the payment of the
Obligations;
(w) the account does not arise out of a contract with, or
order from, an Account Debtor that, by its terms, forbids or makes void or
unenforceable the assignment or grant of a security interest by any Borrower to
the Lender of the account arising from such contract or order;
(x) the account is subject to a Lien in favor of the
Lender, which Lien is perfected (beyond any preference period) as to the account
by the filing of financing statements and which Lien upon such filing
constitutes a first priority security interest and Lien;
-12-
(y) the goods giving rise to the account were not, at the
time of the sale thereof, subject to any Lien, except those in favor of the
Lender;
(z) no part of the account represents a progress billing or
a retainage;
(aa) the account is not excluded for reasons addressed by
items (a) through (z) above, and the Lender in the good faith exercise of its
discretion has not deemed the account ineligible because the Lender considers
the Account Debtor to be not creditworthy or because the Lender otherwise
considers the collateral value of such account to the Lender to be impaired or
its ability to realize such value to be impaired.
In the event of any dispute, under the foregoing criteria, as to whether an
account is, or has ceased to be, an Eligible Receivable, the decision of the
Lender in the good faith exercise of its discretion shall control.
"Enforcement Costs" means all expenses, charges, costs and fees whatsoever
(including, without limitation, reasonable outside and allocated in-house
counsel attorney's fees and expenses) of any nature whatsoever paid or incurred
by or on behalf of the Lender in connection with (a) the preparation of this
Agreement and each of the other Financing Documents from time to time, (b) the
creation or perfection of the Lender's security interests in the Collateral, or
the collection, maintenance, preservation, defense, protection, realization
upon, disposition, sale or enforcement of all or any part of the Collateral, the
Obligations, this Agreement or any of the other Financing Documents, including,
without limitation, all costs and expenses related to the Lender's determination
that the Borrowers meet the requirements of Article 5, and those costs and
expenses more specifically enumerated in Section 3.8 (Costs) and/or Section 8.8
(Enforcement Costs), (c) the Lender's customary charges for services, including,
by way of example and not limitation, wire transfer charges, and (d) following
an Event of Default, the monitoring, administration, processing and/or servicing
of any or all of the Obligations, the Financing Documents, and/or the
Collateral.
"Equity" means at any date as to any Borrower and its Subsidiaries the
total of capital stock (except treasury stock and net of any note and other
receivable received upon the issuance of any shares of capital stock) and
contributed capital, as determined in accordance with GAAP consistently applied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Business Day" means any Business Day on which dealings in
United States Dollar deposits are carried out on the London interbank market and
on which commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in London, England.
-13-
"Eurodollar Lending Office" means with respect to the Lender such branch or
office of the Lender designated by the Lender, as applicable, from time to time
as the branch or office at which the LIBOR Loans are to be made or maintained.
"Event of Default" has the meaning described in Section 7.1.
"Facilities" means the collective reference to the loan, letter of credit,
interest rate protection, foreign exchange risk, cash management, and other
credit facilities now or hereafter provided to any or all of the Borrowers by
the Lender whether under this Agreement or otherwise.
"Fees" means the collective reference to each fee payable to the Lender
under the terms of this Agreement or under the terms of any of the other
Financing Documents, including, without limitation, the following: Revolving
Credit Unused Line Fees, the Early Termination Fee, the Letter of Credit Fees,
the Capital Expenditure Line Activation Fee, the Origination Fee, and Field
Examination Fees.
"Field Examination Fee" and "Field Examination Fees" have the meanings
described in Section 2.6.4 (Field Examination Fees).
"Financing Documents" means at any time collectively this Agreement, the
Notes, the Security Documents, the Letter of Credit Documents, and any other
instrument, agreement or document previously, simultaneously or hereafter
executed and delivered by the Borrower and/or any other Person, singly or
jointly with another Person or Persons, evidencing, securing, guarantying or in
connection with this Agreement, any Note, any of the Security Documents, the
Letter of Credit Documents, any of the Facilities, and/or any of the
Obligations.
"Fixed or Capital Assets" of a Person at any date means all assets which
would, in accordance with GAAP consistently applied, be classified on the
balance sheet of such Person as property, plant or equipment at such date.
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, as amended from time to time,
and regulations promulgated thereunder; (b) any "hazardous substance" as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder; (c)
any substance the presence of which on any
-14-
property now or hereafter owned, acquired or operated by any Borrower is
prohibited by any Law similar to those set forth in this definition; and (d) any
other substance which by Law requires special handling in its collection,
storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated or controlled by any Borrower or for
which any Borrower has responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned, acquired or operated by any Borrower, and
any other contamination by Hazardous Materials for which any Borrower is, or is
claimed to be, responsible.
"Henry Living Trust" means the Warner Wheeler Henry Revocable Trust Dated
December 4, 1982, its successors and assigns.
"Indebtedness" of a Person means at any date the total liabilities of such
Person at such time determined in accordance with GAAP consistently applied.
"Indebtedness for Borrowed Money" of a Person means at any time the sum at
such time of (a) indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such Person
or which are secured by the property of such Person; (f) any obligation of such
Person under a employee stock ownership plan or other similar employee benefit
plan; (g) any obligation of such Person or a Commonly Controlled Entity to a
Multiemployer Plan; and (h) any obligations, liabilities or indebtedness,
contingent or otherwise, under or in connection with, any interest rate or
currency swap agreements, cap, floor, and collar agreements, currency spot,
foreign exchange and forward contracts and other similar agreements and
arrangements; but excluding trade and other accounts payable in the ordinary
course of business in accordance with customary trade terms and which are not
overdue (as determined in accordance with customary trade practices) or which
are being disputed in good faith by such Person and for which adequate reserves
are being provided on the books of such Person if required in accordance with
GAAP.
"Indenture" means that certain Indenture dated as of April 22, 1998 (as
amended, supplemented or otherwise modified from time to time), between the
Company, the Trustee and, as guarantors, Monsey Bakor Group.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the Income Tax Regulations issued and proposed to be
issued thereunder.
-15-
"Interest Period" means as to any LIBOR Loan, the period commencing on and
including the date such LIBOR Loan is made (or on the effective date of the
Borrowers' election to convert any Base Rate Loan to a LIBOR Loan in accordance
with the provisions of this Agreement) and ending on and including the day which
is 30, 60, 90, or 180 days thereafter, as selected by the Borrowers in
accordance with the provisions of this Agreement, and thereafter, each period
commencing on the last day of the then preceding Interest Period for such LIBOR
Loan and ending on and including the day which is 30, 60, 90, or 180 days
thereafter, as selected by the Borrowers in accordance with the provisions of
this Agreement; provided, however, that there shall be no day during any
Interest Period on which the Lender also computes interest at the Base Rate on
the balance of such LIBOR Loan and provided further that:
(a) the first day of any Interest Period shall be a Eurodollar
Business Day;
(b) if any Interest Period would end on a day that shall not be
a Eurodollar Business Day, such Interest Period shall be extended to
the next succeeding Eurodollar Business Day unless such next
succeeding Eurodollar Business Day would fall in the next calendar
month, in which case, such Interest Period shall end on the next
preceding Eurodollar Business Day; and
(c) no Interest Period shall extend beyond the Revolving Credit
Expiration Date.
"Interest Rate Election Notice" has the meaning described in Section
2.5.2(e).
"Inventory" means all inventory of the Borrowers and all right, title and
interest of the Borrowers in and to all of its now owned and hereafter acquired
goods, merchandise and other personal property furnished under any contract of
service or intended for sale or lease, including, without limitation, all raw
materials, work-in-progress, finished goods and materials and supplies of any
kind, nature or description which are used or consumed in a Borrower's business
or are or might be used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise and other licenses,
Copyrights, Trademarks, Patents, warranties, franchises, general intangibles,
personal property, rights under or arising out of present or future contracts,
or agreements with respect to any or all of the foregoing, including all goods,
all claims or causes of action (whether in tort, equity or otherwise), now
existing or hereafter, arising in connection with or under any agreement or
document or by operation of law or otherwise, and all documents of title or
documents relating to the same, and all proceeds (cash and non-cash) of the
foregoing.
"Item of Payment" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the Accounts or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to an Account, and other proceeds of Collateral; and "Items of
Payment" means the collective reference to all of the foregoing.
-16-
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority.
"Lease Obligations" of a Person means for any period the rental commitments
of such Person for such period under leases for real and/or personal property
(net of rent from subleases thereof, but including taxes, insurance, maintenance
and similar expenses which such Person, as the lessee, is obligated to pay under
the terms of said leases, except to the extent that such taxes, insurance,
maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.
"Letter of Credit" and "Letters of Credit" shall have the meanings
described in Section 2.4.1 hereof.
"Letter of Credit Agreement" means the collective reference to each letter
of credit application and agreement substantially in the form of the Lender's
then standard form of application for letter of credit or such other form as may
be approved by the Lender, executed and delivered by any one or more of the
Borrowers in connection with the issuance of a Letter of Credit, as the same may
from time to time be amended, restated, supplemented or modified and "Letter of
Credit Agreements" means all of the foregoing in effect at any time and from
time to time.
"Letter of Credit Documents" means any and all drafts under or purporting
to be under a Letter of Credit, any Letter of Credit Agreement, and any other
instrument, document or agreement executed and/or delivered by any one or more
of the Borrowers or any other Person under, pursuant to or in connection with a
Letter of Credit or any Letter of Credit Agreement.
"Letter of Credit Facility" means the facility established by the Lender
pursuant to Section 2.4 (Letter of Credit Facility) of this Agreement.
"Letter of Credit Fee" and "Letter of Credit Fees" have the meanings
described in Section 2.4.2 hereof.
"Letter of Credit Obligations" means the collective reference to all
Obligations of any one or more of the Borrowers with respect to the Letters of
Credit and the Letter of Credit Agreements.
"Liabilities" means at any date all liabilities that in accordance with
GAAP consistently applied should be classified as liabilities on a consolidated
balance sheet of the Borrowers and their respective Subsidiaries.
"LIBOR Computation Rate" means for any Interest Period with respect to any
LIBOR Loan, the rate per annum (rounded upward, if necessary, to the nearest
next 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in United States Dollars at
approximately 11:00 a.m. (London time) two (2)
-17-
Eurodollar Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR Computation Rate" shall mean, for any LIBOR Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in United States Dollars at approximately
11:00 a.m. (London time) two (2) Eurodollar Business Days prior to the first day
of such Interest Period; provided, however, if more than one rate is specified
on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates. For purposes of this definition, Telerate Page 3750 refers to
the British Bankers Association Libor Rates (determined at approximately 11:00
a.m. (London time)) that are published by Dow Jones Telerate, Inc.
"LIBOR Loan" means any Loan for which interest is to be computed with
reference to the LIBOR Rate.
"LIBOR Rate" means for any Interest Period with respect to any LIBOR Loan,
(i) the Applicable Margin, plus (ii) the per annum rate of interest calculated
pursuant to the following formula:
Libor Computation Rate
-----------------------
1.00 - Reserve Percentage
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, claim or charge of any kind
which attaches to the property of any Borrower, whether perfected or
unperfected, avoidable or unavoidable, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction, excluding the precautionary
filing of any financing statement by any lessor in a true lease transaction, by
any bailor in a true bailment transaction or by any consignor in a true
consignment transaction under the Uniform Commercial Code of any jurisdiction
and excluding the agreement to give any financing statement by any lessee in a
true lease transaction, by any bailee in a true bailment transaction or by any
consignee in a true consignment transaction.
"Life Insurance Policy" individually and "Life Insurance Policies"
collectively mean the life insurance policies described in SCHEDULE 5.1.15 to
this Agreement.
"Loan" means the Revolving Loan or the Capital Expenditure Loan, as the
case may be, and "Loans" means the collective reference to the Revolving Loan
and the Capital Expenditure Loan.
"Loan Notice" has the meaning described in Section 2.1.2 (Procedure for
Making Advances).
"Lockbox" has the meaning described in Section 2.1.8 (The Collateral
Account).
-18-
"Material Adverse Effect" means, either in any case or in the aggregate, a
material adverse change (a) in the business, condition, assets, properties or
operations of the applicable Person, (b) in the right or ability of the
applicable Person to carry on a substantial portion of its operations as now
conducted or proposed to be conducted, or (c) to the value of, or the ability of
the Lender to realize upon, the Collateral.
"Monsey Bakor Group" means the collective reference to Monsey Products,
Kimberton, and Monsey Arizona.
"Monsey Bakor Group Collateral" means the collective reference to the
property covered by the grant contained in Section 3.3 (Grant of Liens) by any
one or more of the Borrowers included in the Monsey Bakor Group.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Worth" means as to the Company and its Subsidiaries at any date the
excess of (a) the Assets, over (b) the Liabilities, determined on a consolidated
basis.
"Note" means the Revolving Credit Note or the Capital Expenditure Note, as
the case may be, and "Notes" means collectively the Revolving Credit Note and
the Capital Expenditure Note, and any other promissory note which may from time
to time evidence all or any portion of the Obligations.
"Obligations" means all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of any one or more of the Borrowers to the Lender under, arising
pursuant to, in connection with and/or on account of the provisions of this
Agreement, each Note, each Security Document, and/or any of the other Financing
Documents, the Loans, and/or any of the Facilities including, without
limitation, the principal of, and interest on, each Note, late charges, the
Fees, Enforcement Costs, and prepayment fees (if any), letter of credit fees or
fees charged with respect to any guaranty of any letter of credit obligations;
also means all other present and future indebtedness, liabilities and
obligations, whether now existing or contemplated or hereafter arising, of any
one or more of the Borrowers to the Lender of any nature whatsoever regardless
of whether such debts, obligations and liabilities be direct, indirect, primary,
secondary, joint, several, joint and several, fixed or contingent; and also
means any and all renewals, extensions, substitutions, amendments, restatements
and rearrangements of any such debts, obligations and liabilities.
"Offering Memorandum" means the Company's Offering Memorandum dated April
15, 1998, pursuant to which the Senior Notes are offered.
"Offering Transaction" means the sale of the Senior Notes as described in
the Offering Memorandum.
-19-
"Origination Fee" has the meaning described in Section 2.6.3 (Origination
Fee).
"Outstanding Letter of Credit Obligations" has the meaning described in
Section 2.4.3 hereof and also includes the Obligations of the Borrowers with
respect to any undertaking of the Lender to Bank of America, N.T. & S.A. with
respect to letters of credit issued at the request of any or all of the
Borrowers.
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of the Borrowers' rights, title and interest in and to
the following to the extent they relate to the Borrower (a) any and all patents
and patent applications, (b) any and all inventions and improvements described
and claimed in such patents and patent applications, (c) reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any patents and
patent applications, (d) income, royalties, damages, claims and payments now or
hereafter due and/or payable under and with respect to any patents or patent
applications, including, without limitation, damages and payments for past and
future infringements, (e) rights to sue for past, present and future
infringements of patents, and (f) all rights corresponding to any of the
foregoing throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Estate Planning Transfers" means the collective reference to
transfers of any of the Borrowers' common stock which are made to or for the
benefit of the families of Warner W. Henry, Frederick H. Muhs, and Joseph T.
Mooney, Jr. or trusts or other entities exclusively benefiting such persons.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent or
which the Lender has determined in the good faith exercise of its discretion (i)
are being diligently contested in good faith and by appropriate proceedings,
(ii) each Borrower has the financial ability to pay, with all penalties and
interest, at all times without materially and adversely affecting that Borrower,
and (iii) except for real and personal property Taxes (which the Lender may, in
its sole and absolute discretion exercised from time to time, pay pursuant to
Section 7.2.6) are not, and will not be with appropriate filing, the giving of
notice and/or the passage of time, entitled to priority over any Lien of the
Lender; (b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance
in the ordinary course of business; (c) Liens in favor of the Lender; (d)
judgment Liens to the extent the entry of such judgment does not constitute a
Default or an Event of Default under the terms of this Agreement or result in
the sale or levy of, or execution on, any of the Collateral, provided, however,
that the Lender shall be entitled to establish reasonable reserves to against
the Borrowing Base to cover any judgment Liens, whether included in this
definition or not; (e) Liens (other than a Lien on the Collateral) existing on
property of any Borrower on the Closing Date and identified in Schedule 4.1.23;
(f) statutory Liens, or other non-consensual Liens imposed by law, of landlords,
carriers, warehousemen, mechanics, and materialmen, created in the ordinary
course of business for amounts (i) which are not yet due or (ii) which are being
contested in good faith and by appropriate proceedings and with respect to which
a
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Borrower has given the Lender notice of each instance where the amount contested
exceeds $100,000, the respective Borrower maintains adequate reserves and,
following the occurrence of an Event of Default, the respective Borrower has
made payment not later than five (5) days after the Lender notifies any Borrower
to do so provided, however, that the Lender may, in the exercise of its sole and
absolute discretion at any time or from time to time, exclude any Inventory
affected from Eligible Inventory which the Lender may, in its sole and absolute
discretion exercised from time to time, pay pursuant to Section 7.2.6; (g) with
respect to any Borrower's real property, zoning restrictions, easements,
rights-of-way, licenses, covenants, restrictions and other similar charges or
encumbrances not interfering with the ordinary conduct of the business of the
respective Borrower, (h) purchase money security interests on any property
acquired or held by a respective Borrower in the ordinary course of business,
securing indebtedness incurred or assumed for the purpose of financing all or
part of the cost of acquiring such property; provided that such lien attaches
solely to the property so acquired and the indebtedness so secured does not
exceed 100% of the cost of such property, and that the aggregate principal
amount of the indebtedness so secured at any time does not exceed $250,000 and
extensions to the maturity thereof or replacements, without increase of
principal or rate of interest thereof; and (i) such other Liens, if any, as are
set forth on Schedule 4.1.23 attached hereto and made a part hereof and
extensions to the maturity thereof or replacements, without increase of
principal or rate of interest thereof.
"Permitted Uses" means (a) with respect to the Capital Expenditure Loan,
the purposes set forth in Section 2.3.2, and (c) with respect to the Revolving
Loan, the payment of expenses incurred in the ordinary course of each Borrowers'
business.
"Person" means and includes an individual, a corporation, a partnership, a
joint venture, a limited liability company or partnership, a trust, an
unincorporated association, a Governmental Authority, or any other organization
or entity.
"Plan" means any pension plan which is covered by Title IV of ERISA and in
respect of which any Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3 of ERISA.
"Post-Default Rate" means (a) with respect to principal balance of the
Loans, the Applicable Interest Rate in effect under the respective Notes from
time to time, plus two percent (2%) per annum and (b) with respect to all other
Obligations, the Base Rate in effect from time to time, plus two and one-quarter
percent (2.25%) per annum.
"Prepayment" means a Revolving Loan Mandatory Prepayment, a Revolving Loan
Optional Prepayment or a Capital Expenditure Loan Optional Prepayment, as the
case may be, and "Prepayments" mean collectively all Revolving Loan Mandatory
Prepayments, all Revolving Loan Optional Prepayments and all Capital Expenditure
Loan Optional Prepayments.
"Prime Rate" means the floating and fluctuating per annum prime commercial
lending rate of interest of the Lender, as established and declared by the
Lender at any time or from time
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to time. The Prime Rate shall be adjusted automatically, without notice,
effective as of the first day of the month following the date of any such change
in such prime commercial lending rate. The Prime Rate does not necessarily
represent the lowest rate of interest charged by the Lender to borrowers.
"Purchase Investments" means any purchase of the assets of a Person, or the
merger (in which a Borrower is the survivor) of a Borrower with a Person,
engaged in the United States in the same line of business described in Section
6.1.7, if as a result of such purchase or merger, substantially all of the
assets of the Person are acquired by the respective Borrower free and clear of
all Liens, other than Permitted Liens, and no Default or Event of Default would
result from the purchase or merger.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
"Reserve Percentage" means, at any time, the then current maximum rate for
which reserves (including any basic, supplemental, marginal and emergency
reserves) are required to be maintained by member banks of the Federal Reserve
System under Regulation D of the Board of Governors of the Federal Reserve
System against "Eurocurrency liabilities", as that term is defined in Regulation
D. The LIBOR Rate shall be adjusted automatically on and as of the effective
date of any change in the Reserve Percentage.
"Responsible Officer" means the chief executive officer of a Borrower or
the president of a Borrower or, with respect to financial matters, the chief
financial officer of a Borrower.
"Revolving Credit Commitment" means the agreement of the Lender relating to
the making of the Revolving Loan and advances thereunder subject to and in
accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in Section
2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means April 30, 2003, extending
automatically for successive periods of one (1) year (but in no event later than
April 30, 2008) unless the Lender in the exercise of its sole and absolute
discretion has notified the Borrowers, or the Borrowers in the exercise of their
sole and absolute discretion have notified the Lender, no later than the
February 28th immediately preceding the next scheduled Revolving Credit
Expiration Date of their intention to terminate the Revolving Credit Facility as
of the next scheduled Revolving Credit Expiration Date.
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"Revolving Credit Facility" means the facility established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement.
"Revolving Credit Note" has the meaning described in Section 2.1.5
(Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a) the Revolving
Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment
is terminated pursuant to Section 7.2 or otherwise.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees"
have the meanings described in Section 2.1.10 (Revolving Credit Unused Line
Fee).
"Revolving Loan" has the meaning described in Section 2.1.1 (Revolving
Credit Facility).
"Revolving Loan Account" has the meaning described in Section 2.1.9
(Revolving Loan Account).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.6 (Mandatory
Prepayments).
"Revolving Loan Optional Prepayment" and "Revolving Loan Optional
Prepayments" have the meanings described in Section 2.1.7 (Revolving Loan
Optional Prepayment).
"Security Documents" means collectively any assignment, pledge agreement,
security agreement, mortgage, deed of trust, deed to secure debt, financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or hereafter granted to, or for the benefit of, the Lender
on any real or personal property of any Person to secure all or any portion of
the Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified, including, without limitation, this
Agreement, the Assignments of Life Insurance, the Assistance Agreement, and the
Assignment of Trademarks.
"Security Procedures" means the rules, policies and procedures adopted and
implemented by the Lender and its Affiliates at any time and from time to time
with respect to security procedures and measures relating to electronic funds
transfers, all as the same may be amended, restated, supplemented, terminated,
or otherwise modified at any time and from time to time as the Lender and/or any
Affiliate of the Lender, as applicable, in its or their sole and absolute
discretion, deems appropriate to meet then prevailing standards of good banking
practice.
"Senior Notes" means any and all 10% Senior Notes due 2008 to be issued
from time to time under the Indenture, in the original principal amount of
$85,000,000 and the maximum principal amount of $150,000,000.
"Senior Notes Documents" means, collectively, the Indenture and the Senior
Notes.
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"State" means the State of Maryland.
"Subordinated Indebtedness" means all Indebtedness incurred at any time by
any Borrower, which is in amounts, subject to repayment terms, and subordinated
to the Obligations, as set forth in one or more written agreements, all in form
and substance satisfactory to the Lender in its sole and absolute discretion.
"Subsidiary" means any corporation or a limited liability company the
majority of the voting shares or other voting ownership interests of which at
the time are owned directly by a Borrower and/or by one or more Subsidiaries of
a Borrower.
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), assessed, levied, confirmed or
imposed by any Governmental Authority on any Borrower or any of its properties
or assets or any part thereof or in respect of any of its franchises,
businesses, income or profits.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of the Borrowers' rights, title and interest in and to
the following as they relate to any Borrower (a) any and all trademarks
(including service marks), trade names and trade styles, and applications for
registration thereof and the goodwill of the business symbolized by any of the
foregoing, (b) any and all licenses of trademarks, service marks, trade names
and/or trade styles, whether as licensor or licensee, (c) any renewals of any
and all trademarks, service marks, trade names, trade styles and/or licenses of
any of the foregoing, (d) income, royalties, damages and payments now or
hereafter due and/or payable with respect thereto, including, without
limitation, damages, claims, and payments for past, present and future
infringements thereof, (e) rights to sue for past, present and future
infringements of any of the foregoing, including the right to settle suits
involving claims and demands for royalties owing, and (f) all rights
corresponding to any of the foregoing throughout the world.
"Trustee" means U.S. Trust Company of California, N.A., and its successor
and assigns as Trustee under the Indenture.
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from time to
time in the State or in any other jurisdiction, as applicable.
"Wholly Owned Subsidiary" means any Subsidiary all the shares of stock of
all classes of which (other than directors' qualifying shares) or, if
applicable, all of the membership interests at the time are owned directly or
indirectly by a Borrower and/or by one or more Wholly Owned Subsidiaries of a
Borrower.
"Wire Transfer Procedures" means the rules, policies and procedures adopted
and implemented by the Lender and its Affiliates at any time and from time to
time with respect to
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electronic funds transfers, including, without limitation, the Security
Procedures, all as the same may be amended, restated, supplemented, terminated
or otherwise modified at any time and from time to time as the Lender and/or any
Affiliate of the Lender, as applicable, in its or their sole and absolute
discretion, deems appropriate to meet then prevailing standards of good banking
practice.
Section 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS.
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP as consistently applied to the applicable Person.
Unless otherwise defined herein, all terms used herein which are defined by the
Uniform Commercial Code shall have the same meanings as assigned to them by the
Uniform Commercial Code unless and to the extent varied by this Agreement. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and article, section, subsection,
schedule and exhibit references are references to articles, sections or
subsections of, or schedules or exhibits to, as the case may be, this Agreement
unless otherwise specified. As used herein, the singular number shall include
the plural, the plural the singular and the use of the masculine, feminine or
neuter gender shall include all genders, as the context may require. Reference
to any one or more of the Financing Documents shall mean the same as the
foregoing may from time to time be amended, restated, substituted, extended,
renewed, supplemented or otherwise modified. Reference in this Agreement and
the other Financing Documents to the "Borrower", the "Borrowers", "each
Borrower" or otherwise with respect to any one or more of the Borrowers shall
mean each and every Borrower and any one or more of the Borrowers, jointly and
severally, unless a specific Borrower is expressly identified.
ARTICLE II
THE CREDIT FACILITIES
Section 2.1 THE REVOLVING CREDIT FACILITY.
2.1.1 REVOLVING CREDIT FACILITY.
Subject to and upon the provisions of this Agreement, the Lender
establishes a revolving credit facility in favor of the Borrowers. The aggregate
of all advances under the Revolving Credit Facility are sometimes referred to in
this Agreement collectively as the "Revolving Loan".
The principal amount of Twenty-Five Million Dollars ($25,000,000)
is the "Revolving Credit Committed Amount". If at any time the unpaid principal
balance of the Revolving Loan exceeds the Revolving Credit Committed Amount in
effect from time to time, the Borrowers shall pay such excess to the Lender ON
DEMAND.
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During the Revolving Credit Commitment Period, the Lender agrees
to make advances under the Revolving Loan requested by any or all of the
Borrowers from time to time provided that after giving effect to the Borrowers'
request, the outstanding principal balance of the Revolving Loan and of the
Outstanding Letter of Credit Obligations would not exceed the lesser of (a) the
Revolving Credit Committed Amount, or (b) the then most current Borrowing Base.
Unless sooner paid, the unpaid Revolving Loan, together with
interest accrued and unpaid thereon, and all other Obligations shall be due and
payable in full on the Revolving Credit Expiration Date.
2.1.2 PROCEDURE FOR MAKING ADVANCES UNDER THE REVOLVING LOAN;
LENDER PROTECTION LOANS.
The Borrowers may borrow under the Revolving Credit Commitment on
any Business Day. Advances under the Revolving Loan shall be deposited to a
demand deposit account of a Borrower with the Lender (or an Affiliate of the
Lender) or shall be otherwise applied as directed by any or all of the
Borrowers, which direction the Lender may require to be in writing. No later
than 1:00 p.m. (Baltimore time) on the date of the requested borrowing, the
Borrowers shall give the Lender oral or written notice (a "Loan Notice") of the
amount and (if requested by the Lender) the purpose of the requested borrowing.
Any oral Loan Notice shall be confirmed in writing by any or all of the
Borrowers within three (3) Business Days after the making of the requested
Revolving Loan. In addition, each Borrower hereby irrevocably authorizes the
Lender at any time and from time to time, without further request from or prior
notice to any or all of the Borrowers, to make advances under the Revolving Loan
which the Lender, in its sole and absolute discretion, deems necessary or
appropriate to cover any amounts due under the Obligations, including, without
limitation, advances under the Revolving Loan made to cover principal of, and/or
interest on, any Loan when due, any of the Obligations, and/or Enforcement
Costs, prior to, on, or after the termination of other advances under this
Agreement, regardless of whether the outstanding principal amount of the
Revolving Loan which the Lender may make hereunder exceeds the Revolving Credit
Committed Amount.
2.1.3 BORROWING BASE.
As used in this Agreement, the term "Borrowing Base" means at any
time, an amount equal to the aggregate of (a) eighty-five percent (85%) of the
amount of Eligible Receivables, plus (b) the lesser of (i) seventy-five percent
(75%) of the amount of Eligible Foreign Receivables, or (ii) $3,000,000, plus
(c) the lesser of (i) sixty percent (60%) of the amount of Eligible Inventory,
or (ii) Fifteen Million Dollars ($15,000,000) , plus (d) ninety-five percent
(95%) of the aggregate cash surrender value immediately available to the Lender
as assignee of the Eligible Life Insurance Policies.
The Borrowing Base shall be computed based on the Borrowing Base
Report most recently delivered to, and accepted by, the Lender in its good faith
discretion. In the
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event the Borrower shall fail to furnish a Borrowing Base Report required by
Section 2.1.4 below, or in the event the Lender believes in good faith that a
Borrowing Base Report is no longer accurate, the Lender may, in its sole and
absolute discretion exercised from time to time and without limiting its other
rights and remedies under this Agreement, suspend the making of or limit
advances under the Revolving Loan until the Lender receives such a report or
revised report. The Borrowing Base shall be subject to reduction by amounts
credited to the Collateral Account since the date of the most recent Borrowing
Base Report and by the amount of any account or any Inventory which was included
in the Borrowing Base but which the Lender determines fails to meet the
respective criteria applicable from time to time for Eligible Receivables,
Eligible Foreign Receivables, Eligible Life Insurance Policies or Eligible
Inventory.
If at any time the total of the aggregate principal amount of the
Revolving Loan and Outstanding Letter of Credit Obligations exceeds the
Borrowing Base, a borrowing base deficiency ("Borrowing Base Deficiency") shall
exist. Each time a Borrowing Base Deficiency exists, the Borrower, at the sole
and absolute discretion of the Lender exercised from time to time, shall pay the
Borrowing Base Deficiency ON DEMAND to the Lender.
Without implying any limitation on the Lender's discretion with
respect to the Borrowing Base, the criteria for Eligible Receivables, Eligible
Foreign Receivables, Eligible Life Insurance Policies and for Eligible Inventory
contained in the respective definitions of Eligible Receivables, Eligible
Foreign Receivables, Eligible Life Insurance Policies and of Eligible Inventory
are in part based upon the business operations of any or all of the Borrowers
existing on or about the Closing Date and upon information and records furnished
to the Lender by the Borrower. If at any time or from time to time hereafter,
the business operations of any or all of the Borrowers materially change or
such information and records furnished to the Lender is incorrect or misleading,
the Lender in its discretion, may at any time and from time to time during the
duration of this Agreement change add new criteria. The Lender may communicate
such changed or additional criteria to any or all of the Borrowers from time to
time either orally or in writing.
2.1.4 BORROWING BASE REPORT.
The Borrowers will furnish to the Lender no less frequently than
monthly or, if the aggregate outstanding principal amount of the Revolving Loan
and the Outstanding Letter of Credit Obligations exceeds the Borrowing Base
minus Two Million Five Hundred Thousand Dollars ($2,500,000) ,weekly (provided,
however, that the Eligible Inventory component shall be computed based on the
most recent monthly Inventory report required by Section 6.1.1(f)(iii)), and at
such other times as may be requested by the Lender a report of the Borrowing
Base (each a "Borrowing Base Report"; collectively, the "Borrowing Base
Reports") in the form required from time to time by the Lender, appropriately
completed and duly signed. The Borrowing Base Report shall contain the amount
and payments on the Accounts and the Eligible Foreign Receivables, the aggregate
cash surrender value immediately available to the Lender as assignee, under the
Assignments of Life Insurance as Collateral, of the Eligible Life Insurance
Policies, the value of Inventory, and the calculations of the Borrowing Base,
all in such detail, and accompanied by such
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supporting and other information, as the Lender may from time to time request.
Upon the Lender's request upon the creation of any Receivables or at such other
intervals as the Lender may require, the Borrowers will provide the Lender with:
(a) confirmatory assignment schedules; (b) copies of Account Debtor invoices;
(c) evidence of shipment or delivery; and (d) such further schedules, documents
and/or information regarding any of the Receivables, the Life Insurance Policies
and Inventory as the Lender may reasonably require. The items to be provided
under this subsection shall be certified as true and correct by a Responsible
Officer (or by any other officers or employees of the Borrowers whom a
Responsible Officer from time to time authorizes in writing to do so), and
delivered to the Lender from time to time solely for the Lender's convenience in
maintaining records of the Collateral. The failure of the Borowers to deliver
any such items to the Lender shall not affect, terminate, modify, or otherwise
limit the Lender's security interests in, and Liens on, the Collateral.
2.1.5 REVOLVING CREDIT NOTE.
The obligation of the Borrowers to pay the Revolving Loan, with
interest, shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the "Revolving
Credit Note") substantially in the form of EXHIBIT "A-1" attached hereto and
made a part hereof, with appropriate insertions. The Revolving Credit Note
shall be dated as of the date of this Agreement, shall be payable to the order
of the Lender at the times provided in the Revolving Credit Note, and shall be
in the principal amount of the Revolving Credit Committed Amount. The Borrowers
acknowledge and agree that, if the outstanding principal balance of the
Revolving Loan outstanding from time to time exceeds the face amount of the
Revolving Credit Note, the excess shall until repaid bear interest at the Base
Rate or, if applicable, the Post-Default Rate being charged under the Revolving
Loan from time to time and shall be payable, with accrued interest, ON DEMAND.
The Revolving Credit Note shall not operate as a novation of any of the
Obligations or nullify, discharge, or release any such Obligations or the
continuing contractual relationship of the parties hereto in accordance with the
provisions of this Agreement.
2.1.6 MANDATORY PREPAYMENTS OF REVOLVING LOAN.
The Borrowers shall make the mandatory prepayments (each a
"Revolving Loan Mandatory Prepayment" and collectively, the "Revolving Loan
Mandatory Prepayments") of the Revolving Loan at any time and from time to time
in such amounts requested by the Lender pursuant to Section 2.1.3 (Borrowing
Base) of this Agreement in order to cover any Borrowing Base Deficiency.
2.1.7 OPTIONAL PREPAYMENTS OF REVOLVING LOAN.
The Borrowers shall have the option, at any time and from time to
time, to prepay (each a "Revolving Loan Optional Prepayment" and collectively
the "Revolving Loan Optional Prepayments") the Revolving Loan, in whole or in
part without premium or penalty.
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2.1.8 THE COLLATERAL ACCOUNT.
The Borrowers will deposit, or cause to be deposited, all Items
of Payment to a bank account designated by the Lender and from which the Lender
alone has power of access and withdrawal (the "Collateral Account"). Each
deposit shall be made not later than the next Business Day after the date of
receipt of the Items of Payment. The Items of Payment shall be deposited in
precisely the form received, except for the endorsements of the Borrowers where
necessary to permit the collection of any such Items of Payment, the Borrowers
hereby agreeing to make such endorsement. In the event the Borrowers shall fail
to do so, the Lender is hereby authorized by the Borrowers to make the
endorsement in the name of the Borrowers. Prior to such a deposit, the
Borrowers will not commingle any Items of Payment with any of the other funds or
property of the Borrowers, but will hold them separate and apart in trust and
for the account of the Lender.
In addition, if so directed by the Lender, the Borrowers shall
direct the mailing of all Items of Payment from its Account Debtors to a
post-office box designated by the Lender, or to such other additional or
replacement post-office boxes pursuant to the request of the Lender from time to
time (collectively, the "Lockbox"). The Lender shall have unrestricted and
exclusive access to the Lockbox.
The Borrowers hereby authorize the Lender to inspect all Items of
Payment, endorse all Items of Payment in the name of any or all of the
Borrowers, and deposit Items of Payment in the Collateral Account. The Lender
reserves the right, exercised in its sole and absolute discretion from time to
time, to provide to the Collateral Account credit prior to final collection of
an Item of Payment and to disallow credit for any Item of Payment which is
unsatisfactory to the Lender. In the event Items of Payment are returned to the
Lender for any reason whatsoever, the Lender may, in the exercise of its
discretion from time to time, forward such Items of Payment a second time. Any
returned Items of Payment for which credit has been given by the Lender shall be
charged back to the Collateral Account, the Revolving Loan Account, or other
account, as appropriate.
The Lender will apply the whole or any part of the collected
funds credited to the Collateral Account against the Revolving Loan Account as
of each Business Day, provided, however, the Lender shall have the right (a)
after an Event of Default, to apply collected funds against any of the
Obligations in such order as the Lender may elect in its sole and absolute
discretion from time to time, and (b) at any time, to apply collected funds
which are not proceeds of accounts or inventory of any or all of the Borrowers
as a Prepayment of any one or more of the Loans. As part of the Obligations,
an amount equal to the additional interest which would have accrued on the
Revolving Loan during the preceding month if collections in the Collateral
Account during the month had been received one (1) Business Day subsequent to
their actual receipt shall be due and payable by any or all of the Borrowers to
the Lender on the first day of each month, commencing on the first such date
following the date hereof, and on the Revolving Credit Termination Date,
provided, however, except for the payment due on the Revolving Credit
Termination Date, no such payment shall be considered past due unless the
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Lender has not covered the payment by an advance under Section 2.1.2 and the
payment continues unpaid for one (1) Business Day after the Lender has given
written notice of the amount of the payment.
2.1.9 REVOLVING LOAN ACCOUNT.
The Lender will establish and maintain a loan account on its
books (the "Revolving Loan Account") to which the Lender will (a) debit (i) the
principal amount of each advance of the Revolving Loan made by the Lender
hereunder as of the date made, (ii) the amount of any interest accrued on the
Revolving Loan as and when due, and (iii) any other amounts due and payable by
the Borrower to the Lender from time to time under the provisions of this
Agreement in connection with the Revolving Loan, including, without limitation,
Enforcement Costs, Fees, late charges, and service, collection and audit fees,
as and when due and payable, and (b) credit all payments made by the Borrower to
the Lender on account of the Revolving Loan as of the date made including,
without limitation, funds credited to the Revolving Loan Account from the
Collateral Account. All credit entries to the Revolving Loan Account are
conditional and shall be readjusted as of the date made if final and
indefeasible payment is not received by the Lender in cash or solvent credits.
Any and all monthly periodic statements of the Revolving Loan Account furnished
by the Lender to the Borrower shall, with respect to the Revolving Loan balance,
the computation thereof, and debits and credits to the Revolving Loan Account,
shall be final, binding and conclusive upon the Borrower, unless the Lender
receives specific written objection thereto from the Borrower within sixty (60)
Business Days after such statement or reconciliation shall have been sent by the
Lender.
2.1.10 REVOLVING CREDIT UNUSED LINE FEE.
The Borrowers shall pay to the Lender a monthly revolving credit
facility fee (collectively, the "Revolving Credit Unused Line Fees" and
individually, a "Revolving Credit Unused Line Fee") in an amount equal to
one-quarter percent (1/4%) per annum of the average daily unused and undisbursed
portion of the Revolving Credit Committed Amount in effect from time to time
accruing during each month. The accrued and unpaid portion of the Revolving
Credit Unused Line Fee shall be due and payable by any or all of the Borrowers
to the Lender on the first day of each month, commencing on the first such date
following the date hereof, and on the Revolving Credit Termination Date,
provided, however, except for the payment due on the Revolving Credit
Termination Date, no such payment shall be considered past due unless the Lender
has not covered the payment by an advance under Section 2.1.2 and the payment
continues unpaid for one (1) Business Day after the Lender has given written
notice of the amount of the payment.
2.1.11 EARLY TERMINATION FEE.
In the event of the termination by, or on behalf of, the
Borrowers, of the Revolving Credit Commitment, the Borrowers shall pay a fee
(the "Early Termination Fee") equal to following amount at the following times:
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Period Early Termination Fee
Closing Date, through and
including, April 30, 1999 $100,000
May 1, 1999, through and
including, April 30, 2000 $ 75,000
Thereafter until 30 days preceding
the Revolving Credit Expiration Date $ 50,000
Payment of the Revolving Loan in whole or in part by or on behalf
of the Borrower, by court order or otherwise, following and as a result of the
institution of any bankruptcy proceeding by or against any Borrower, shall be
deemed to be a prepayment of the Revolving Loan subject to the Early Termination
Fee provided in this subsection.
Notwithstanding the foregoing, an Early Termination Fee shall not
be due if the termination of the Revolving Credit Commitments and repayment of
the Revolving Credit Facility are made solely as a result of (a) a replacement
credit facility extended by the Lender and/or its Affiliates to the Borrowers,
which generates sufficient proceeds and is in fact used to repay all Obligations
(including all Letter of Credit Obligations) in full and, if, in connection with
such repayment of all Obligations (including all Letter of Credit Obligations)
are terminated and/or released, or (b) a simultaneous public or private offering
of the Company's equity securities with net cash proceeds to the Borrowers of
$25,000,000 or more.
The Lender acknowledges and agrees that no "Early Termination
Fee" (as that term is defined in the Original Financing Agreement) is due and
the same is hereby waived.
2.1.12 REQUIRED AVAILABILITY UNDER THE REVOLVING CREDIT
FACILITY.
On the Closing Date, the aggregate outstanding principal amount
of the Revolving Loan and Outstanding Letter of Credit Obligations shall not
exceed an amount equal to the lesser of (i) the Revolving Credit Committed
Amount, or (ii) the Borrowing Base minus the sum of (A) the amount of the
Permitted Uses of the Revolving Loan required to be made on the Closing Date,
the amount of the costs relating to the closing of this Agreement and the
Offering Transaction (including, without limitation, applicable Fees, recording
costs, recording taxes, and the fees and expenses of the Borrowers' and the
Lender's professionals), and (B) the amount of Three Million Dollars
($3,000,000), provided that the Lender shall also be satisfied on the Closing
Date that each Borrower is continuing to pay its trade payables in accordance
with past practices.
(a) The Borrower shall not at any time permit the aggregate
outstanding principal amount of the Revolving Loan and the Outstanding Letter of
Credit Obligations to exceed an amount equal to the lesser of (i) the Revolving
Credit Committed Amount, or (ii) the Borrowing Base minus One Million Dollars
($1,000,000).
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(b) The Borrowers shall make a Revolving Loan Mandatory
Prepayment pursuant to the provisions of Section 2.1.6 to the extent necessary
to achieve compliance with this Section.
2.1.13 RIGHT OF LENDER TO DEMAND PAYMENT AND TERMINATE
REVOLVING CREDIT FACILITY.
Notwithstanding any of the provisions of this Agreement, the
Revolving Credit Note or any of the other Financing Documents, following an
Event of Default, the Lender may at any time, in its sole and absolute
discretion, demand payment of the Revolving Loan in whole or in part and/or
terminate, suspend or limit the Revolving Credit Commitment. Upon termination of
the Revolving Credit Facility, the outstanding principal balance under the
Revolving Loan, and any accrued and unpaid interest thereon, shall be
immediately due and payable, and the Lender shall not make any further advances
under the Revolving Loan, unless it elects to do so in the exercise of its sole
and absolute discretion.
Section 2.2 THE CAPITAL EXPENDITURE FACILITY.
2.2.1 CAPITAL EXPENDITURE FACILITY.
Subject to and upon the provisions of this Agreement, the Lender
establishes a credit facility in favor of any or all of the Borrowers which may
be used by any or all of the Borrowers to purchase Fixed or Capital Assets (the
"Capital Expenditure Facility"). The aggregate of all advances under the
Capital Expenditure Facility are sometimes referred to in this Agreement
collectively as the "Capital Expenditure Loan."
The principal amount of Ten Million Dollars ($10,000,000) is the
"Capital Expenditure Loan Committed Amount."
During the Capital Expenditure Commitment Period, the Lender
agrees to make advances under the Capital Expenditure Credit Facility requested
by any or all of the Borrowers from time to time provided that after giving
effect to any or all of the Borrowers' request, the outstanding principal
balance of the Capital Expenditure Loan would not exceed the Capital Expenditure
Loan Committed Amount.
2.2.2 PROCEDURE FOR MAKING ADVANCES UNDER THE CAPITAL EXPENDITURE
FACILITY.
The proceeds of the Capital Expenditure Loan shall be used solely
by any or all of the Borrowers to purchase Fixed or Capital Assets.
(a) The amount of each advance shall not exceed eighty
percent (80%) of the cost (excluding transportation, taxes, delivery,
installation, site preparation and other similar costs) of the Fixed or Capital
Assets to be purchased.
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(b) No later three (3) Business Days prior to the date of
the proposed advance under the Capital Expenditure Facility, a Responsible
Officer shall provide the Lender with a written request for the advance (which
may not be less than $25,000) which shall contain the proposed date (which shall
be a Business Day) for the advance, and a written certification from a
Responsible Officer of a Borrower as to the use of the proceeds of the requested
advance. Advances under the Capital Expenditure Loan shall be deposited to a
Borrower's demand deposit account with the Lender or shall be otherwise applied
as directed by any or all of the Borrowers, which direction the Lender may
require to be in writing.
2.2.3 CAPITAL EXPENDITURE NOTE.
The obligation of the Borrowers to repay the Capital Expenditure
Loan with interest shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the "Capital
Expenditure Note") substantially in the form of EXHIBIT "A-2" attached hereto
and made a part hereof, with appropriate insertions.
(a) The Capital Expenditure Note shall be dated as of the
date of this Agreement, shall be payable to the order of the Lender, shall be in
the principal amount of the Capital Expenditure Committed Amount, shall provide
for payment of interest at the rate, time and manner provided in this Agreement,
shall provide for quarterly installments of principal, (i) which, commencing
June 1, 2000, and continuing on the first day of each June, September, December
and March thereafter to maturity, are in the amount of five percent (5%) of the
outstanding principal balance of the Capital Expenditure Note outstanding on May
31, 2000, and (ii) which, commencing September 1, 2000, shall increase quarterly
on the first day of each December, March, June and September, thereafter to
maturity, by an amount equal to five percent (5%) of the aggregate advances made
under the Capital Expenditure Loan during the immediately preceding three (3)
month period, and shall mature on the earlier of April 30, 2003, or the
Revolving Credit Termination Date. The Capital Expenditure Note shall not
operate as a novation of any of the Obligations or nullify, discharge, or
release any such Obligations or the continuing contractual relationship of the
parties hereto in accordance with the provisions of this Agreement.
2.2.4 OPTIONAL PREPAYMENTS OF CAPITAL EXPENDITURE LOAN.
The Borrowers may, at their option, at any time and from time to
time prepay (each a "Capital Expenditure Loan Optional Prepayment" and
collectively the "Capital Expenditure Loan Optional Prepayments") the Capital
Expenditure Loan, in whole or in part without premium or penalty, upon five (5)
Business Days prior written notice, specifying the date and amount of
prepayment. The amount to be so prepaid, together with interest accrued
thereon to date of prepayment if the amount is intended as a prepayment of the
Capital Expenditure Loan in whole, shall be paid by the Borrowers to the Lender
on the date specified for such prepayment. Partial Capital Expenditure Loan
Optional Prepayments shall be in an amount not less than the aggregate amount of
the next principal installment under the Capital Expenditure Note and shall be
applied first to all accrued and unpaid interest on the principal of
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the Capital Expenditure Note, then to the principal against the balloon payment
due at maturity, if any, and then to principal against the principal
installments in the inverse order of their maturity.
2.2.5 ACTIVATION FEE.
The Borrower shall pay to the Lender on or before the date of
each advance under the Capital Expenditure Line a fee (the "Capital Expenditure
Line Activation Fee") in the amount of one-quarters percent (1/4%) of the amount
advanced, provided, however, that the aggregate amount of the Capital
Expenditure Line Activation Fees paid hereunder shall not exceed Twenty-five
Thousand Dollars ($25,000).
Section 2.3 THE LETTER OF CREDIT FACILITY.
2.3.1 LETTERS OF CREDIT.
Subject to and upon the provisions of this Agreement, and as a
part of the Revolving Credit Commitment, the Borrowers may, upon the prior
approval of the Lender, obtain standby letters of credit (as the same may from
time to time be amended, supplemented or otherwise modified, each a "Letter of
Credit" and collectively the "Letters of Credit") from the Lender from time to
time from the Closing Date until the Business Day preceding the Revolving Credit
Termination Date. No Borrower will be entitled to obtain a Letter of Credit
hereunder unless (a) after giving effect to the request, the outstanding
principal balance of the Revolving Loan and of the Letter of Credit Obligations
would not exceed the lesser of (i) the Revolving Credit Committed Amount, or
(ii) the most current Borrowing Base and (b) the sum of the aggregate face
amount of the then outstanding Letters of Credit (including the face amount of
the requested Letter of Credit) does not exceed Three Million Dollars
($3,000,000).
2.3.2 LETTER OF CREDIT FEES.
Prior to or simultaneously with the opening of each Letter of
Credit, the Borrowers shall pay to the Lender, a letter of credit fee (each a
"Letter of Credit Fee" and collectively the "Letter of Credit Fees") in an
amount equal to one percent (1%) per annum of the amount of the Letter of
Credit. Such Letter of Credit Fees shall be paid on the first day of each month
computed in arrears. In addition, the Borrowers shall pay to the Lender any and
all additional issuance, negotiation, processing, transfer or other fees to the
extent and as and when required by the provisions of any Letter of Credit
Agreement; such additional fees are included in and a part of the "Fees" payable
by the Borrowers under the provisions of this Agreement.
2.3.3 TERMS OF LETTERS OF CREDIT.
Each Letter of Credit shall (a) be opened pursuant to a Letter of
Credit Agreement, and (b) expire on a date not later than the Business Day
preceding the Revolving Credit Expiration Date; provided, however, if any Letter
of Credit does have an expiration date
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later than the Business Day preceding the Revolving Credit Termination Date, as
of the Business Day preceding the Revolving Credit Termination Date an advance
of the Revolving Loan Credit Facility shall be made by the Lender in the face
amount of such Letter of Credit (or Letters of Credit) and the proceeds thereof
shall be deposited in an account titled in the name of the Lender as trustee for
the Borrowers. The proceeds of the trustee account referred to in the
immediately preceding sentence shall be held as collateral for the Letter of
Credit (or Letters of Credit) and in the event of a draw under the Letter of
Credit (or Letters of Credit), used to pay any such draw. The aggregate face
amount of all Letters of Credit at any one time outstanding and issued by the
Lender pursuant to the provisions of this Agreement, plus the amount of any
unpaid Letter of Credit Fees accrued or scheduled to accrue thereon, and less
the aggregate amount of all drafts issued under or purporting to have been
issued under such Letters of Credit that have been paid by the Lender, is herein
called the "Outstanding Letter of Credit Obligations".
2.3.4 PROCEDURE FOR LETTERS OF CREDIT.
The Borrowers shall give the Lender written notice at least three
(3) Business Days prior to the date on which a Letter of Credit is requested to
be opened of their request for a Letter of Credit. Such notice shall be
accompanied by a duly executed and delivered Letter of Credit Agreement. Upon
receipt of the Letter of Credit Agreement and the Letter of Credit Fee, the
Lender shall process such Letter of Credit Agreement in accordance with its
customary procedures and open such Letter of Credit on the Business Day
specified in such notice.
Section 2.4 INTEREST.
2.4.1 APPLICABLE INTEREST RATES.
Each Loan shall bear interest until maturity (whether by
acceleration, declaration, extension or otherwise) at either the Base Rate or
the LIBOR Rate, as selected and specified by the Borrowers in an Interest Rate
Election Notice furnished to the Lender in accordance with the provisions of
Section 2.5.2(e), or as otherwise determined in accordance with the provisions
of this Section 2.5, and as may be adjusted from time to time in accordance with
the provisions of Section 2.5.3.
(a) Notwithstanding the foregoing, following the occurrence
and during the continuance of an Event of Default, at the option of the Lender,
all Loans and all other Obligations shall bear interest at the Post-Default
Rate.
(b) For the Revolving Loan, the Applicable Margin for (i)
LIBOR Loans shall be 225 basis points per annum, and (ii) Base Rate Loans shall
be 0 basis points per annum.
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(c) For the Capital Expenditure Loan, the Applicable
Margin for (i) LIBOR Loans shall be 250 basis points per annum, and (ii) Base
Rate Loans shall be 25 basis points per annum.
2.4.2 SELECTION OF INTEREST RATES.
The Borrowers may select the initial Applicable Interest Rate or
Applicable Interest Rates to be charged on each of the Loans.
(a) From time to time after the date of this Agreement as
provided in this Section, by a proper and timely Interest Rate Election Notice
furnished to the Lender in accordance with the provisions of Section 2.5.2(e),
the Borrowers may select an initial Applicable Interest Rate or Applicable
Interest Rates for any Loan or may convert the Applicable Interest Rate and,
when applicable, the Interest Period, for any existing Loan to any other
Applicable Interest Rate or, when applicable, any other Interest Period.
(b) The Borrowers' selection of an Applicable Interest Rate
and/or an Interest Period, the Borrowers' election to convert an Applicable
Interest Rate and/or an Interest Period to another Applicable Interest Rate or
Interest Period, and any other adjustments in an interest rate are subject to
the following limitations:
(i) the Borrowers shall not at any time select
or change to an Interest Period that extends beyond the Revolving
Credit Expiration Date in the case of the Revolving Loan or
beyond the respective scheduled maturity of the Capital
Expenditure Loan,
(ii) except as otherwise provided in Section
2.5.4, no change from the LIBOR Rate to the Base Rate shall
become effective on a day other than a Business Day and on a day
which is the last day of the then current Interest Period, no
change of an Interest Period shall become effective on a day
other than the last day of the then current Interest Period, and
no change from the Base Rate to the LIBOR Rate shall become
effective on a day other than a day which is a Eurodollar
Business Day,
(iii) any Applicable Interest Rate change for any
Loan to be effective on a date on which any principal payment on
account of such Loan is scheduled to be paid shall be made only
after such payment shall have been made,
(iv) no more than four (4) different LIBOR Rates
may be outstanding at any time and from time to time with respect
to the Revolving Loan,
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(v) only two (2) LIBOR Rate may be outstanding
at any time and from time to time with respect to the Capital
Expenditure Loan,
(vi) the first day of each Interest Period shall
be a Eurodollar Business Day,
(vii) as of the effective date of a selection,
there shall not exist a Default or an Event of Default, and
(viii) the minimum principal amount of a LIBOR
Loan shall be Seven Hundred Fifty Thousand Dollars ($750,000).
(c) If a request for an advance under the Loans is not
accompanied by an Interest Rate Election Notice or does not otherwise include a
selection of an Applicable Interest Rate and, if applicable, an Interest Period,
or if, after having made a selection of an Applicable Interest Rate and, if
applicable, an Interest Period, the Borrowers fail or are not otherwise entitled
under the provisions of this Agreement to continue such Applicable Interest Rate
or Interest Period, the Borrowers shall be deemed to have selected the Base Rate
as the Applicable Interest Rate until such time as the Borrowers have selected a
different Applicable Interest Rate and specified an Interest Period in
accordance with, and subject to, the provisions of this Section.
(d) The Lender will not be obligated to make Loans, to
convert the Applicable Interest Rate on Loans to another Applicable Interest
Rate, or to change Interest Periods, unless the Lender shall have received an
irrevocable written or telephonic notice (an "Interest Rate Election Notice")
from the Borrowers specifying the following information:
(i) the amount to be borrowed or converted,
(i) a selection of the Base Rate or the LIBOR
Rate,
(ii) the length of the Interest Period if the
Applicable Interest Rate selected is the LIBOR Rate, and
(iii) the requested date on which such election
is to be effective.
Any telephonic notice must be confirmed in writing within three
(3) Business Days. Each Interest Rate Election Notice must be received by the
Lender not later than 1:00 p.m. (Baltimore City time) on the Business Day of any
requested borrowing or conversion in the case of a selection of the Base Rate
and not later than 1:00 p.m. (Baltimore City time) on the third Business Day
before the effective date of any requested borrowing or conversion in the case
of a selection of the LIBOR Rate.
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2.4.3 INABILITY TO DETERMINE LIBOR COMPUTATION RATE.
In the event that (i) the Lender shall have determined that, by
reason of circumstances affecting the London interbank eurodollar market,
adequate and reasonable means do not exist for ascertaining the LIBOR
Computation Rate for any requested Interest Period with respect to a Loan the
Borrowers have requested to be made as or to be converted to a LIBOR Loan or
(ii) the Lender shall determine that the LIBOR Computation Rate for any
requested Interest Period with respect to a Loan the Borrowers have requested to
be made as or to be converted to a LIBOR Loan does not adequately and fairly
reflect the cost to the Lender of funding or converting such Loan, the Lender
shall give telephonic or written notice of such determination to the Borrowers
at least one (1) day prior to the proposed date for funding or converting such
Loan, provided that Lender's NationsBank Business Credit operation has
determined to give such notice to its Borrowers generally. If such notice is
given, any request for a LIBOR Loan shall be made as or converted to a Base Rate
Loan. Until such notice has been withdrawn by the Lender, the Borrowers will
not request that any Loan be made as or converted to a LIBOR Loan. No such
notice shall be given by Lender with respect to an Interest Period that has
already commenced.
2.4.4 INDEMNITY.
The Borrowers agree to indemnify and reimburse the Lender and to
hold the Lender harmless from any loss, cost (including administrative costs) or
expense which the Lender may sustain or incur as a consequence of (a) a default
by the Borrowers in payment when due of the principal amount of or interest on
any LIBOR Loan, (b) the failure of the Borrowers to make, or convert to a LIBOR
Rate the Applicable Interest Rate of, a Loan after the Borrowers have given a
Loan Notice or an Interest Rate Election Notice, (c) the failure of the
Borrowers to make any prepayment of a LIBOR Loan after the Borrowers have given
notice of such intention to make such a prepayment, and/or (d) the making by the
Borrowers of a prepayment of a LIBOR Loan on a day which is not the last day of
the Interest Period for such LIBOR Loan, including, without limitation, any such
loss or expense arising from the reemployment of funds obtained by the Lender to
maintain any LIBOR Loan or from fees payable to terminate the deposits from
which such funds were obtained, but in no event shall the charge be less than
$500.00.
2.4.5 PAYMENT OF INTEREST.
Unpaid and accrued interest on any advance of the Revolving Loan
and on any portion of the Capital Expenditure Loan which consists of a Base Rate
Loan shall be paid monthly, in arrears, on the first day of each calendar month,
commencing on the first such date after the date of this Agreement, and on the
first day of each calendar month thereafter, and at maturity (whether by
acceleration, declaration, extension or otherwise). Payment on account of
interest on the Revolving Loan shall be by debit to the Revolving Loan Account
as set forth in Section 2.1.9 (Revolving Loan Account).
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(a) Notwithstanding the foregoing, any and all unpaid and
accrued interest on any Base Rate Loan converted to a LIBOR Loan or prepaid
shall be paid immediately upon such conversion and/or prepayment, as
appropriate.
(b) Unpaid and accrued interest on any LIBOR Loan shall be
paid on the last Business Day of each Interest Period for such LIBOR Loan and at
maturity (whether by acceleration, declaration, extension or otherwise);
provided, however that any and all unpaid and accrued interest on any LIBOR Loan
prepaid prior to expiration of the then current Interest Period for such LIBOR
Loan shall be paid immediately upon prepayment. Payment on account of interest
on the Revolving Loan shall be by debit to the Revolving Loan Account as set
forth in Section 2.1.9 (Revolving Loan Account).
Section 2.5 GENERAL FINANCING PROVISIONS.
2.5.1 BORROWERS' REPRESENTATIVES.
The Borrowers hereby represent and warrant to the Lender that
each of them will derive benefits, directly and indirectly, from each Letter of
Credit and from each Loan, both in their separate capacity and as a member of
the integrated group to which each of the Borrowers belong and because the
successful operation of the integrated group is dependent upon the continued
successful performance of the functions of the integrated group as a whole,
because (a) the terms of the consolidated financing provided under this
Agreement are more favorable than would otherwise would be obtainable by the
Borrowers individually, and (b) the Borrowers' additional administrative and
other costs and reduced flexibility associated with individual financing
arrangements which would otherwise be required if obtainable would substantially
reduce the value to the Borrowers of the financing. The Borrowers in the
discretion of their respective managements are to agree among themselves as to
the allocation of the benefits of Letters of Credit and the proceeds of Loans,
provided, however, that the Borrowers shall be deemed to have represented and
warranted to the Lender at the time of allocation that each benefit and use of
proceeds is a Permitted Use.
For administrative convenience, each Borrower hereby irrevocably
appoints the Company as the Borrower's attorney-in-fact, with power of
substitution (with the prior written consent of the Lender in the exercise of
its sole and absolute discretion), in the name of the Company or in the name of
the Borrower or otherwise to take any and all actions with respect to the this
Agreement, the other Financing Documents, the Obligations and/or the Collateral
(including, without limitation, the proceeds thereof) as the Company may so
elect from time to time, including, without limitation, actions to (i) request
advances under the Loans, apply for and direct the benefits of Letters of
Credits, and direct the Lender to disburse or credit the proceeds of any Loan
directly to an account of the Company, any one or more of the Borrowers or
otherwise, which direction shall evidence the making of such Loan and shall
constitute the acknowledgement by each of the Borrowers of the receipt of the
proceeds of such Loan or the benefit of such Letter of Credit, (ii) enter into,
execute, deliver, amend, modify, restate, substitute, extend and/or renew this
Agreement, any additional Borrower joinder
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supplement, any other Financing Documents, security agreements, mortgages,
deposit account agreements, instruments, certificates, waivers, letter of credit
applications, releases, documents and agreements from time to time, and (iii)
endorse any check or other item of payment in the name of the Borrower or in the
name of the Company. The foregoing appointment is coupled with an interest,
cannot be revoked without the prior written consent of the Lender, and may be
exercised from time to time through the Company's duly authorized officer,
officers or other Person or Persons designated by the Company to act from time
to time on behalf of the Company.
Each of the Borrowers hereby irrevocably authorizes the Lender to
make Loans to any one or more all of the Borrowers, and hereby irrevocably
authorizes the Lender to issue or cause to be issued Letters of Credit for the
account of any or all of the Borrowers, pursuant to the provisions of this
Agreement upon the written, oral or telephone request any one or more of the
Persons who is from time to time a Responsible Officer of a Borrower under the
provisions of the most recent certificate of corporate resolutions and/or
incumbency of the Borrowers on file with the Lender and also upon the written,
oral or telephone request of any one of the Persons who is from time to time a
Responsible Officer of the Company under the provisions of the most recent
certificate of corporate resolutions and/or incumbency for the Company on file
with the Lender.
The Lender does not assume any responsibility or liability for
any errors, mistakes, and/or discrepancies in the oral, telephonic, written or
other transmissions of any instructions, orders, requests and confirmations
between the Lender and the Borrowers or the Lender in connection with the Credit
Facilities, any Loan, any Letter of Credit or any other transaction in
connection with the provisions of this Agreement. Without implying any
limitation on the joint and several nature of the Obligations, the Lender agrees
that, notwithstanding any other provision of this Agreement, the Borrowers may
create reasonable inter-company indebtedness between or among the Borrowers with
respect to the allocation of the benefits and proceeds of the advances and
Credit Facilities under this Agreement. The Borrowers agree among themselves,
and the Lender consents to that agreement, that each Borrower shall have rights
of contribution from all of the other Borrowers to the extent such Borrower
incurs Obligations in excess of the proceeds of the Loans received by, or
allocated to purposes for the direct benefit of, such Borrower. All such
indebtedness and rights shall be, and are hereby agreed by the Borrowers to be,
subordinate in priority and payment to the indefeasible repayment in full in
cash of the Obligations, and, unless the Lender agrees in writing otherwise,
shall not be exercised or repaid in whole or in part until all of the
Obligations have been indefeasibly paid in full in cash. The Borrowers agree
that all of such inter-company indebtedness and rights of contribution are part
of the Collateral and secure the Obligations. Each Borrower hereby waives all
rights of counterclaim, recoupment and offset between or among themselves
arising on account of that indebtedness and otherwise. Each Borrower shall not
evidence the inter-company indebtedness or rights of contribution by note or
other instrument, and shall not secure such indebtedness or rights of
contribution with any Lien or security.
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2.5.2 USE OF PROCEEDS OF THE LOANS.
The proceeds of each advance under the Loans shall be used by the
Borrowers for Permitted Uses, and for no other purposes except as may otherwise
be agreed by the Lender in writing. The Borrowers shall use the proceeds of the
Loans promptly.
2.5.3 ORIGINATION FEE.
The Borrowers shall pay to the Lender on or before the Closing
Date a loan origination fee (the "Origination Fee") in the amount of
Seventy-five Thousand Dollars ($75,000), which fee has been fully earned and is
non-refundable.
2.5.4 FIELD EXAMINATION FEES.
The Borrowers shall pay to the Lender a field examination fee
(collectively, the "Field Examination Fees" and individually a "Field
Examination Fee") in the amount of $5,000 for each field examination of the
Lender provided that, prior to an Event of Default the Field Examination Fees
(a) shall not exceed $15,000 in any fiscal year and (b) shall be used by the
Lender to cover its expenses with respect to field examinations except as
expressly permitted by Section 6.1.3(c).
2.5.5 COMPUTATION OF INTEREST AND FEES.
All applicable Fees and interest shall be calculated on the basis
of a year of 360 days for the actual number of days elapsed.
2.5.6 PAYMENTS.
All payments of the Obligations, including, without limitation,
principal, interest, Prepayments, and Fees, shall be paid by the Borrowers
without setoff, recoupment or counterclaim to the Lender in immediately
available funds not later than 2:00 p.m., Baltimore, Maryland time on the due
date of such payment. All such payments shall be made to the Lender's principal
office in Baltimore, Maryland or at such other location as the Lender may at any
time and from time to time notify the Borrowers. Alternatively, at its sole
discretion, the Lender may charge any deposit account of any or all of the
Borrowers at the Lender or any Affiliate of the Lender with all or any part of
any amount due to the Lender under this Agreement or any of the other Financing
Documents to the extent that the Borrowers shall have not otherwise tendered
timely payment to the Lender. All payments shall be applied first to any unpaid
Fees, second to any and all accrued and unpaid late charges and Enforcement
Costs, third to any and all accrued and unpaid interest on the Obligations, and
then to the then unpaid principal balance of the Obligations, all in such order
and manner as set forth in this Agreement.
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2.5.7 LIENS; SETOFF.
The Borrowers hereby grants to the Lender as additional
collateral and security for all of the Obligations, a continuing Lien on any and
all monies, securities, and other personal property of the Borrowers and any and
all proceeds thereof, now or hereafter held (except as provided in the last
sentence of Section 2.5.10 hereof) or received by, or in transit to, the Lender
or any Affiliate of the Lender from, or for the account of, the Borrowers, and
also upon any and all depository accounts (whether general or special) and
credits of the Borrowers, if any, with the Lender or any Affiliate of the
Lender, at any time existing, excluding any depository accounts held by the
Borrowers in their capacity as trustee for Persons who are not Affiliates of the
Borrowers. Without implying any limitation on any other rights the Lender may
have under the Financing Documents or applicable Laws, during the continuance of
an Event of Default, the Lender is hereby authorized by the Borrowers at any
time and from time to time at the Lender's option, without notice to, or consent
of, the Borrowers, to set off, appropriate, seize, freeze and apply any or all
items hereinabove referred to against all Obligations then outstanding (whether
or not then due), all in such order and manner as shall be determined by the
Lender in its sole and absolute discretion.
2.5.8 REQUIREMENTS OF LAW.
In the event that the Lender shall have determined in good faith
that after the Closing Date (a) the adoption of any Laws regarding capital
adequacy, or (b) any change in such Laws or in the interpretation or application
thereof or (c) compliance by the Lender or any corporation controlling the
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any Governmental Authority or central bank, does
or shall have the effect of reducing the rate of return on the capital of the
Lender or such controlling corporation as a consequence of the Lender's
obligations under this Agreement to a level below that which the Lender or such
corporation would have achieved but for such adoption, change or compliance
(taking into consideration the policies of the Lender and its controlling
corporation with respect to capital adequacy) by an amount deemed by the Lender,
in its discretion, to be material, then from time to time, after submission by
the Lender to the Borrowers of a written request therefor, a statement that the
Lender's NationsBank Business Credit operation is making similar requests of its
customers generally, and a statement of the basis for the Lender's
determination, the Borrowers shall pay to the Lender ON DEMAND such additional
amount or amounts in order to compensate the Lender or its controlling
corporation for any such reduction; provided, however, if the additional
compensation would exceed one-half of one percent (1/2%) per annum of the
Revolving Credit Committed Amount, the Borrower may, for a period of ninety (90)
days after notice to the Borrower, prepay all of the Obligations and terminate
the Commitments without payment of the Early Termination Fee, but only if the
Borrowers have within thirty (30) days following receipt of such notice,
notified the Lender of the Borrowers' intention to do so.
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2.5.9 FUNDS TRANSFER SERVICES.
(a) The Borrowers have requested that the Lender and its
Affiliates make available to the Borrowers electronic funds transfer services
and related security measures in connection with the Obligations. A copy of the
Lender's current Wire Transfer Procedures, including the Security Procedures, is
attached to this Agreement as EXHIBIT B. The Borrowers acknowledge and agree
that all electronic funds transfers made by the Lender or any Affiliate of the
Lender to, or for the account of, the Borrowers shall be governed by, and
subject to, the Wire Transfer Procedures and the Security Procedures in effect
from time to time. The Borrowers and the Lender agree that the current Wire
Transfer Procedures and the Security Procedures are commercially reasonable.
The Borrowers further acknowledge and agree, however, that the full scope of the
Security Procedures which the Lender and its Affiliates offer and strongly
recommend for electronic funds transfers is available only if the Borrowers
communicate directly with the Lender or its Affiliate, as applicable, in
accordance with and as required by the Wire Transfer Procedures and the Security
Procedures. If the Borrowers attempt to communicate with the Lender or any
Affiliate of the Lender by any other method or otherwise does not communicate
with the Lender and/or its Affiliate, as appropriate, in accordance with the
Wire Transfer Procedures and the Security Procedures, the Lender and/or its
Affiliate, as applicable, shall not be required to execute the instructions of
the Borrowers, but if the Lender or such Affiliate, as applicable, does so, the
Borrowers will be deemed to have refused and waived the Security Procedures that
the Lender or its Affiliate, as applicable, offers and strongly recommends, and
the Borrowers will be bound by any funds transfer, whether or not authorized,
which is issued in any Borrower's name and accepted by the Lender or any
Affiliate, as applicable, in good faith. The Lender or its Affiliate, as
applicable, may modify the Wire Transfer Procedures ncluding, without
limitation, the Security Procedures at such time or times and in such manner as
the Lender and/or any Affiliate of the Lender, as applicable, in its or their
sole and absolute discretion, deems appropriate to meet then prevailing
standards of good banking practice. The Lender shall notify the Borrowers of
any material change or modification to the Wire Transfer Procedures and/or the
Security Procedures. By continuing to use the wire transfer services of the
Lender and/or any Affiliate of the Lender following notice to the Borrowers of
any such change or modification to the Wire Transfer Procedures and/or the
Security Procedures, the Borrowers shall be deemed automatically to have agreed
to the Wire Transfer Procedures and the Security Procedures, as changed and/or
modified and to have further agreed that the Wire Transfer Procedures and the
Security Procedures, as changed and/or modified, are likewise commercially
reasonable. The Borrowers further agree to establish and maintain procedures to
safeguard the Security Procedures and any information related thereto. Neither
the Lender or any Affiliate of the Lender is responsible for detecting any error
in any payment order sent by any Borrower to the Lender or any Affiliate of the
Lender.
(b) The Lender and its Affiliates, as applicable, will
generally use the Fedwire funds transfer system for domestic funds transfers,
and the funds transfer system operated by the Society for Worldwide
International Financial Telecommunication (SWIFT) for international funds
transfers. International funds transfers may also be initiated through the
Clearing House InterBank Payment System (CHIPs) or international cable.
However, the Lender
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and/or its Affiliates, as applicable, may use any means and routes that the
Lender or any such Affiliate, as applicable, in its sole discretion, may
consider suitable for the transmission of funds. Each payment order, or
cancellation thereof, carried out through a funds transfer system or a
clearinghouse will be governed by all applicable funds transfer system rules and
clearinghouse rules and clearing arrangements, whether or not the Lender or any
Affiliate, as applicable, is a member of the system, clearinghouse or
arrangement and the Borrowers acknowledge that the right of the Lender or any
Affiliate, as applicable, to reverse, adjust, stop payment or delay posting of
an executed payment order is subject to the Laws, regulations, rules, circulars
and arrangements described herein.
2.5.10 NO NOVATION.
The Borrowers and the Lender acknowledge and agree that (a) this
Agreement amends and restates the Original Financing Agreement, (b) the
Obligations outstanding under the Original Financing Agreement have not been
extinguished or repaid, continue without interruption, and have not been
discharged by this Agreement, (c) the Obligations outstanding under the Original
Financing Agreement are part of the Obligations under this Agreement and the
respective Credit Facilities under which such Obligations arose under the
Original Financing Agreement, as those Credit Facilities have been amended and
restated by this Agreement, (d) the obligation of the Borrowers to repay the
Obligations outstanding under the Original Financing Agreement are evidenced by
the Notes under this Agreement, which Notes replace the Notes under the Original
Financing Agreement, and (e) this Agreement and the other Financing Documents
are not intended to, and shall not, result in a novation of the Obligations
outstanding under the Original Financing Agreement. The Lender acknowledges and
agrees that the "Notes" which it received in conjunction with the Original
Financing Agreement shall be marked "SUBSTITUTED" and returned to the Company at
the time the Notes are executed and delivered pursuant to this Agreement and
that the Lender's Liens on that portion of the "Collateral" under the Original
Financing Agreement which is not part of the Collateral under this Agreement is
hereby released and terminated shall be released by the Lender and the Lender
shall execute and deliver all documents evidencing such releases with reasonable
promptness hereafter.
ARTICLE III
THE COLLATERAL
Section 3.1 DEBT AND OBLIGATIONS SECURED.
All property and Liens assigned, pledged or otherwise granted under or in
connection with this Agreement (including, without limitation, those under
Section 3.3 (Grant of Liens) below) or any of the Financing Documents shall
secure (a) the payment of all of the Obligations, and (b) the performance,
compliance with and observance by each Borrower of the provisions of this
Agreement and all of the other Financing Documents or otherwise under the
Obligations.
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Section 3.2 MONSEY BAKOR GROUP COLLATERAL.
The Lender and the Borrowers acknowledge that on the date of this
Agreement, the Monsey Bakor Group may have failed to provide a perfected
security interest in some or all of the Monsey Bakor Group Collateral, and a
Collateral Disclosure List with respect to the Monsey Bakor Group. The Lender
agrees that such failure shall not constitute a breach of the representations
and warranties, conditions of lending or covenants of the Borrowers under this
Agreement and that the representations, warranties and covenants with respect to
the Collateral Disclosure List shall not apply to the Monsey Bakor Group until
the Collateral Disclosure List with respect thereto has been furnished as
required by this Section; PROVIDED, HOWEVER:
(a) Commencing immediately after the Closing Date, the Borrowers
shall commence and diligently pursue completion of the Collateral Disclosure
List for the Monsey Bakor Group and shall effect such completion no later than
May 5, 1998.
(b) No assets of the Monsey Bakor Group may be included in the
computation of Eligible Receivables or Eligible Inventory unless and until the
Lender's security interests in those assets have been perfected.
(c) The Monsey Bakor Group shall take all steps required by the
Lender under Section 6.1.23 and, in any event, shall have perfected the Lender's
security interests and Liens granted in Section 3.3 and any applicable
Assignment of Trademarks on or before June 22, 1998.
Section 3.3 GRANT OF LIENS.
Each Borrower hereby assigns, pledges and grants to the Lender, and agrees
that the Lender shall have a perfected (except to the limited extent provided in
Section 3.2 above) and continuing security interest in, and Lien on,(a) all of
the respective Borrower's Accounts, Inventory, and Capital Expenditure Loan
Equipment, whether now owned or existing or hereafter acquired or arising, (b)
all returned, rejected or repossessed goods, the sale or lease of which shall
have given or shall give rise to an Account, (c) all insurance policies relating
to the foregoing, (d) all books and records in whatever media (paper, electronic
or otherwise) recorded or stored, with respect to the foregoing and all
equipment and general intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and records, and (e) all
cash and non-cash proceeds and products of the foregoing.
The Borrowers further agree that the Lender shall have in respect
thereof all of the rights and remedies of a secured party under the Uniform
Commercial Code as well as those provided in this Agreement, under each of the
other Financing Documents and under applicable Laws.
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Section 3.4 COLLATERAL DISCLOSURE LIST.
Each of the Borrowers shall deliver to the Lender a list (collectively, the
"Collateral Disclosure List") which shall contain such information with respect
to the Borrowers' businesses and real and personal property as the Lender may
require and shall be certified by a Responsible Officer of the Borrowers, all in
the form provided to the Borrowers by the Lender. Promptly after demand by the
Lender, the Borrowers shall furnish to the Lender an update of the information
contained in the Collateral Disclosure List at any time and from time to time as
may be requested by the Lender. The Collateral Disclosure List for the Company
shall be provided on or before the Closing Date. The Collateral Disclosure List
for the Monsey Bakor Group shall be provided as required by Section 3.2.
Section 3.5 CERTAIN PERSONAL PROPERTY.
The Borrowers acknowledge and agree that it is the intention of the parties
to this Agreement that the Lender shall have a first priority, perfected Lien,
in form and substance satisfactory to the Lender and its counsel, on all of the
Collateral and proceeds thereof of any kind and nature whatsoever, whether now
owned or hereafter acquired, subject only to the Permitted Liens. In
furtherance of the foregoing:
3.5.1 CERTAIN POSSESSORY COLLATERAL.
(a) On the Closing Date and without implying any limitation
on the scope of Section 3.3 (Grant of Liens) above, the Borrowers shall
deliver to the Lender all originals of all of the Borrowers' letters of credit,
chattel paper, documents of title, securities, instruments and other property
which may be perfected by possession and which is included among the Collateral,
and, if the Lender so requires, shall execute and deliver to the Lender separate
pledges, assignments and security agreements in form and content acceptable to
the Lender, which pledges, assignments and security agreements shall assign,
pledge and grant a Lien to the Lender on all such letters of credit, chattel
paper, documents of title and instruments.
(b) In the event that any Borrower shall acquire after the
Closing Date any letters of credit, chattel paper, documents of title and
instruments included among the Collateral, the Borrower shall promptly so notify
the Lender and deliver the originals of all of the foregoing to the Lender
promptly and in any event within ten (10) days of each acquisition.
(c) All letters of credit, chattel paper, documents of
title and instruments included among the Collateral shall be delivered to the
Lender endorsed and/or assigned as required by any pledge, assignment and
security agreement and/or as the Lender may require and, if applicable, shall be
accompanied by notices as the Lender may require.
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3.5.2 ADDITIONAL STEPS TO PERFECT.
On the Closing Date and without implying any limitation on the
scope of Section 3.2 above, each Borrower shall execute and deliver all
Financing Documents it is required to execute and take all actions requested by
the Lender in order to perfect a first priority assignment of Patents,
Copyrights, Trademarks or any other type or kind of intellectual property
acquired by any Borrower with respect to the Collateral after the Closing Date.
Section 3.6 RECORD SEARCHES.
As of the Closing Date and thereafter at the time any Financing Document is
executed and delivered by the Borrowers pursuant to this Section, the Lender
shall have received, in form and substance satisfactory to the Lender, such Lien
or record searches with respect to the Borrowers and/or any other Person, as
appropriate, and the property covered by such Financing Document showing that
the Lien of such Financing Document will be a perfected first priority Lien on
the property covered by such Financing Document subject only to Permitted Liens
or to such other matters as the Lender may approve.
Section 3.7 COSTS.
The Borrowers agree to pay, as part of the Enforcement Costs (other than
Enforcement Costs incurred by the Lender prior to an Event of Default on account
of an assignment, participation or transfer under Section 8.5) and to the
fullest extent permitted by applicable Laws, on demand all costs, fees and
expenses incurred by the Lender in connection with the taking, perfection,
preservation, protection and/or release of a Lien on the Collateral, including,
without limitation:
(a) customary fees and expenses incurred in preparing
Financing Documents from time to time (including, without limitation, reasonable
attorneys' fees incurred in connection with preparing the Financing Documents);
(b) all filing and/or recording taxes or fees;
(c) all title insurance premiums and costs;
(d) all costs of Lien and record searches;
(e) reasonable attorneys' fees in connection with all legal
opinions required;
(f) appraisal and/or survey costs; and
(g) all related costs, fees and expenses.
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Section 3.8 RELEASE.
Upon the payment and performance of all Obligations of the Borrowers and
all obligations and liabilities of each other Person, other than the Lender,
under this Agreement and all other Financing Documents, the termination and/or
expiration of the Commitment and Outstanding Letter of Credit Obligations, upon
the Borrowers' request and at the Borrowers' sole cost and expense, the Lender
shall release and/or terminate any Financing Document but only if and provided
that there is no commitment or obligation (whether or not conditional) of the
Lender to re-advance amounts which would be secured thereby.
Section 3.9 INCONSISTENT PROVISIONS.
In the event that the provisions of any Financing Document directly
conflict with any provision of this Agreement, the provisions of this Agreement
govern.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES.
The Borrowers represent and warrant to the Lender, as follows:
4.1.1 SUBSIDIARIES.
The Borrowers have no Subsidiaries except that Monsey Products is
a Subsidiary of the Company and that Bakor Holdings, Inc., Kimberton and Monsey
Arizona are Subsidiaries of Monsey Products. Each of the Subsidiaries is a
Wholly Owned Subsidiary. Bakor Holdings, Inc. and each of its Subsidiaries is a
corporation organized under the laws of Canada or its provinces.
4.1.2 GOOD STANDING.
Each of the corporate Borrowers (a) is a corporation duly
organized, existing and in good standing under the laws of the jurisdiction of
its incorporation, (b) has the corporate power to own its property and to carry
on its business as now being conducted, and (c) is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
4.1.3 GOOD STANDING - LIMITED LIABILITY COMPANY.
Monsey Arizona (a) is a limited liability company duly organized,
and existing under the laws of the state in which it is organized, (b) has the
limited liability company power to own its property and to carry on its business
as now being conducted and is duly
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qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary.
4.1.4 POWER AND AUTHORITY.
(a) Each corporate Borrower has full corporate power and
authority to execute and deliver this Agreement, the other Financing Documents
to which it is a party, to make the borrowings under this Agreement, and to
incur and perform the Obligations whether under this Agreement, the other
Financing Documents or otherwise, all of which have been duly authorized by all
proper and necessary corporate action.
(b) Monsey Arizona has full limited liability company power
and authority to execute and deliver this Agreement and the other Financing
Documents to which it is a party, to make the borrowings under this Agreement,
and to incur and perform the Obligations whether under this Agreement, the other
Financing Documents or otherwise, all of which have been duly authorized by all
proper and necessary limited liability company action.
(c) No consent or approval of shareholders or any creditors
of any Borrower, and no consent, approval, filing or registration with or notice
to any Governmental Authority on the part of any Borrower, is required as a
condition to the execution, delivery, validity or enforceability of this
Agreement, the other Financing Documents or the performance by the Borrower of
the Obligations
4.1.5 BINDING AGREEMENTS.
This Agreement and the other Financing Documents executed and
delivered by the Borrowers have been properly executed and delivered and
constitute the valid and legally binding obligations of the Borrowers and are
fully enforceable against each of the Borrowers in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applications affecting the rights and remedies of
creditors and secured parties, and general principles of equity regardless of
whether applied in a proceeding in equity or at law.
4.1.6 NO CONFLICTS.
Neither the execution, delivery and performance of the terms of
this Agreement or of any of the other Financing Documents executed and delivered
by any Borrower nor the consummation of the transactions contemplated by this
Agreement will conflict with, violate or be prevented by (a) any corporate
Borrower's charter or bylaws or Monsey Arizona's articles of organization or
operating agreement, (b) with immaterial exceptions and those exceptions set
forth in Schedule 4.1.6, any existing mortgage, indenture, contract or agreement
binding on any Borrower or affecting its property, or (c) any Laws, the
violation would have a Material Adverse Effect on any Borrower.
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4.1.7 NO DEFAULTS, VIOLATIONS.
(a) No Default or Event of Default has occurred and is
continuing.
(b) Except as previously disclosed to the Lender in
writing, none of the Borrowers is in default under or with respect to any
obligation under any existing mortgage, indenture, contract or agreement binding
on it or affecting its property in any respect the loss of which or damages
because of which would be materially adverse to the business, operations,
property or financial condition of any Borrower, or which would materially
adversely affect the ability of the Borrowers taken as a whole to perform its
obligations under this Agreement or the other Financing Documents, to which that
Borrower is a party.
4.1.8 COMPLIANCE WITH LAWS.
None of the Borrowers is in violation of any applicable Laws
(including, without limitation, any Laws relating to employment practices, to
environmental, occupational and health standards and controls) or order, writ,
injunction, decree or demand of any court, arbitrator, or any Governmental
Authority affecting any Borrower or any of its properties, the violation of
which, considered in the aggregate, could materially adversely affect the
business, operations or properties of any Borrower and/or their Subsidiaries.
4.1.9 MARGIN STOCK.
None of the proceeds of the Loans will be used, directly or
indirectly, by any Borrower or any of their Subsidiaries for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System or for any other purpose which might
make the transactions contemplated in this Agreement a "purpose credit" within
the meaning of said Regulation G or Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.
4.1.10 INVESTMENT COMPANY ACT; MARGIN SECURITIES.
None of the Borrowers nor any of their Subsidiaries are an
investment company within the meaning of the Investment Company Act of 1940, as
amended, nor is it, directly or indirectly, controlled by or acting on behalf of
any Person which is an investment company within the meaning of said Act. None
of the Borrowers nor any of their Subsidiaries are engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying "margin security" within the meaning of
Regulation G
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(12 CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR
Part 221), of the Board of Governors of the Federal Reserve System.
4.1.11 LITIGATION.
Except as otherwise disclosed to the Lender on Schedule 4.1.11
attached to and made a part of this Agreement, there are no proceedings, actions
or investigations pending or, so far as each Borrower knows, threatened before
or by any court, arbitrator any Governmental Authority which, in any one case or
in the aggregate, if determined adversely to the interests of any Borrower,
would have a material adverse effect on the business, properties, condition
(financial or otherwise) or operations, present or prospective, of the Borrowers
taken as a whole.
4.1.12 FINANCIAL CONDITION.
The financial statements of the Company dated December 31, 1997,
and the consolidated financial statements of Monsey Products, respectively, are
complete and correct and fairly present the financial position of the applicable
Borrowers and their Subsidiaries and the results of their operations and
transactions in their surplus accounts as of the date and for the period
referred to and have been prepared in accordance with GAAP (except for the
absence of normal year end adjustments and accruals) applied on a consistent
basis throughout the period involved. There are no liabilities, direct or
indirect, fixed or contingent, known to any Borrower as of the date of such
financial statements which are required by GAAP to be, but are not, reflected
therein or in the notes thereto. There has been no adverse change in the
financial condition or operations of any Borrower or its Subsidiaries since the
date of such financial statements and to each Borrower's knowledge no such
adverse change is pending or threatened. No Borrower nor any Subsidiary has
guaranteed the obligations of, or made any investment in or advances to, any
Person, except as disclosed in such financial statements and except for the
guaranty of the Senior Notes by the Monsey Bakor Group.
4.1.13 FULL DISCLOSURE.
The financial statements referred to in Section 4.1.12 (Financial
Condition) of this Agreement, the Financing Documents (including, without
limitation, this Agreement) to be executed by the Borrowers, and the statements,
reports or certificates furnished by any Borrower in connection with the
Financing Documents (a) do not contain any untrue statement of a material fact
and (b) when taken in their entirety, do not omit any material fact necessary to
make the statements contained therein not misleading. There is no fact known to
any Borrower which that Borrower has not disclosed to the Lender in writing
prior to the date of this Agreement with respect to the transactions
contemplated by the Financing Documents which materially and adversely affects
or in the future could, in the reasonable opinion of the respective Borrower
materially adversely affect the condition, financial or otherwise, results of
operations, business, or assets of any Borrower or of any Subsidiary.
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4.1.14 INDEBTEDNESS FOR BORROWED MONEY.
Except for the Obligations, the Obligations under the Senior
Notes, the Indenture and the Senior Notes Documents and except as set forth in
Schedule 4.1.14 attached to and made a part of this Agreement, the Borrowers
have no Indebtedness for Borrowed Money. The Lender has received a photocopy of
all the promissory notes (including, without limitation, the "Global Note," as
that term is defined in the Indenture) evidencing any Indebtedness for Borrowed
Money set forth in SCHEDULE 4.1.14 and a copy of the Indenture which contains
the guaranty of the Senior Notes by the Monsey Bakor Group, together with any
and all subordination agreements, other agreements, documents, or instruments
securing, evidencing, guarantying or otherwise executed and delivered in
connection therewith.
4.1.15 OFFERING.
The Lender has received true and correct photocopies of the
Offering Memorandum, and each of the Senior Notes Documents, executed, delivered
and/or furnished on or before the Closing Date in connection with the
transactions contemplated by the Senior Notes Documents. Neither the Offering
Memorandum nor any of the Senior Notes Documents has been modified, changed,
supplemented, canceled, amended or otherwise altered or affected, except as
otherwise disclosed to the Lender in writing on or before the Closing Date. The
Offering Transaction has been effected, closed and consummated pursuant to, and
in accordance with, the terms and conditions of the Offering Memorandum and,
assuming the accuracy of the representations and warranties made in the Purchase
Agreement dated April 15, 1998 relating to the Senior Notes by the "Initial
Purchaser" (as defined in that Purchase Agreement), all applicable Laws.
4.1.16 TAXES.
Each of the Borrowers has filed all returns, reports and forms
for Taxes which, to the knowledge of each Borrower, are required to be filed,
and has paid all Taxes as shown on such returns or on any assessment received by
it, to the extent that such Taxes have become due, unless and to the extent only
that such Taxes, assessments and governmental charges are currently contested in
good faith and by appropriate proceedings by a Borrower, such Taxes are not the
subject of any Liens other than Permitted Liens, and adequate reserves therefor
have been established as required under GAAP. All tax liabilities of each
Borrower were as of the date of financial statements referred to in Section
4.1.12 (Financial Condition) above, and are now, adequately provided for on the
books of each Borrower or its Subsidiaries, as appropriate. No tax liability
has been asserted by the Internal Revenue Service or any state or local
authority against any Borrower for Taxes in excess of those already paid.
4.1.17 ERISA.
With respect to any "pension plan" as defined in SECTION 3(2) of
ERISA, which plan is now or previously has been maintained or contributed to by
any Borrower
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and/or by any Commonly Controlled Entity: (a) no "accumulated funding
deficiency" as defined in Code Section 412 or ERISA Section 302 has occurred,
whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred; (c) no termination of any plan subject to Title
IV of ERISA has occurred; (d) no Borrower nor any Commonly Controlled Entity (as
defined under ERISA) has incurred a "complete withdrawal" within the meaning of
ERISA Section 4203 from any Multiemployer Plan; (e) no Borrower nor any Commonly
Controlled Entity has incurred a "partial withdrawal" within the meaning of
ERISA Section 4205 with respect to any Multiemployer Plan; (f) no Multiemployer
Plan to which any Borrower or any Commonly Controlled Entity has an obligation
to contribute is in "reorganization" within the meaning of ERISA Section 4241
nor has notice been received by any Borrower or any Commonly Controlled Entity
that such a Multiemployer Plan will be placed in "reorganization".
4.1.18 TITLE TO PROPERTIES.
Each Borrower has good and marketable title to all of its
properties, including, without limitation, the Collateral and the properties and
assets reflected in the balance sheets described in Section 4.1.12 (Financial
Condition) above, subject to the Permitted Liens. Each Borrower has all such
rights as are necessary to use such property and assets in the ordinary course.
All of such properties, including, without limitation, the Collateral which were
purchased, were purchased for fair consideration and reasonably equivalent value
in the ordinary course of business of both the seller and a Borrower and not, by
way of example only, as part of a bulk sale, except for those bulk sales
described in Schedule 4.1.18 and except bulk sales described on the Collateral
Disclosure List with respect to the Monsey Bakor Group.
4.1.19 CAPITAL EXPENDITURE LOAN EQUIPMENT.
All Capital Expenditure Loan Equipment is personalty and is not
and will not be affixed to real estate in such manner as to become a fixture or
part of such real estate. No Capital Expenditure Loan Equipment is held by a
Borrower on a sale on approval basis.
4.1.20 PATENTS, TRADEMARKS, ETC.
Each of the Borrowers owns, possesses, or has the right to use
all necessary Patents, licenses, Trademarks, Copyrights, permits and franchises
to own its properties and to conduct its business as now conducted, without
known conflict with the rights of any other Person. Any and all obligations to
pay royalties or other charges with respect to such properties and assets are
properly reflected on the financial statements described in Section 4.1.12
(Financial Condition) above.
4.1.21 EMPLOYEE RELATIONS.
Except as disclosed on Schedule 4.1.21 attached hereto and made a
part hereof, (a) neither any Borrower nor any of the Borrowers' employees is
subject to any collective bargaining agreement, (b) no petition for
certification or union election is pending with respect to
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the employees of any Borrower and no union or collective bargaining unit has
sought such certification or recognition with respect to the employees of any
Borrower, (c) there are no strikes, slowdowns, work stoppages or controversies
pending or, to the best knowledge of each Borrower after due inquiry, threatened
between any Borrower and its employees, and (d) no Borrower is subject to an
employment contract, severance agreement, commission contract, consulting
agreement or bonus agreement. Hours worked and payments made to the employees
of the Borrowers have not been in violation of the Fair Labor Standards Act or
any other applicable law dealing with such matters. All payments due from any
Borrower or for which any claim may be made against any Borrower, on account of
wages and employee and retiree health and welfare insurance and other benefits
have been paid or accrued as a liability on its books. The consummation of the
transactions contemplated by the Financing Agreement or any of the other
Financing Documents will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which any Borrower is a party or by which it is bound.
4.1.22 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS
CONTAMINATION.
To the best of each Borrower's knowledge, except as set forth in
the reports described in Schedule 4.1.22 to this Agreement (a) no Hazardous
Materials are located on any real property owned, controlled or operated by any
Borrower or for which any Borrower is, or is claimed to be, responsible, except
for reasonable quantities of necessary supplies for use and sale by a Borrower
in the ordinary course of its current line of business and stored, used and
disposed in accordance with applicable Laws; and (b) no property owned,
controlled or operated by any Borrower or for which any Borrower has, or is
claimed to have, responsibility has ever been used as a manufacturing or storage
site for Hazardous Materials (except those manufactured by any Borrower in the
ordinary course of its business), or dump site for Hazardous Materials nor is
affected by Hazardous Materials Contamination at any other property.
4.1.23 PERFECTION AND PRIORITY OF COLLATERAL.
The Lender has, or upon execution and recording of this Agreement
and the Security Documents will have, and will continue to have as security for
the Obligations, a valid and perfected Lien on and security interest in all
Collateral, free of all other Liens, claims and rights of third parties
whatsoever except Permitted Liens, including, without limitation, those
described on Schedule 4.1.23.
4.1.24 PLACES OF BUSINESS AND LOCATION OF COLLATERAL.
The information contained in the Collateral Disclosure List is
complete and correct. The Collateral Disclosure List completely and accurately
identifies the address of (a) the chief executive office of each Borrower, (b)
any and each other place of business of the Borrowers, (c) the location of all
books and records pertaining to the Collateral, and (d) each location, other
than the foregoing, where any of the Collateral is located.
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4.1.25 BUSINESS NAMES AND ADDRESSES.
Except as set forth in the Collateral Disclosure List, in the
twelve (12) years preceding the date hereof, no Borrower has changed its name,
identity or corporate structure, has conducted business under any name other
than its current name, and has conducted its business in any jurisdiction other
than those disclosed on the Collateral Disclosure List provided, however, that
the representations and warranties in this Section 4.1.25 are made to the best
of the Borrowers' knowledge with respect to such changes and such business
conduct pertaining to entities included in the Monsey Bakor Group and taking
place prior to the date of this Agreement.
4.1.26 INVENTORY.
The Inventory of each Borrower is (a) of good and merchantable
quality, free from defects, except to the extent reserved on a Borrower's
financial statements and in accordance with GAAP, (b) not stored with a bailee,
warehouseman, carrier, or similar party, other than a warehouseman or bailee who
is identified on the Collateral Disclosure List or, after the date of this
Agreement, in a notice from a Borrower to the Lender, and other than a carrier
or similar party in the ordinary course of business and delivery, (c) not on
consignment, sale on approval, or sale or return, and (d) located at the places
of business set forth on the Collateral Disclosure List. No goods offered for
sale by a Borrower are consigned to or held on sale or return terms by a
Borrower.
4.1.27 ACCOUNTS.
With respect to all Accounts and to the best of each Borrower's
knowledge (a) they are genuine, and in all respects what they purport to be, and
are not evidenced by a judgment, an instrument, or chattel Paper (unless such
judgment has been assigned and such instrument or chattel paper has been
endorsed and delivered to the Lender); (b) they represent bona fide transactions
completed in accordance with the terms and provisions contained in the invoices,
purchase orders and other contracts relating thereto, and the underlying
transaction therefor is in accordance with all applicable Laws; (c) the amounts
shown on any Borrower's books and records, with respect thereto are actually and
absolutely owing to their respective Borrower and are not contingent or subject
to reduction for any reason other than regular discounts, credits or adjustments
allowed by the respective Borrower in the ordinary course of its business; (d)
no payments have been or shall be made thereon except payments turned over to
the Lender by a Borrower; (e) all Account Debtors thereon have the capacity to
contract; and (f) the goods sold, leased or transferred or the services
furnished giving rise thereto are not subject to any Liens except the security
interest granted to the Lender by this Agreement and Permitted Liens.
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4.1.28 COMPLIANCE WITH ELIGIBILITY STANDARDS.
Each Account, Life Insurance Policy and all Inventory included in
the calculation of the Borrowing Base does and will at all times meet and comply
with all of the standards for Eligible Receivables, Eligible Foreign
Receivables, Eligible Life Insurance Policies and Eligible Inventory. With
respect to those Accounts which the Lender has deemed Eligible Receivables and
Eligible Foreign Receivables (a) there are no facts, events or occurrences known
to any Borrower which in any way impair the validity, collectibility or
enforceability thereof or tend to reduce the amount payable thereunder; and (b)
there are no proceedings or actions known to any Borrower which are threatened
or pending against any Account Debtor which might result in any material adverse
change in the Borrowing Base.
Section 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES.
(a) All representations and warranties contained in or made under or
in connection with this Agreement and the other Financing Documents shall
survive the Closing Date, the making of any advance under the Loans and
extension of credit made hereunder, and the incurring of any other Obligations
and shall be deemed to have been made at the time of each request for, and again
at the time the making of, each advance under the Loans or the issuance of each
Letter of Credit, except that the representations and warranties which relate to
financial statements which are referred to in Section 4.1.11, shall also be
deemed to cover financial statements furnished from time to time to the Lender
pursuant to Section 6.1.1 (Financial Statements) of this Agreement.
(b) Immediately prior to the execution and delivery of this
Agreement, the Company acquired the stock of Monsey Products. In recognition
thereof, the Lender and the Company agree that, notwithstanding any other
provision of this Agreement, the representations and warranties contained in
made under or in connection with this Agreement and the other Financing
Documents (i) are made, and through December 31, 1998 shall be deemed to be
made, to the best of the Company's knowledge with respect to the Monsey Bakor
Group and its Subsidiaries and (ii) as written herein or therein with respect to
the Company at all times and, after December 31, 1998, with respect to the
Monsey Bakor Group and its Subsidiaries.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 CONDITIONS TO THE INITIAL ADVANCE AND INITIAL LETTER OF
CREDIT.
The making of the initial advance under the Loans and the issuance of the
initial Letter of Credit is subject to the fulfillment on or before the Closing
Date of the following conditions precedent in a manner satisfactory in form and
substance to the Lender:
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5.1.1 ORGANIZATIONAL DOCUMENTS - CORPORATE BORROWERS.
The Lender shall have received:
(a) a certificate of good standing for each Borrower
certified by the Secretary of State, or other appropriate Governmental
Authority, of the state of incorporation for each respective Borrower;
(b) a certificate of qualification to do business for each
Borrower certified by the Secretary of State or other Governmental Authority of
each state in which such Borrower conducts business;
(c) a certificate dated as of the Closing Date by the
Secretary or an Assistant Secretary of each Borrower covering:
(i) true and complete copies of each Borrower's
corporate charter, bylaws, and all amendments thereto;
(ii) true and complete copies of the resolutions
of each Borrower's Board of Directors authorizing (a) the
execution, delivery and performance of the Financing Documents to
which such Borrower is a party, (b) the borrowings by such
Borrower hereunder, and (c) the granting of the Liens
contemplated by this Agreement and the Financing Documents to
which such Borrower is a party;
(iii) the incumbency, authority and signatures of
the officers of each Borrower authorized to sign this Agreement
and the other Financing Documents to which such Borrower is a
party; and
(iv) the identity of each Borrower's current
directors, common stock holders and other equity holders, as well
as their respective percentage ownership interests.
5.1.2 ORGANIZATIONAL DOCUMENTS - MONSEY ARIZONA.
In addition, the Lender shall have received a certificate of the
managing member of Monsey Arizona as of the date of this Agreement:
(a) stating that attached to the certificate is a true and
complete copy of Monsey Arizona's articles of organization and operating
agreement furnished to the Lender on the date of this Agreement and that those
documents have not been the subject of any amendments, modifications,
restatements, substitutions, extensions or renewals thereto;
(b) stating that attached to the certificate is a
resolution approved by all members of Monsey Arizona authorizing the execution
and delivery of this Agreement,
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the joinder in the other Financing Documents, and the performance of Monsey
Arizona's obligations under the Financing Documents;
(c) setting forth the identity and signatures of the
representatives of the managing member then authorized to sign the Financing
Documents to which Monsey Arizona is a party;
(d) authorizing the Company to request and direct advances
under the Financing Agreement on behalf of Monsey Arizona and otherwise to act
on behalf of Monsey Arizona as set forth in | of this Agreement; and
(e) identifying of Monsey Arizona's members.
The Lender shall have also received with respect to the corporate
managing member of Monsey Arizona a certificate of the corporate managing
member's Secretary or Assistant Secretary dated the date of this Agreement
covering:
(a) true and complete copies of the corporate managing
member's corporate charter, bylaws, and all amendments thereto;
(b) true and complete copies of the resolutions of its
Board of Directors authorizing the execution and delivery of the Financing
Documents by corporate managing member on behalf of Monsey Arizona;
(c) the incumbency, authority and signatures of the
officers of the corporate managing member authorized to sign this Agreement and
the other Financing Documents on behalf of Monsey Arizona; and
(d) the identity of the corporate managing member's current
directors, common stock holders and other equity holders, as well as their
respective percentage ownership interests.
5.1.3 OPINION OF BORROWER'S COUNSEL.
The Lender shall have received the favorable opinion of counsel
for the Borrowers addressed to the Lender.
5.1.4 CONSENTS, LICENSES, APPROVALS, ETC.
The Lender shall have received copies of all consents, licenses
and approvals, required in connection with the execution, delivery, performance,
validity and enforceability of the Financing Documents, the Senior Notes
Documents, and such consents, licenses and approvals shall be in full force and
effect.
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5.1.5 NOTES.
The Lender shall have received the Capital Expenditure Note and
the Revolving Credit Note, each conforming to the requirements hereof and
executed by a Responsible Officer of each Borrower and attested by a duly
authorized representative of each Borrower.
5.1.6 FINANCING DOCUMENTS AND COLLATERAL.
Each Borrower shall have executed and delivered the Financing
Documents to be executed by it, and shall have delivered original chattel paper,
instruments, securities, and related Collateral and all opinions, title
insurance, and other documents contemplated by Article 3 hereof.
5.1.7 OTHER FINANCING DOCUMENTS.
In addition to the Financing Documents to be delivered by the
Borrower, the Lender shall have received the Financing Documents duly executed
and delivered by Persons other than the Borrowers.
5.1.8 OTHER DOCUMENTS, ETC.
The Lender shall have received such other certificates, opinions,
documents and instruments confirmatory of or otherwise relating to the
transactions contemplated hereby as may have been reasonably requested by the
Lender.
5.1.9 PAYMENT OF FEES.
The Lender shall have received payment of any Fees due on or
before the Closing Date.
5.1.10 COLLATERAL DISCLOSURE LIST.
The Company shall have delivered the Collateral Disclosure List
required under the provisions of Section 3.4 (Collateral Disclosure List) hereof
duly executed by a Responsible Officer of the Company.
5.1.11 RECORDINGS AND FILINGS.
Each Borrower shall have: (a) executed and delivered all
Financing Documents (including, without limitation, statements) required by the
Lender to be filed, registered or recorded in order to create, in favor of the
Lender, a perfected Lien in the Collateral (subject only to the Permitted Liens)
in form and in sufficient number for filing, registration, and recording in each
office in each jurisdiction in which such filings, registrations and
recordations are required, and (b) delivered such evidence as the Lender require
that all necessary filing fees
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and all recording and other similar fees, and all Taxes and other expenses
related to such filings, registrations and recordings will be or have been paid
in full.
5.1.12 INSURANCE CERTIFICATE.
The Lender shall have received an insurance certificate in
accordance with the provisions of Section 6.1.8 (Insurance) of this Agreement.
5.1.13 FIELD EXAMINATION.
The Lender shall have completed a field examination and audit of
the Borrowers' business, operations and income, the results of which field
examination and audit shall be in all respects acceptable to the Lender in its
sole and absolute discretion and shall include reference discussions with key
customers and vendors.
5.1.14 OFFERING.
The Lender shall have received a certificate signed by a
Responsible Officer of the Company, certifying to the Lender that the Company
(a) has received the proceeds from the sale of the Senior Notes, in accordance
with, and pursuant to, the terms and conditions of the Offering Memorandum and
the Senior Notes Documents, and has applied the same to such purposes as has
been previously disclosed to, and approved by, the Lender, and (b) has delivered
to the Lender true and correct photocopies of all Senior Notes Documents.
5.1.15 LIFE INSURANCE.
The Lender shall have received the original Life Insurance
Policies, together with the fully executed duplicate originals of the
Assignments of Life Insurance.
Section 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The making of all advances under the Loans and the issuance of all Letters
of Credit is subject to the fulfillment of the following conditions precedent in
a manner satisfactory in form and substance to the Lender:
5.2.1 COMPLIANCE.
Each Borrower shall have complied and shall then be in compliance
with all terms, covenants, conditions and provisions of this Agreement and the
other Financing Documents which are binding upon it.
5.2.2 BORROWING BASE.
The Borrowers shall have furnished all Borrowing Base Reports
required by Section 2.1.4 (Borrowing Base Report) of this Agreement, there shall
exist no Borrowing
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Base Deficiency, and as evidence thereof, the Borrowers shall have furnished to
the Lender such reports, schedules, certificates, records and other papers as
may be requested by the Lender, and each Borrower shall be in compliance with
the provisions of Section 2.1.12 of this Agreement both immediately before and
immediately after the making of the advance requested.
5.2.3 DEFAULT.
There shall exist no Event of Default or Default hereunder.
5.2.4 REPRESENTATIONS AND WARRANTIES.
Subject to Section 4.2(b), the representations and warranties of
the Borrowers contained among the provisions of this Agreement shall be true and
with the same effect as though such representations and warranties had been made
at the time of the making of, and of the request for, each advance under the
Loans or the issuance of each Letter of Credit, except that the representations
and warranties which relate to financial statements which are referred to in
Section 4.1.12, shall also be deemed to cover financial statements furnished
from time to time to the Lender pursuant to Section 6.1.1 (Financial Statements)
of this Agreement.
5.2.5 ADVERSE CHANGE.
No adverse change shall have occurred in the condition (financial
or otherwise), operations or business of any Borrower which would, in the good
faith judgment of the Lender, materially impair the ability of any Borrower to
pay or perform any of the Obligations.
5.2.6 LEGAL MATTERS.
All legal documents incident to each advance under the Loans and
each of the Letters of Credit shall be reasonably satisfactory to counsel for
the Lender.
ARTICLE VI
COVENANTS OF THE BORROWER
Section 6.1 AFFIRMATIVE COVENANTS.
So long as any of the Obligations or the Commitment shall be outstanding
hereunder, the Borrower agrees with the Lender as follows:
6.1.1 FINANCIAL STATEMENTS.
The Borrowers shall furnish to the Lender:
(a) ANNUAL STATEMENTS AND CERTIFICATES. The Company shall
furnish to the Lender as soon as available, but in no event more than one
hundred twenty (120)
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days after the close of each fiscal year of the Company, (i) a copy of the
annual financial statement in reasonable detail satisfactory to the Lender
relating to the Company, prepared in accordance with GAAP and examined and
certified by independent certified public accountants reasonably satisfactory to
the Lender, which financial statement shall include a consolidated and
consolidating balance sheet of the Company and its Subsidiaries as of the end of
such fiscal year and consolidated and consolidating statements of income, cash
flows and changes in shareholders equity of the Company and its Subsidiaries for
such fiscal year, (ii) a Compliance Certificate, in substantially the form
attached to this Agreement as EXHIBIT C, as may be amended by the Lender from
time to time, containing a detailed computation of each financial covenant which
is applicable for the period reported, a certification that no material change
has occurred to the information contained in the Collateral Disclosure List
(except as set forth in a schedule attached to the certification), and a cash
flow projection report, each prepared by a Responsible Officer of the Company in
a format acceptable to the Lender, and (iii) a management letter in the form
prepared by the Company's independent certified public accountants.
(b) ANNUAL OPINION OF ACCOUNTANT. The Company shall
furnish to the Lender as soon as available, but in no event more than one
hundred twenty (120) days after the close of the Company's fiscal years, a
letter or opinion of the accountant who examined and certified the annual
financial statement relating to the Company and its Subsidiaries stating whether
anything in such accountant's examination has revealed the occurrence of a
Default or an Event of Default hereunder, and, if so, stating the facts with
respect thereto.
(c) QUARTERLY STATEMENTS AND CERTIFICATES. The Company
shall furnish to the Lender as soon as available, but in no event more than
forty-five (45) days after the close of the Company's first three fiscal
quarters, consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the close of such period, consolidated and consolidating
income, cash flows and changes in shareholders equity statements for such
period, projected cash flow on a month to month basis and projected income
statements, and a Compliance Certificate, in substantially the form attached to
this Agreement as EXHIBIT C, containing a detailed computation of each financial
covenant which is applicable for the period reported, a certification that no
change has occurred to the information contained in the Collateral Disclosure
List (except as set forth any schedule attached to the certification), and a
cash flow projection report, all as prepared and certified by a Responsible
Officer of the Company and accompanied by a certificate of that officer stating
whether any event has occurred which constitutes a Default or an Event of
Default hereunder, and, if so, stating the facts with respect thereto.
(d) MONTHLY STATEMENTS AND CERTIFICATES. The Company shall
furnish to the Lender as soon as available, but in no event more than the later
of thirty (30) days after the close of each month or the last day of the first
month after the end of each month, consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the close of such period, consolidated
and consolidating income, cash flows and changes in shareholders equity
statements for such period, projected cash flow on a month to month basis
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and projected income statements, and a detailed computation of each financial
covenant in this Agreement which is applicable for the period reported, all as
prepared and certified by a Responsible Officer of the Company and accompanied
by a certificate of that officer stating whether any event has occurred which
constitutes a Default or an Event of Default hereunder, and, if so, stating the
facts with respect thereto.
(e) LIMITED GRACE PERIOD. Notwithstanding the provisions
of subsections (d) above, in the event the Company fails to furnish any of the
financial statements, certificates or other requirements of those subsections
because the same is not available before the later of thirty (30) days after the
close of the applicable period or the last day of the first month after the end
of applicable period, no Default or Event of Default shall be deemed to exist
unless such failure continues uncured for a period of five (5) days or more,
there have been more than a total of two (2) such failures in any twelve (12)
month period.
(f) MONTHLY REPORTS. The Borrowers shall furnish to the
Lender within fifteen (15) days after the end of each fiscal month, a report
containing the following information with respect to the Borrowers:
(i) a detailed aging schedule of all accounts receivable
by Account Debtor, in such detail, and accompanied by such supporting
information, as the Lender may from time to time reasonably request;
(ii) a detailed aging of all accounts payable by supplier,
in such detail, and accompanied by such supporting information, as the
Lender may from time to time reasonably request; and
(iii) a listing of all Inventory by component, category and
location, in such detail, and accompanied by such supporting
information as the Lender may from time to time reasonably request.
(g) ANNUAL BUDGET AND PROJECTIONS. The Borrowers shall
furnish to the Lender as soon as available, but in no event later than the 10th
day before the end of each fiscal year with respect to the Borrowers (i) a
consolidated and consolidating budget and pro forma financial statements on an
annual basis for the following fiscal year, and (ii) five year projections. The
Borrowers shall also furnish to the Lender as soon as available, but in no event
later than January 15th of each fiscal year with respect to the Borrowers a
consolidated and consolidating budget and pro forma financial statements on a
month-to-month basis for the current fiscal year.
(h) CERTAIN INFORMATION FURNISHED TO TRUSTEE. The
Borrowers will furnish to the Lender, at the same time sent to the Trustee, at
least one (1) copy of all financial statements, reports, and other information
sent by the Borrowers to the holders of the Senior Notes and the Trustee
pursuant to Section 4.08 of the Indenture as in effect on the Closing Date.
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(i) OTHER BORROWER INFORMATION. The Borrower shall furnish
promptly upon the Lender's request from time to time, (i) such additional
information, reports or statements as the Borrower may prepare from time to time
in connection with the Borrower, and (ii) tax returns (whether or not
consolidated) filed with respect to each Borrower's income and properties.
(j) ADDITIONAL REPORTS AND INFORMATION. The Borrowers
shall furnish to the Lender promptly, such additional information, reports or
statements as the Lender may from time to time reasonably request.
6.1.2 REPORTS TO SEC AND TO STOCKHOLDERS.
The Company will furnish to the Lender, promptly upon the filing
or making thereof, at least one (1) copy of all financial statements, reports,
notices and proxy statements sent by the Company to its stockholders, and of all
regular and other reports filed by the Borrowers with any securities exchange or
with the Securities and Exchange Commission.
6.1.3 RECORDKEEPING, RIGHTS OF INSPECTION, FIELD EXAMINATION,
ETC.
The Borrowers shall, and shall cause each of their Subsidiaries
to, maintain (i) a standard system of accounting in accordance with GAAP, and
(ii) proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its properties,
business and activities.
(a) The Borrowers shall, and shall cause each of their
Subsidiaries to, permit authorized representatives of the Lender to visit and
inspect the properties of the Borrowers, to review, audit, check and inspect the
Collateral at any time with or without notice, to review, audit, check and
inspect the Borrowers' other books of record at any time with or without notice
and to make abstracts and photocopies thereof, and to discuss the affairs,
finances and accounts of the Borrowers and/or any Subsidiaries, with the
officers, directors, employees and other representatives of the Borrower and/or
any Subsidiaries and their respective accountants, all at such times during
normal business hours and other reasonable times and as often as the Lender may
reasonably request.
(b) The Borrowers hereby irrevocably authorize and direct
all accountants and auditors employed by any Borrower and/or any Subsidiaries at
any time prior to the repayment in full of the Obligations to exhibit and
deliver to the Lender copies of any and all of the financial statements, trial
balances, management letters, or other accounting records of any nature of any
Borrower and/or any Subsidiaries in the accountant's or auditor's possession,
and to disclose to the Lender any information they may have concerning the
financial status and business operations of any Borrower and its Subsidiaries.
Further, the Borrowers hereby authorizes all Governmental Authorities to furnish
to the Lender copies of reports or examinations relating to any Borrower and/or
any Subsidiaries, whether made by a Borrower or otherwise.
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(c) Any and all costs and expenses incurred by, or on
behalf of, the Lender in connection with the conduct of any of the foregoing
shall be part of the Enforcement Costs and shall be payable to the Lender upon
demand. The Borrowers acknowledge and agree that such expenses may include, but
shall not be limited to, any and all out-of-pocket costs and expenses of the
Lender's employees and agents in, and when, travelling to the Borrowers'
facilities. Notwithstanding the other provisions of this subsection (d), the
Lender agrees that prior to an Event of Default, the Borrowers shall not be
obligated to pay the Lender's Enforcement Costs under this Section 6.1.3.
6.1.4 EXISTENCE.
(a) Each corporate Borrower shall maintain its corporate
existence in good standing in the jurisdiction in which it is incorporated and
in each other jurisdiction where it is required to register or qualify to do
business if the failure to do so in such other jurisdiction would have a
material adverse effect on the ability of the Borrower to perform the
Obligations, the conduct of the Borrowers' operations, the Borrowers' financial
condition, or the value of, or the ability of the Lender to realize upon, the
Collateral.
(b) Monsey Arizona shall maintain its limited liability
company existence in good standing in the jurisdiction in which it is organized
and in each other jurisdiction where it is required to register or qualify to do
business if the failure to do so in such other jurisdiction would have a
material adverse effect on the ability of the Monsey Arizona to perform the
Obligations, the conduct of Monsey Arizona's operations, Monsey Arizona's
financial condition, or the value of, or the ability of the Lender to realize
upon, the Collateral.
6.1.5 COMPLIANCE WITH LAWS.
Each Borrower shall comply with all applicable Laws and observe
the valid requirements of Governmental Authorities, the noncompliance with or
the nonobservance of which would have a material adverse effect on the ability
of the Borrowers taken as a whole to perform the Obligations, the conduct of the
Borrowers' operations taken as a whole, the Borrowers' financial condition taken
as whole, or the value of, or the ability of the Lender to realize upon, the
Collateral (with immaterial exceptions).
6.1.6 PRESERVATION OF PROPERTIES.
Each Borrower will (a) maintain, preserve, protect and keep its
properties, whether owned or leased, in good operating condition, working order
and repair (ordinary wear and tear excepted), and from time to time will make
all proper repairs, maintenance, replacements, additions and improvements
thereto needed to maintain such properties in good operating condition, working
order and repair, and (b) do or cause to be done all things necessary to
preserve and to keep in full force and effect its material franchises, leases of
real and personal property, trade names, Patents, Trademarks, Copyrights and
permits which are necessary for the orderly continuance of its business.
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6.1.7 LINE OF BUSINESS.
The Borrowers will continue to engage substantially only in the
business of the manufacturing and distribution of construction products
including asphalt-based and polyurethane foam materials, industrial emulsions
and roofing systems.
6.1.8 INSURANCE.
(a) Each Borrower will at all times maintain with A-or
better rated insurance companies such insurance as is required by applicable
Laws and such other insurance, all in such amounts not less than the Lender
shall reasonably determine from time to time, of such types and against such
risks, hazards, liabilities, casualties and contingencies as are usually insured
against in the same geographic areas by business entities engaged in the same or
similar business. Without limiting the generality of the foregoing, each
Borrower will keep adequately insured all of its property against loss or damage
resulting from fire or other risks insured against by extended coverage and
maintain public liability insurance against claims for personal injury, death or
property damage occurring upon, in or about any properties occupied or
controlled by it, or arising in any manner out of the businesses carried on by
it.
(b) Without implying any limitation on the provisions of
subsection (a), each Borrower will maintain hazard insurance with fire and
extended coverage and naming the Lender as an additional insured with loss
payable to the Lender as its respective interest may appear on the Capital
Expenditure Loan Equipment and the Inventory in an amount at least equal to the
lesser amount of the outstanding principal amount of the Obligations or the fair
market value of the Capital Expenditure Loan Equipment and the Inventory (but in
any event sufficient to avoid any co-insurance obligations) and with a specific
endorsement to each such insurance policy pursuant to which the insurer agrees
to give the Lender at least thirty (30) days written notice before any
alteration or termination of such insurance policy and that no act or default of
any Borrower shall affect the right of the Lender to recover under such policy
in the event of loss or damage.
(c) Each Borrower shall deliver to the Lender on the
Closing Date (and thereafter on each date there is a material change in the
insurance coverage) a certificate of a Responsible Officer of the respective
Borrower containing a detailed list of the insurance then in effect and stating
the names of the insurance companies, the types, the amounts and rates of the
insurance, dates of the expiration thereof and the properties and risks covered
thereby. Within thirty (30) days after notice in writing from the Lender, the
respective Borrower will obtain such additional insurance as the Lender may
reasonably request; provided, however, (i) the Lender may not require insurance
which is not usually insured against in the same geographic areas by business
entities engaged in the same or similar business, and (ii) the Lender has
reviewed the respective Borrower's current insurance and has determined that it
is reasonable both as to scope and levels of coverage on the date of this
Agreement.
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6.1.9 TAXES.
Except to the extent that the validity or amount thereof is being
contested in good faith and by appropriate proceedings, each Borrower will pay
and discharge all Taxes prior to the date when any interest or penalty would
accrue for the nonpayment thereof. The Borrowers shall furnish to the Lender at
such times as the Lender may require proof satisfactory to the Lender of the
making of payments or deposits required by applicable Laws including, without
limitation, payments or deposits with respect to amounts withheld by any
Borrower from wages and salaries of employees and amounts contributed by any
Borrower on account of federal and other income or wage taxes and amounts due
under the Federal Insurance Contributions Act, as amended.
6.1.10 ERISA.
Each Borrower will, and will cause each of its Subsidiaries and
Affiliates to, comply with the funding requirements of ERISA with respect to
employee pension benefit plans for its respective employees. The Borrowers will
not permit with respect to any employee benefit plan or plans covered by Title
IV of ERISA (a) any prohibited transaction or transactions under ERISA or the
Internal Revenue Code, which results, or may result, in any material liability
of any Borrower and/or any Subsidiary and/or Affiliate, or (b) any Reportable
Event if, upon termination of the plan or plans with respect to which one or
more such Reportable Events shall have occurred, there is or would be any
material liability of any Borrower and/or any Subsidiary and/or Affiliate to the
PBGC. Upon the Lender's request, the Borrowers will deliver to the Lender a
copy of the most recent actuarial report, financial statements and annual report
completed with respect to any "defined benefit plan", as defined in ERISA.
6.1.11 NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS.
The Borrowers shall promptly notify the Lender upon obtaining
knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or overtly threatened against
any Borrower or its Subsidiaries and of the entry of any judgment or Lien (other
than any Permitted Liens) against any of the assets or properties of any
Borrower or any Subsidiary where such litigation could reasonably be expected to
result in judgments or Liens against such Borrower or any of its Subsidiaries in
excess of Five Hundred Thousand Dollars ($500,000), and such judgments or Liens
are not covered by insurance;
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(d) any event, development or circumstance whereby the
financial statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational results
of any Borrower or any Subsidiary;
(e) any judicial, administrative or arbitral proceeding
pending against any Borrower and any judicial or administrative proceeding known
by any Borrower to be threatened against it which could reasonably be expected
to affect materially and adversely the Borrowers' financial condition or
operations (present or prospective) taken as a whole;
(f) the receipt by any Borrower of any notice, claim or
demand from any Governmental Authority which alleges that any Borrower is in
violation of any of the terms of, or has failed to comply with any applicable
Laws regulating its operation and business, including, but not limited to, the
Occupational Safety and Health Act and the Environmental Protection Act if such
violation or failure would result in a Material Adverse Effect on the Borrowers
taken as a whole; and
(g) any other development in the business or affairs of any
Borrower which could reasonably be expected to have a Material Adverse Effect on
the Borrowers taken as a whole;
in each case describing in detail satisfactory to the Lender the nature thereof
and the action any Borrower proposes to take with respect thereto.
6.1.12 HAZARDOUS MATERIALS; CONTAMINATION.
The Borrowers agree to:
(a) give notice to the Lender immediately upon any
Borrower's acquiring knowledge of the presence of any Hazardous Materials and of
any Hazardous Materials Contamination on any property owned or controlled by any
Borrower or for which any Borrower is, or is claimed to be, responsible
(provided that such notice shall not be required for Hazardous Materials placed
or stored on such property in accordance with applicable Laws in the ordinary
course (including, without limitation, quantity) of a Borrower's line of
business expressly described in this Agreement) or of any Hazardous Materials
Contamination, with a full description thereof;
(b) promptly comply with any Laws requiring any Borrower to
remove, treat or dispose of Hazardous Materials or Hazardous Materials
Contamination and provide the Lender with satisfactory evidence of such
compliance;
(c) to the extent actions any Governmental Authority
requires any Borrower to take an action described in Section 6.1.12(b), provide
the Lender, within thirty (30) days after a demand by the Lender, with a bond,
letter of credit or similar financial assurance evidencing to the Lender's
satisfaction that the necessary funds are available to pay the cost of
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such removal, treatment, and disposal of such Hazardous Materials or Hazardous
Materials Contamination and discharging any Lien which may be established as a
result thereof on any property owned or controlled by any Borrower or for which
any Borrower is, or is claimed to be, responsible; and
(d) as part of the Obligations, defend, indemnify and hold
harmless the Lender and its agents, employees, trustees, successors and assigns
from any and all claims which may now or in the future (whether before or after
the termination of this Agreement) be asserted as a result of the presence of
any Hazardous Materials or of any Hazardous Materials Contamination on any
property owned or controlled by any Borrower or for which any Borrower is, or is
claimed to be, responsible. The Borrowers acknowledge and agree that this
indemnification shall survive the termination of this Agreement and the
Commitment and the payment and performance of all of the other Obligations.
6.1.13 DISCLOSURE OF SIGNIFICANT TRANSACTIONS.
Each of the Borrowers shall deliver to the Lender a written
notice describing in detail each transaction by it involving the purchase, sale,
lease, or other acquisition or loss or casualty to or disposition of an interest
in Fixed or Capital Assets which exceeds Two Hundred Fifty Thousand Dollars
($250,000.00), said notices to be delivered to the Lender within thirty (30)
days of the occurrence of each such transaction.
6.1.14 LIFE INSURANCE POLICIES.
The Company shall at all times maintain the Life Insurance
Policies as Eligible Life Insurance Policies subject to the Assignments of Life
Insurance.
6.1.15 FINANCIAL COVENANTS.
The Borrowers will maintain the financial covenants set forth on
ANNEX 1 which is attached to and made and made a part of this Agreement.
6.1.16 COLLECTION OF ACCOUNTS.
Until such time that the Lender shall notify the Borrowers of the
revocation of such privilege following an Event of Default, the Borrowers and
each of their Subsidiaries shall at its own expense have the privilege for the
account of, and in trust for, the Lender of collecting its Accounts and
receiving in respect thereto all Items of Payment and shall otherwise completely
service all of the Accounts including (a) the billing, posting and maintaining
of complete records applicable thereto, (b) the taking of such action with
respect to the Accounts as the Lender may request or in the absence of such
request, as each of the Borrowers and each of the Subsidiaries may deem
advisable; and (c) the granting, in the ordinary course of business, to any
Account Debtor, any rebate, refund or adjustment to which the Account Debtor may
be lawfully entitled, and may accept, in connection therewith, the return of
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goods, the sale or lease of which shall have given rise to an Account and may
take such other actions relating to the settling of any Account Debtor's claim
as may be commercially reasonable. The Lender may, at its option, at any time
or from time to time after and during the continuance of an Event of Default
hereunder, revoke the collection privilege given in this Agreement to any
Borrower and any one or more of the Subsidiaries by either giving notice of its
assignment of, and lien on the Collateral to the Account Debtors or giving
notice of such revocation to the Borrowers. The Lender shall not have any duty
to, and the Borrowers hereby release the Lender from all claims of loss or
damage caused by the delay or failure to collect or enforce any of the Accounts
or to preserve any rights against any other party with an interest in the
Collateral. The Lender shall be entitled at any time and from time to time to
confirm and verify Accounts.
6.1.17 ASSIGNMENTS OF ACCOUNTS.
Each of the Borrowers will promptly, upon request, execute and
deliver to the Lender written assignments, in form and content acceptable to the
Lender, of specific Accounts or groups of Accounts; provided, however, the Lien
and/or security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the inclusion or exclusion of Accounts within such
assignments. Accounts so assigned shall secure payment of the Obligations and
are not sold to the Lender whether or not any assignment thereof, which is
separate from this Agreement, is in form absolute. Each Borrower agrees that
neither any assignment to the Lender nor any other provision contained in this
Agreement or any of the other Financing Documents shall impose on the Lender any
obligation or liability of any Borrower with respect to that which is assigned
and each Borrower hereby agrees to indemnify the Lender and hold the Lender
harmless from any and all claims, actions, suits, losses, damages, costs,
expenses, fees, obligations and liabilities which may be incurred by or imposed
upon the Lender by virtue of the assignment of and Lien on any Borrower's
rights, title and interest in, to, and under the Collateral.
6.1.18 GOVERNMENT ACCOUNTS.
Each of the Borrowers will promptly notify the Lender if any of
the Accounts arise out of contracts with the United States or with any other
Governmental Authority, provided that no notice shall be required for an
individual contract involving an aggregate purchase of less than $100,000, and
execute any instruments and take any steps required by the Lender in order that
all moneys due and to become due under such contracts shall be assigned to the
Lender and notice thereof given to the Governmental Authority under the Federal
Assignment of Claims Act or any other applicable Laws.
6.1.19 NOTICE OF RETURNED GOODS, ETC.
Each of the Borrowers will promptly notify, and will cause its
Subsidiaries to notify promptly, the Lender of the return, rejection or
repossession of any goods sold or delivered in respect of any Accounts, and of
any claims made in regard thereto to the extent that
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the aggregate purchase price of any such goods in any given calendar month
exceeds in the aggregate One Hundred Thousand Dollars ($100,000.00) in any given
calendar month.
6.1.20 EQUIPMENT.
Each of the Borrowers shall (a) maintain all Capital Expenditure
Loan Equipment as personalty, (b) not affix any Capital Expenditure Loan
Equipment to any real estate in such manner as to become a fixture or part of
such real estate, and (c) shall hold no Capital Expenditure Loan Equipment on a
sale on approval basis. The Borrowers hereby declares their intent that,
notwithstanding the means of attachment, no Capital Expenditure Loan Equipment
hereafter attached to any realty shall be deemed a fixture, which declaration
shall be irrevocable, without the Lender's consent, until all of the Obligations
have been paid in full and all of the Commitments have been terminated.
6.1.21 INVENTORY.
With respect to the Inventory, each Borrower will: (a) as soon
as possible upon demand by the Lender from time to time, prepare and deliver to
the Lender designations of Inventory specifying each Borrower's cost of
Inventory, the retail price thereof, and such other matters and information
relating to the Inventory as the Lender may reasonably request; (b) keep correct
and accurate records itemizing and describing the kind, type, quality and
quantity of Inventory, each Borrower's cost therefor and the selling price
thereof, all of which records shall be available to the officers, employees or
agents of the Lender upon demand for inspection and copying thereof; (c) except
as set forth in SCHEDULE 6.1.21, not store any of its Inventory with a bailee,
warehouseman or similar Person without the Lender's prior written consent, which
consent may be conditioned on, among other things, delivery by the bailee,
warehouseman or similar Person to the Lender of warehouse receipts, in form
acceptable to the Lender, in the name of the Lender evidencing the storage of
Inventory and the Lender's interests therein, provided, however, that, unless an
Event of Default would arise under another provision of this Agreement, a
Borrower may store its Inventory with a warehouseman (i) who is identified on
the Collateral Disclosure List or, after the date of this Agreement, in a notice
from any such Borrower to the Lender given no less than five (5) Business Days
prior to any such storage, and (ii) (A) from whom the Lender has received a
waiver and consent, in form and substance satisfactory to the Lender, to the
extent required by the Lender, or (B) (without implying any limitation on the
Lender's other rights and remedies) with respect to whose potential claims the
Lender has established reserves satisfactory to the Lender; and (d) permit the
Lender and its agents or representatives to inspect and examine the Inventory
and to check and test the same as to quality, quantity, value and condition at
any time or times hereafter during a Borrower's usual business hours or at other
reasonable times. Any Borrower shall be permitted to sell its Inventory in the
ordinary course of its business until the occurrence of a Default or an Event of
Default.
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6.1.22 MAINTENANCE OF THE COLLATERAL.
(a) The Borrowers will not permit anything to be done to the
Collateral which may materially impair the value thereof. (b) The Lender, or an
agent designated by the Lender, shall be permitted to enter the premises of any
Borrower and any Subsidiary and examine, audit and inspect the Collateral at any
reasonable time and from time to time without notice. The Lender agrees to act
in a commercially reasonable manner when inspecting the premises of the
Borrowers and the Subsidiaries and when examining, auditing and/or inspecting
the Collateral. The Lender shall not have any duty to, and the Borrowers hereby
release the Lender from all claims of loss or damage caused by the delay or
failure to collect or enforce any of the Accounts or to, preserve any rights
against any other party with an interest in the Collateral.
6.1.23 DEFENSE OF TITLE AND FURTHER ASSURANCES.
(a) No later June 22, 1998, the Monsey Bakor Group and the
Company (to the extent not previously provided) shall provide to the Lender, a
landlord's waiver from each landlord of each and every business premise leased
by the Borrowers and on which any of the Collateral is located, which landlords'
waivers must be in the form provided by the Lender or shall be otherwise
reasonably acceptable to the Lender and its counsel.
(b) At their expense the Borrowers will defend the title to
the Collateral (and any part thereof), and will immediately execute, acknowledge
and deliver any financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate or other document which
the Lender may require in order to perfect, preserve, maintain, continue,
protect and/or extend the Lien granted to the Lender under this Agreement or
under any of the other Financing Documents and the first priority of that Lien
subject only to the Permitted Liens. In addition to the requirements of
subparagraph (a) above, the Borrowers will from time to time do whatever the
Lender may require by way of obtaining, executing, delivering, and/or filing
financing statements, landlords', mortgagees' or bailees' waivers, notices of
assignment and other notices and amendments and renewals thereof and the
Borrowers will take any and all steps and observe such formalities as the Lender
may require, in order to create and maintain a valid Lien upon, pledge of, or
paramount security interest in, the Collateral, subject to the Permitted Liens.
The Borrowers shall pay to the Lender on demand all taxes, costs and expenses
incurred by the Lender in connection with the preparation, execution, recording
and filing of any such document or instrument. To the extent that the proceeds
of any of the Accounts of any of the Borrower's are expected to become subject
to the control of, or in the possession of, a party other than a Borrower or the
Lender, the respective Borrower shall cause all such parties to execute and
deliver on the Closing Date security documents, financing statements or other
documents as requested by the Lender and as may be necessary to evidence and/or
perfect the security interest of the Lender in those proceeds. The Borrowers
agree that a copy of a fully executed security agreement and/or financing
statement shall be sufficient to satisfy for all purposes the requirements of a
financing statement as set forth in Article of the applicable Uniform
Commercial Code. Each Borrower hereby irrevocably appoints the Lender as
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each such Borrower's attorney-in-fact, with power of substitution, in the name
of the Lender or in the name of each such Borrower or otherwise, for the use and
benefit of the Lender, but at the cost and expense of the Borrowers and without
notice to any Borrower, to execute and deliver any and all of the instruments
and other documents and take any action which the Lender may require pursuant
the foregoing provisions of this Section 6.1.23.
6.1.24 BUSINESS NAMES; LOCATIONS.
Each of the Borrowers will notify the Lender not less than
thirty (30) days prior to (a) any change in the name under which such Borrower
conducts its business, (b) any change of the location of the chief executive
office of such Borrower , and (c) the opening of any new place of business or
the closing of any existing place of business, and any change in the location of
the places where the Collateral, or any part thereof, or the books and records,
or any part thereof, are kept.
6.1.25 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING
REQUIREMENTS.
In the event that any Borrower shall transfer its principal place
of business or the office where it keeps its records pertaining to the
Collateral, upon the Lender's request, the Borrowers will provide to the Lender
a subsequent opinion of counsel as to the filing, recording and other
requirements with which the Borrowers have complied to maintain the Lien and
security interest in favor of the Lender in the Collateral.
6.1.26 USE OF PREMISES AND EQUIPMENT.
The Borrowers agree that until the Obligations are fully paid and
this Agreement has been terminated, the Lender (a) after and during the
continuance of a Default or an Event of Default, may use any of the Borrowers'
owned or leased lifts, hoists, trucks and other facilities or equipment for
handling or removing the Collateral; and (b) shall have, and is hereby granted,
a right of ingress and egress to the places where the Collateral is located, and
may proceed over and through any of the Borrowers' owned or leased property.
6.1.27 PROTECTION OF COLLATERAL.
The Borrowers agree that the Lender may at any time following an
Event of Default take such steps as the Lender deems reasonably necessary to
protect the Lender's interest in, and to preserve the Collateral, including, (a)
the hiring of such security guards or the placing of other security protection
measures as the Lender deems appropriate, (b) the employment and maintenance at
any of the Borrowers' premises a custodian who shall have full authority to do
all acts necessary to protect the Lender's interests in the Collateral and (c)
leasing warehouse facilities to which the Lender may move all or any part of the
Collateral to the extent commercially reasonable. Each Borrower agrees to
cooperate fully with the Lender's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as the Lender may reasonably
direct. All of the Lender's expenses of preserving the Collateral, including
any
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reasonable expenses relating to the compensation and bonding of a custodian,
shall be part of the Enforcement Costs.
Section 6.2 NEGATIVE COVENANTS.
So long as any of the Obligations or the Commitment shall be outstanding
hereunder, the Borrowers agree with the Lender as follows:
6.2.1 CAPITAL STRUCTURE, MERGER, ACQUISITION OR SALE OF ASSETS.
None of the Borrowers will alter or amend its capital structure,
authorize any additional class of equity, issue any stock or equity of any class
(except in connection with Permitted Estate Planning Transfers or in connection
with the exercise of any of the options, warrants or rights outstanding on the
date hereof and described on SCHEDULE 6.2.1 attached to and made and made a part
of this Agreement), enter into any merger or consolidation or amalgamation,
windup or dissolve itself (or suffer any liquidation or dissolution) or acquire
all or substantially all the assets of any Person, or engage in any Asset
Disposition; provided, however, if there shall exist no Event of Default:
(a) the Company may make or participate in Permitted Estate
Planning Transfers;
(b) the Company may issue the stock or equity in the
Company which does not result in a Default or an Event of Default under 7.1.12;
and
(c) the Lender agrees to consider the Company's requests
for the Lender's consent to proposed Purchase Investments (which request shall
be accompanied by such appraisals, projections and other information which the
Lender may reasonably request) and agrees that such consent shall not be
unreasonably withheld.
Any consent of the Lender to the disposition of any assets may be conditioned on
a specified use of the proceeds of disposition.
6.2.2 SUBSIDIARIES.
None of the Borrowers will create or acquire any Subsidiaries
other than the Subsidiaries described in the Collateral Disclosure List;
provided, however, if there shall exist no Event of Default, the Lender agrees
to consider any Borrower's requests for the Lender's consent to proposed
Purchase Investments (which request shall be accompanied by such appraisals,
projections and other information which the Lender may reasonably request) and
agrees that such consent shall not be unreasonably withheld.
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6.2.3 ISSUANCE OF STOCK.
None of the Borrowers will issue, or grant any option or right to
purchase, any of its capital stock; provided, however, the Borrower may make or
participate in Permitted Estate Planning Transfers, and, provided, further, the
Lender agrees to consider any Borrower's requests for the Lender's consent to
proposed Purchase Investments (which request shall be accompanied by such
appraisals, projections and other information which the Lender may reasonably
request) and agrees that such consent shall not be unreasonably withheld.
6.2.4 PURCHASE OR REDEMPTION OF SECURITIES, DIVIDEND
RESTRICTIONS.
Without the Lender's prior written consent, none of the Borrowers
will purchase, redeem or otherwise acquire any shares of its capital stock or
warrants now or hereafter outstanding, declare or pay any dividends thereon
(other than stock dividends), apply any of its property or assets to the
purchase, redemption or other retirement of, set apart any sum for the payment
of any dividends on, or for the purchase, redemption, or other retirement of,
make any distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of any Borrower, or any warrants, permit
any Subsidiary to purchase or acquire any shares of any class of capital stock
of, or warrants issued by, any Borrower, make any distribution to stockholders
or set aside any funds for any such purpose other than payments or other
distributions to the holders of the Company's Series A Convertible Preferred
Stock issued to Joseph T. Mooney, Jr., as such payments or distributions may be
required pursuant to the terms, existing on the date hereof, of such securities
but only if such payments or distributions are made at any time from the
proceeds of life insurance (other than the Life Insurance Policies) or are made
after May 1, 2003. Notwithstanding the foregoing, so long as any Borrower is
eligible for taxation as a corporation under Subchapter S of the Internal
Revenue Code and provided there shall exist no Default or Event of Default, that
Borrower may distribute to each of its shareholders an amount sufficient to
cover that shareholder's actual tax liability due and payable as a result of
income of such Borrower attributed to such shareholder.
6.2.5 INDEBTEDNESS.
None of the Borrowers will create, incur, assume or suffer to
exist any Indebtedness for Borrowed Money, or prepay, purchase or redeem any
Indebtedness for Borrowed Money, except:
(a) the Obligations;
(b) current accounts payable and motor vehicle and
equipment operating leases arising in the ordinary course;
(c) Indebtedness represented by the Senior Notes;
(d) the guaranty of the Senior Notes by the Monsey Bakor
Group;
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(e) Indebtedness secured by Permitted Liens; and
(f) Indebtedness described on Schedule 6.2.5 to this
Agreement.
6.2.6 INVESTMENTS, LOANS AND OTHER TRANSACTIONS.
Except as otherwise provided in this Agreement, none of the
Borrowers will (a) make, assume, acquire or continue to hold any investment in
any Person, whether by stock purchase, capital contribution, acquisition of
indebtedness of such Person or otherwise (including, without limitation,
investments in any joint venture or partnership), (b) guaranty or otherwise
become contingently liable for the indebtedness or obligations of any Person, or
(c) make any loans or advances, or otherwise extend credit to any Person except:
(a) loans and advances which are to officers and employees
who are not Affiliates of any Borrower or of any Subsidiary and which, exclusive
of such loans and advances which are outstanding on the date of this Agreement,
shall not exceed Five Hundred Thousand Dollars ($500,000) in the aggregate
outstanding at any time;
(b) the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business;
(c) any investment in Cash Equivalents; and
(d) trade credit extended to customers in the ordinary
course of business.
6.2.7 OPERATING LEASE OBLIGATIONS.
None of the Borrowers will incur or permit to exist any Lease
Obligations except Capital Leases expressly permitted by this Agreement so to
do, if the aggregate amount of all such Lease Obligations of the Borrowers
(taken as a whole) would at any time exceed One Million Five Hundred Thousand
Dollars ($1,500,000) during any fiscal year of the Borrowers.
6.2.8 CAPITAL EXPENDITURES.
None of the Borrowers will (by way of the acquisition of the
securities of a Person or otherwise), make any Capital Expenditures in the
aggregate for the Borrowers (taken as a whole) in any fiscal year exceeding
Three Million Five Hundred Thousand Dollars ($3,500,000).
6.2.9 STOCK OF SUBSIDIARIES.
None of the Borrowers will sell or otherwise dispose of any
shares of capital stock of any Subsidiary (except in connection with a merger or
consolidation of a Wholly Owned Subsidiary into a Borrower or another Wholly
Owned Subsidiary or with the dissolution
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of any Subsidiary) or permit any Subsidiary to issue any additional shares of
its capital stock except pro rata to its stockholders.
6.2.10 SUBORDINATED INDEBTEDNESS.
None of the Borrowers will make:
(a) any payment of principal of, or interest on, any of the
Subordinated Indebtedness if a Default or an Event of Default then exists
hereunder or would result from such payment;
(b) any payment of the principal or interest due on the
Subordinated Debt as a result of acceleration thereunder or a mandatory
prepayment thereunder;
(c) any amendment or modification of or supplement to the
documents evidencing or securing the Subordinated Debt; or
(d) payment of principal or interest on the Subordinated
Debt other than when due (without giving effect to any acceleration of maturity
or mandatory prepayment).
6.2.11 LIENS; CONFESSED JUDGMENT.
Each Borrower agrees that it (a) will not create, incur, assume
or suffer to exist any Lien upon any of its properties or assets, whether now
owned or hereafter acquired, except for Liens securing the Obligations and
Permitted Liens, (b) will not agree to, assume or suffer to exist any provision
in any instrument or other document for confession of judgment, cognovit or
other similar right or remedy, (c) except as set forth in Schedule 6.2.11, will
not allow or suffer to exist any Permitted Liens to be superior to Liens
securing the Obligations, (d) will not enter into any contracts for the
consignment of goods to any Borrower, (e) will not execute or suffer the filing
of any financing statements or the posting of any signs giving notice of
consignments to any Borrower, (f) will not, as a material part of its business,
engage in the sale of goods belonging to others, and (g) will not allow or
suffer to exist the failure of any Lien described in the Security Documents to
attach to, and/or remain at all times perfected on, any of the property
described in the Security Documents.
6.2.12 TRANSACTIONS WITH AFFILIATES.
None of the Borrowers will enter into or participate in any
transaction with any Affiliate or use or permit the use of any proceeds of the
Collateral or the Loans for the benefit of any Affiliate (other than another
Borrower) or, except in the ordinary course of business or as set forth in
SCHEDULE 6.2.12 hereof, enter into or participate in any transaction with the
officers, directors, employees and other representatives of any Borrower, other
than Permitted Estate Planning Transfers.
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6.2.13 OTHER BUSINESSES.
None of the Borrowers will engage directly or indirectly in any
business other than their current lines of business described elsewhere in this
Agreement.
6.2.14 ERISA COMPLIANCE.
None of the Borrowers nor any Commonly Controlled Entity shall:
(a) engage in or permit any "prohibited transaction" (as defined in ERISA); (b)
cause any "accumulated funding deficiency" as defined in ERISA and/or the
Internal Revenue Code; (c) terminate any pension plan in a manner which could
result in the imposition of a lien on the property of any Borrower pursuant to
ERISA; (d) terminate or consent to the termination of any Multiemployer Plan; or
(e) incur a complete or partial withdrawal with respect to any Multiemployer
Plan.
6.2.15 PROHIBITION ON HAZARDOUS MATERIALS.
None of Borrowers shall place, manufacture or store or permit to
be placed, manufactured or stored any Hazardous Materials on any property owned,
operated or controlled by any Borrower or for which any Borrower is responsible
other than Hazardous Materials placed or stored on such property in accordance
with applicable Laws in the ordinary course.
6.2.16 METHOD OF ACCOUNTING; FISCAL YEAR.
None of the Borrowers shall change the method of accounting
employed in the preparation of any financial statements furnished to the Lender
under the provisions of Section 6.1.1 (Financial Statements) of this Agreement,
unless required to conform to GAAP and on the condition that any such Borrower's
accountants shall furnish such information as the Lender may request to
reconcile the changes with such Borrower's prior financial statements.
(a) None of the Borrowers will change its fiscal year from
a year ending on December 31.
6.2.17 COMPENSATION.
None of the Borrowers will pay any bonuses, fees, compensation,
commissions, salaries, drawing accounts, or other payments (cash and non-cash),
whether direct or indirect, to any stockholders of any Borrower or any Affiliate
of any Borrower, other than (a) reasonable compensation for actual services
rendered by stockholders in their capacity as officers, employees or directors
of a Borrower, (b) compensation disclosed in the portion of the Offering
Memorandum captioned "Certain Transactions," and (c) other compensation paid to
stockholders in their capacity as officers or employees but only if the amount
and manner of payment of that other compensation is consistent with such
Borrower's past practices disclosed to the Lender prior to the Closing Date and
if there exists no Event of Default and no Event of
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Default would result from the payment or accrual of that other compensation;
provided, however, that residential arrangements existing on the date of this
Agreement with respect to property owned or leased in Kimberton, Pennsylvania
shall not be deemed to be compensation for the purposes of this Section 6.2.17.
6.2.18 TRANSFER OF COLLATERAL.
Other than locations described on the Collateral Disclosure List,
none of the Borrowers will transfer, or permit the transfer, to another location
of any of the Collateral or the books and records related to any of the
Collateral.
6.2.19 SALE AND LEASEBACK.
None of the Borrowers will directly or indirectly enter into any
arrangement to sell or transfer all or any substantial part of its fixed assets
and thereupon or within one year thereafter rent or lease the assets so sold or
transferred.
6.2.20 DISPOSITION OF COLLATERAL.
None of the Borrowers will sell, discount, allow credits or
allowances, transfer, assign, extend the time for payment on, convey, lease,
assign, transfer or otherwise dispose of the Collateral, except, prior to an
Event of Default, dispositions expressly permitted elsewhere in this Agreement,
the sale of Inventory in the ordinary course of business.
ARTICLE VII
DEFAULT AND RIGHTS AND REMEDIES
Section 7.1 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default" under the provisions of this Agreement:
7.1.1 FAILURE TO PAY.
The failure of the Borrowers to pay any of the Obligations as and
when due and payable in accordance with the provisions of this Agreement, the
Notes and/or any of the other Financing Documents;
7.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES.
Any representation or warranty made in this Agreement or in any
report, statement, schedule, certificate, opinion (including any opinion of
counsel for any Borrower), financial statement or other document furnished in
connection with this Agreement, any of the other Financing Documents, or the
Obligations, shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect.
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7.1.3 FAILURE TO COMPLY WITH COVENANTS.
The failure of the Borrowers to perform, observe or comply with
any covenant, condition or agreement contained in this Agreement and, (i) only
with respect to a failure under Sections 6.1.1(a), (b) or (g) (Financial
Statement), such failure continues uncured for a period of five (5) days, or
(ii) only with respect to a failure under Sections 6.1.2 (Reports to SEC and to
Stockholders), 6.1.3(a) (Bookkeeping), 6.1.4 (Corporate Existence), 6.1.6(a)
(Preservation of Properties), Section 6.1.9 (Taxes) which does not relate to
Taxes due or claimed to be due in excess of $100,000 in the aggregate, Section
6.1.21(b) (Inventory), or 6.1.22 (Maintenance of Collateral), if any Borrower
after discovering such failure, fails to diligently and continuously pursue the
cure of such failure or such failure continues uncured thirty (30) days after
discovery.
7.1.4 DEFAULT UNDER OTHER FINANCING DOCUMENTS OR OBLIGATIONS.
A default shall occur under any of the other Financing Documents
or under any other Obligations, and such default is not cured within any
applicable grace period provided therein.
7.1.5 RECEIVER; BANKRUPTCY.
Any Borrower or any Subsidiary shall (a) apply for or consent to
the appointment of a receiver, trustee or liquidator of itself or any of its
property, (b) admit in writing its inability to pay its debts as they mature,
(c) make a general assignment for the benefit of creditors, (d) be adjudicated a
bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition
or an answer seeking or consenting to reorganization or an arrangement with
creditors or to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against it in any
proceeding under any such law, or take corporate action for the purposes of
effecting any of the foregoing, or (f) by any act indicate its consent to,
approval of or acquiescence in any such proceeding or the appointment of any
receiver of or trustee for any of its property, or suffer any such receivership,
trusteeship or proceeding to continue undischarged for a period of sixty (60)
days, or (g) by any act indicate its consent to, approval of or acquiescence in
any order, judgment or decree by any court of competent jurisdiction or any
Governmental Authority enjoining or otherwise prohibiting the operation of a
material portion of any Borrower's or any Subsidiary's business or the use or
disposition of a material portion of any Borrower's or any Subsidiary's assets.
7.1.6 INVOLUNTARY BANKRUPTCY, ETC.
(a) An order for relief shall be entered in any involuntary case
brought against any Borrower or any Subsidiary under the Bankruptcy Code, or (b)
any such case shall be commenced against any Borrower or any Subsidiary and
shall not be dismissed within sixty (60) days after the filing of the petition,
or (c) an order, judgment or decree under any other Law
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is entered by any court of competent jurisdiction or by any other Governmental
Authority on the application of a Governmental Authority or of a Person other
than a Borrower or any Subsidiary (i) adjudicating any Borrower, or any
Subsidiary bankrupt or insolvent, or (ii) appointing a receiver, trustee or
liquidator of any Borrower or of any Subsidiary, or of a material portion of any
Borrower's or any Subsidiary's assets, or (iii) enjoining, prohibiting or
otherwise limiting the operation of a material portion of any Borrower's or any
Subsidiary's business or the use or disposition of a material portion of any
Borrower's or any Subsidiary's assets, and such order, judgment or decree
continues unstayed and in effect for a period of thirty (30) days from the date
entered.
7.1.7 JUDGMENT.
Unless adequately insured in the reasonable opinion of the
Lender, the entry of a final judgment for the payment of money involving more
than $500,000 against any Borrower, and the failure by any such Borrower to
discharge the same, or cause it to be discharged, within thirty (30) days from
the date of the order, decree or process under which or pursuant to which such
judgment was entered, or to secure a stay of execution pending appeal of such
judgment.
7.1.8 EXECUTION; ATTACHMENT.
Any execution or attachment involving more than $500,000 shall be
levied against the Collateral, or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.
7.1.9 DEFAULT UNDER OTHER BORROWINGS.
Default shall be made with respect to any Indebtedness for
Borrowed Money (other than the Loans) aggregating more than $750,000 if the
effect of such default is to accelerate the maturity of such Indebtedness for
Borrowed Money or to permit the holder or obligee thereof or other party thereto
to cause any such Indebtedness for Borrowed Money to become due prior to its
stated maturity.
7.1.10 CHALLENGE TO AGREEMENTS.
Any Borrower shall challenge the validity and binding effect of
any provision of any of the Financing Documents or shall state its intention to
make such a challenge of any of the Financing Documents or any of the Financing
Documents executed by any one or more of the Borrowers shall for any reason
(except to the extent permitted by its express terms) cease to be effective or
to create a valid and perfected first priority Lien (except for Permitted Liens)
on, or security interest in, any of the Collateral purported to be covered
thereby.
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7.1.11 MATERIAL ADVERSE CHANGE.
A material adverse change shall have occurred in the financial
condition of the any Borrower.
7.1.12 CHANGE IN OWNERSHIP.
Any change shall occur in the ownership of any Borrower, other
than transfers of interests in the Company such that any Person or group of
Persons other than Warner W. Henry, each of his immediate family members, the
Warner W. Henry Living Trust, trustees or trusts, entities or arrangements for
the exclusive benefit of the foregoing persons or entities, shall become the
owner, directly or indirectly, beneficially or of record, or control the voting
of, shares representing more than 50% of the aggregate voting power represented
by the aggregate capital stock of the Company.
7.1.13 LIQUIDATION, TERMINATION, DISSOLUTION, CHANGE IN
MANAGEMENT, ETC.
Any Borrower shall liquidate, dissolve or terminate its existence
or shall suspend or terminate a substantial portion of its business operations
or any change occurs in the management or control of any Borrower without the
prior written consent of the Lender.
Section 7.2 REMEDIES.
Upon the occurrence of any Default or Event of Default, the Lender may at
any time thereafter exercise any one or more of the following rights, powers or
remedies:
7.2.1 ACCELERATION.
The Lender may declare the Obligations to be immediately due and
payable, notwithstanding anything contained in this Agreement or in any of the
other Financing Documents to the contrary, without presentment, demand, protest,
notice of protest or of dishonor, or other notice of any kind, all of which the
Borrowers hereby waive.
7.2.2 FURTHER ADVANCES.
The Lender may from time to time without notice to the Borrowers
suspend, terminate or limit any further loans or other extensions of credit
under this Agreement and under any of the other Financing Documents. Further,
upon the occurrence of an Event of Default or Default specified in Sections
7.1.5 (Receiver; Bankruptcy) or 7.1.6 (Involuntary Bankruptcy, etc.) above, the
Revolving Credit Commitment and any agreement in any of the Financing Documents
to provide additional credit shall immediately and automatically terminate and
the unpaid principal amount of the Notes (with accrued interest thereon) and all
other Obligations then outstanding, shall immediately become due and payable
without further action
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of any kind and without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived by the Borrowers.
7.2.3 UNIFORM COMMERCIAL CODE.
The Lender shall have all of the rights and remedies of a secured
party under the applicable Uniform Commercial Code and other applicable Laws.
Upon demand by the Lender, the Borrowers shall assemble the Collateral and make
it available to the Lender, at a place designated by the Lender. The Lender or
its agents may without notice from time to time enter upon any Borrower's
premises to take possession of the Collateral, to remove it, to render it
unusable, to process it or otherwise prepare it for sale, or to sell or
otherwise dispose of it.
Any written notice of the sale, disposition or other intended
action by the Lender with respect to the Collateral which is sent by regular
mail, postage prepaid, to the Borrowers at the address set forth in Section 8.1
of this Agreement, at least ten (10) days prior to such sale, disposition or
other action, shall constitute commercially reasonable notice to the Borrowers.
The Lender may alternatively or additionally give such notice in any other
commercially reasonable manner. Nothing in this Agreement shall require the
Lender to give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state,
municipal or other governmental department, agency or authority or of any
person, or any person, corporation, partnership or other entity having any
interest therein, should be necessary to effectuate any sale or other
disposition of the Collateral, the Borrower agrees to execute all such
applications and other instruments, and to take all other action, as may be
required in connection with securing any such consent, approval or
authorization.
The Borrower recognizes that the Lender may be unable to effect a
public sale of all or a part of the Collateral consisting of securities by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and other applicable federal and state Laws. The Lender may,
therefore, in its discretion, take such steps as it may deem appropriate to
comply with such Laws and may, for example, at any sale of the Collateral
consisting of securities restrict the prospective bidders or purchasers as to
their number, nature of business and investment intention, including, without
limitation, a requirement that the Persons making such purchases represent and
agree to the satisfaction of the Lender that they are purchasing such securities
for their account, for investment, and not with a view to the distribution or
resale of any thereof. The Borrower covenants and agrees to do or cause to be
done promptly all such acts and things as the Lender may request from time to
time and as may be necessary to offer and/or sell the securities or any part
thereof in a manner which is valid and binding and in conformance with all
applicable Laws. Upon any such sale or disposition, the Lender shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral
consisting of securities so sold.
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7.2.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL.
In addition to all other rights and remedies provided hereunder
or as shall exist at law or in equity from time to time, the Lender may (but
shall be under no obligation to), without notice to the Borrowers, and each
Borrower hereby irrevocably appoints the Lender as its attorney-in-fact, with
power of substitution, in the name of the Lender or in the name of any or all of
the Borrowers or otherwise, for the use and benefit of the Lender, but at the
cost and expense of the Borrowers and without notice to the Borrowers:
(a) request any account debtor obligated on any of the
Accounts to make payments thereon directly to the Lender, with the Lender taking
control of the cash and non-cash proceeds thereof;
(b) compromise, extend or renew any of the Collateral or
deal with the same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or
any part of the Collateral;
(d) copy, transcribe, or remove from any place of business
of any Borrower or any Subsidiary all books, records, ledger sheets,
correspondence, invoices and documents, relating to or evidencing any of the
Collateral or without cost or expense to the Lender, make such use of any
Borrower's or any Subsidiary's place(s) of business as may be reasonably
necessary to administer, control and collect the Collateral;
(e) repair, alter or supply goods if necessary to fulfill
in whole or in part the purchase order of any Account Debtor;
(f) demand, collect, receipt for and give renewals,
extensions, discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings
to enforce collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange
or adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
(i) endorse or sign the name of any Borrower upon any Items
of Payment, certificates of title, instruments, securities, stock powers,
documents, documents of title, financing statements, assignments, notices, or
other writing relating to or part of the Collateral and on any Proof of Claim in
Bankruptcy against an Account Debtor;
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(j) notify the Post Office authorities to change the
address for the delivery of mail to the Borrowers to such address or Post Office
Box as the Lender may designate and receive and open all mail addressed to any
Borrower; and
(k) take any other action necessary or beneficial to
realize upon or dispose of the Collateral or to carry out the terms of this
Agreement.
7.2.5 APPLICATION OF PROCEEDS.
Any proceeds of sale or other disposition of the Collateral will
be applied by the Lender to the payment of the Enforcement Costs, and any
balance of such proceeds will be applied by the Lender to the payment of the
balance of the Obligations in such order and manner of application as the Lender
may from time to time in its sole and absolute discretion determine. If the
sale or other disposition of the Collateral fails to fully satisfy the
Obligations, the Borrowers shall remain liable to the Lender for any deficiency.
7.2.6 PERFORMANCE BY LENDER.
Upon the occurrence and continuation of an Event of Default, the
Lender without notice to or demand upon the Borrowers and without waiving or
releasing any of the Obligations or any Default or Event of Default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of the Borrowers, pay or
satisfy (in whole or in part) Liens on the Collateral (whether or not such Liens
are Permitted Liens), and may enter upon the premises of any Borrower for that
purpose and take all such action thereon as the Lender may consider necessary or
appropriate for such purpose and each Borrower hereby irrevocably appoints the
Lender as its attorney-in-fact to do so, with power of substitution, in the name
of the Lender or in the name of any of the Borrowers or otherwise, for the use
and benefit of the Lender, but at the cost and expense of the Borrowers and
without notice to the Borrowers. All sums so paid or advanced by the Lender
together with interest thereon from the date of payment, advance or incurring
until paid in full at the Post-Default Rate and all costs and expenses, shall be
deemed part of the Enforcement Costs, shall be paid by the Borrowers to the
Lender on demand, and shall constitute and become a part of the Obligations.
7.2.7 OTHER REMEDIES.
The Lender may from time to time proceed to protect or enforce
its rights by an action or actions at law or in equity or by any other
appropriate proceeding, whether for the specific performance of any of the
covenants contained in this Agreement or in any of the other Financing
Documents, or for an injunction against the violation of any of the terms of
this Agreement or any of the other Financing Documents, or in aid of the
exercise or execution of any right, remedy or power granted in this Agreement,
the Financing Documents, and/or applicable Laws. The Lender is authorized to
offset and apply to all or any part of the Obligations all moneys, credits and
other property of any nature whatsoever of any or all of the
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Borrowers now or at any time hereafter in the possession of, in transit to or
from, under the control or custody of, or on deposit with, the Lender.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 NOTICES.
All notices, requests and demands to or upon the parties to this Agreement
shall be in writing and shall be deemed to have been given or made when
delivered by hand on a Business Day, or two (2) days after the date when
deposited in the mail, postage prepaid by registered or certified mail, return
receipt requested, or when sent by overnight courier, on the Business Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows:
Borrowers: c/o Henry Company
2911 Slauson Avenue
Huntington Park, California 90255
Attention: Jeffrey A. Wahba
with a copy to:
Munger, Tolles & Olson
355 Grand Avenue
35th Floor
Los Angeles, California 90071
Attention: Judith T. Kitano
Lender: NationsBank Business Credit
100 South Charles Street
MD4-325-04-14
Baltimore, Maryland 21201
Attention: Stephen V. Rieger
with a copy to:
Frederick W. Runge, Jr., Esquire
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
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Section 8.2 AMENDMENTS; WAIVERS.
This Agreement and the other Financing Documents may not be amended,
modified, or changed in any respect except by an agreement in writing signed by
the Lender and all of the Borrowers. No waiver of any provision of this
Agreement or of any of the other Financing Documents, nor consent to any
departure by the Borrowers therefrom, shall in any event be effective unless the
same shall be in writing. No course of dealing between the Borrowers and the
Lender and no act or failure to act from time to time on the part of the Lender
shall constitute a waiver, amendment or modification of any provision of this
Agreement or any of the other Financing Documents or any right or remedy under
this Agreement, under any of the other Financing Documents or under applicable
Laws.
Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the
specific instance, for the terms and purpose for which given, subject to such
conditions as the Lender may specify in any such instrument.
(b) No waiver of any Default or Event of Default shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereto.
(c) No notice to or demand on the Borrowers in any case
shall entitle the Borrowers to any other or further notice or demand in the
same, similar or other circumstance.
(d) No failure or delay by the Lender to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, shall constitute a waiver,
amendment or modification of any such term, condition, covenant or agreement or
of any such breach or preclude the Lender from exercising any such right, power
or remedy at any time or times.
(e) By accepting payment after the due date of any amount
payable under this Agreement or under any of the other Financing Documents, the
Lender shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a default for failure to effect such
prompt payment of any such other amount.
Section 8.3 CUMULATIVE REMEDIES.
The rights, powers and remedies provided in this Agreement and in the other
Financing Documents are cumulative, may be exercised concurrently or separately,
may be exercised from time to time and in such order as the Lender shall
determine and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable Laws. In
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order to entitle the Lender to exercise any remedy reserved to it in this
Agreement, it shall not be necessary to give any notice, other than such notice
as may be expressly required in this Agreement. Without limiting the generality
of the foregoing, the Lender may:
(a) proceed against any one or more of the Borrowers with or without
proceeding against any Person who may be liable (by endorsement, guaranty,
indemnity or otherwise) for all or any part of the Obligations;
(b) proceed against any one or more of the Borrowers with or without
proceeding under any of the other Financing Documents or against any Collateral
or other collateral and security for all or any part of the Obligations;
(c) without reducing or impairing the obligation of the Borrowers and
without notice, release or compromise with any guarantor or other Person liable
for all or any part of the Obligations under the Financing Documents or
otherwise;
(d) without reducing or impairing the obligations of the Borrowers
and without notice thereof: (i) fail to perfect the Lien in any or all
Collateral or to release any or all the Collateral or to accept substitute
Collateral, (ii) approve the making of advances under the Revolving Loan under
this Agreement, (iii) waive any provision of this Agreement or the other
Financing Documents, (iv) exercise or fail to exercise rights of set-off or
other rights, or (v) accept partial payments or extend from time to time the
maturity of all or any part of the Obligations.
Section 8.4 SEVERABILITY.
In case one or more provisions, or part thereof, contained in this
Agreement or in the other Financing Documents shall be invalid, illegal or
unenforceable in any respect under any Law, then without need for any further
agreement, notice or action:
(a) the validity, legality and enforceability of the
remaining provisions shall remain effective and binding on the parties thereto
and shall not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the
limit of such validity;
(c) if such provision or part thereof pertains to repayment
of the Obligations, then, at the sole and absolute discretion of the Lender, all
of the Obligations of the Borrowers to the Lender shall become immediately due
and payable; and
(d) if the affected provision or part thereof does not
pertain to repayment of the Obligations, but operates or would prospectively
operate to invalidate this Agreement in whole or in part, then such provision or
part thereof only shall be void, and the remainder of this Agreement shall
remain operative and in full force and effect.
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Section 8.5 ASSIGNMENTS BY LENDER.
The Lender may, without notice to, or consent of, the Borrowers, sell,
assign or transfer to or participate with any Person or Persons all or any part
of the Obligations, provided, however, prior to an Event of Default that
NationsBank shall at all times remain as lead lender, in the case of a
participation, or servicing agent, in the case of an assignment. Each such
Person or Persons shall have the right to enforce the provisions of this
Agreement and any of the other Financing Documents as fully as the Lender,
provided that the Lender shall continue to have the unimpaired right to enforce
the provisions of this Agreement and any of the other Financing Documents as to
so much of the Obligations that the Lender has not sold, assigned or
transferred. In the event the Lender makes a transfer which is required to, but
does not, conform with the proviso of the first sentence of this Section, the
Borrowers may, for a period of one hundred twenty (120) days after notice to the
Borrowers of the transfer and as its sole remedy, prepay all of the Obligations
and terminate the Commitments without payment of the Early Termination Fee, but
only if the Borrowers have within thirty (30) days following receipt of such
notice, notified the Lender of the Borrowers' intention to do so. In connection
with the foregoing and provided the Lender obtains a confidentiality agreement,
the Lender shall have the right to disclose to any such actual or potential
purchaser, assignee, transferee or participant all financial records,
information, reports, financial statements and documents obtained in connection
with this Agreement and any of the other Financing Documents or otherwise.
Section 8.6 SUCCESSORS AND ASSIGNS.
This Agreement and all other Financing Documents shall be binding upon and
inure to the benefit of the Borrowers and the Lender and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lender.
Section 8.7 CONTINUING AGREEMENTS.
All covenants, agreements, representations and warranties made by the
Borrowers in this Agreement, in any of the other Financing Documents, and in any
certificate delivered pursuant hereto or thereto shall survive the making by the
Lender of the Loans and the execution and delivery of the Notes, shall be
binding upon the Borrowers regardless of how long before or after the date
hereof any of the Obligations were or are incurred, and shall continue in full
force and effect so long as any of the Obligations are outstanding and unpaid.
From time to time upon the Lender's request, and as a condition of the release
of any one or more of the Security Documents, the Borrowers and other Persons
obligated with respect to the Obligations shall provide the Lender with such
acknowledgments and agreements as the Lender may require to the effect that
there exists no defenses, rights of setoff or recoupment, claims, counterclaims,
actions or causes of action of any kind or nature whatsoever against the Lender,
its agents and others, or to the extent there are, the same are waived and
released.
-89-
Section 8.8 ENFORCEMENT COSTS.
The Borrowers shall pay to the Lender on demand all Enforcement Costs,
together with interest thereon from the date incurred or advanced until paid in
full at a per annum rate of interest equal at all times to the Post-Default
Rate. Enforcement Costs shall be immediately due and payable at the time
advanced or incurred, whichever is earlier. Without implying any limitation on
the foregoing, the Borrowers shall pay, as part of the Enforcement Costs, upon
demand any and all stamp and other Taxes and fees payable or determined to be
payable in connection with the execution and delivery of this Agreement and the
other Financing Documents and to save the Lender harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay any Taxes or fees referred to in this Section. The provisions
of this Section shall survive the execution and delivery of this Agreement, the
repayment of the other Obligations and shall survive the termination of this
Agreement.
Section 8.9 APPLICABLE LAW; JURISDICTION.
As a material inducement to the Lender to enter into this Agreement, the
Borrowers acknowledge and agree that the Financing Documents, including, this
Agreement, shall be governed by the Laws of the State, as if each of the
Financing Documents and this Agreement had each been executed, delivered,
administered and performed solely within the State even though for the
convenience and at the request of the Borrowers, one or more of the Financing
Documents may be executed elsewhere. The Lender acknowledges, however, that
remedies under certain of the Financing Documents which relate to property
outside the State may be subject to the laws of the state in which the property
is located.
(a) The Borrowers irrevocably submit to the jurisdiction of
any federal court sitting in Maryland and to the jurisdiction of any state or
federal court sitting in California over any suit, action or proceeding arising
out of or relating to this Agreement or any of the other Financing Documents.
Each Borrower irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding upon the Borrowers and
may be enforced in any court in which the Borrowers are subject to jurisdiction,
by a suit upon such judgment, provided that service of process is effected upon
the Borrowers in one of the manners specified in this Section or as otherwise
permitted by applicable Laws.
(b) The Borrower hereby irrevocably designates and appoints
in Maryland CT Corporation System, Inc., Baltimore, Maryland 21202, as each
Borrower's authorized agent to receive on each Borrower's behalf service of any
and all process that may be served in any suit, action or proceeding of the
nature referred to in this Section in any state or federal court sitting in the
State. If such agent shall cease so to act, each Borrower shall
-90-
irrevocably designate and appoint without delay another such agent in the State
satisfactory to the Lender and shall promptly deliver to the Lender evidence in
writing of such other agent's acceptance of such appointment and its agreement
that such appointment shall be irrevocable.
(c) The Borrowers hereby consent to process being served in
any suit, action or proceeding of the nature referred to in this Section by (i)
the mailing of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to the Borrowers at the Borrowers' address designated
in or pursuant to Section 8.1 hereof, and (ii) serving a copy thereof upon the
agent, if any, designated and appointed by the Borrowers as the Borrowers' agent
for service of process by or pursuant to this Section. The Borrowers
irrevocably agree that such service (i) shall be deemed in every respect
effective service of process upon the Borrowers in any such suit, action or
proceeding, and (ii) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon the Borrowers. Nothing in this Section
shall affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring proceedings
against the Borrowers in the courts of any jurisdiction or jurisdictions.
Section 8.10 DUPLICATE ORIGINALS AND COUNTERPARTS.
This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.
Section 8.11 HEADINGS.
The headings in this Agreement are included herein for convenience only,
shall not constitute a part of this Agreement for any other purpose, and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.
Section 8.12 NO AGENCY.
Nothing herein contained shall be construed to constitute any of Borrowers
as the Lender's agent for any purpose whatsoever or to permit the Borrower to
pledge any of the Lender's credit. The Lender shall not be responsible nor
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof. The Lender shall not, by anything herein or in any of the Financing
Documents or otherwise, assume any of the Borrower's obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by any or all of the Borrowers of any
of the terms and conditions thereof.
Section 8.13 DATE OF PAYMENT.
Should the principal of or interest on any of the Notes become due and
payable on other than a Business Day, the maturity thereof shall be extended to
the next succeeding Business Day
-91-
and in the case of principal, interest shall be payable thereon at the rate per
annum specified in the Notes during such extension.
Section 8.14 ENTIRE AGREEMENT.
This Agreement is intended by the Lender and the Borrowers to be a
complete, exclusive and final expression of the agreements contained herein.
Neither the Lender nor the Borrowers shall hereafter have any rights under any
prior agreements pertaining to the matters addressed by this Agreement but shall
look solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.
Section 8.15 WAIVER OF TRIAL BY JURY.
THE BORROWERS AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWERS AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY
OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the Borrowers and
the Lender, and the Borrowers and the Lender hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers and the Lender further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
Section 8.16 LIABILITY OF THE LENDER.
The Borrowers acknowledge and agree that the Lender is acting on its own
behalf, and not on behalf of any of the Borrowers or any other Person, in making
examinations, investigations or otherwise in perfecting, maintaining, protecting
or realizing upon any lien or security interest or any other interest in the
Collateral or other security for the Obligations, in inspecting the Collateral
or any other properties of the Borrowers and by accepting or approving anything
required to be observed, performed or fulfilled by the Borrowers or to be given
to the Lender pursuant to this Agreement or any of the other Financing
Documents.
The Borrowers hereby agree that the Lender shall not be liable for or
estopped by any negligence, mistake, act or omission of any accountant,
examiner, agency or attorney employed by the Lender in making such examinations,
investigations, or otherwise in perfecting, maintaining, protecting or realizing
upon any lien or security interest or any other interest in the Collateral or
other security for the Obligations.
-92-
By inspecting the Collateral or any other properties of the Borrowers or by
accepting or approving anything required to be observed, performed or fulfilled
by the Borrowers or to be given to the Lender pursuant to this Agreement or any
of the other Financing Documents, the Lender shall not be deemed to have
warranted or represented the condition, sufficiency, legality, effectiveness or
legal effect of the same, and such acceptance or approval shall not constitute
any warranty or representation with respect thereto by the Lender.
IN WITNESS WHEREOF, each of the parties hereto have executed and delivered
this Agreement under their respective seals as of the day and year first written
above ON THE FOLLOWING, SEPARATE PAGES.
-93-
AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
BORROWERS' SIGNATURE PAGE
ATTEST: HENRY COMPANY
/s/ Jeffrey A. Wahba By: /s/ Richard B. Gordinier
- ---------------------------- ---------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and President
Secretary
ATTEST: MONSEY PRODUCTS CO.
/s/ Jeffrey A. Wahba By: /s/ Richard B. Gordinier
- ---------------------------- ---------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and President
Secretary
ATTEST: KIMBERTON ENTERPRISES, INC.
/s/ Jeffrey A. Wahba By: /s/ Richard B. Gordinier
- ---------------------------- ---------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and President
Secretary
MONSEY PRODUCTS OF ARIZONA LLC
By its Designated Member,
ATTEST: MONSEY PRODUCTS CO.
/s/ Jeffrey A. Wahba By: /s/ Richard B. Gordinier
- ---------------------------- ---------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and President
Secretary
-94-
AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
LENDER'S SIGNATURE PAGE
WITNESS: NATIONSBANK, N.A.
By: /s/ Stephen V. Rieger
- ---------------------------- ---------------------------
Stephen V. Rieger
Vice President
-95-
EXHIBIT A-1
CAPITAL EXPENDITURE NOTE
$10,000,000 Baltimore, Maryland
April 22,1998
FOR VALUE RECEIVED, HENRY COMPANY, a corporation organized under the laws
of the State of California (the "Company"), MONSEY PRODUCTS CO., a corporation
organized under the laws of the State of Pennsylvania ("Monsey Products"),
KIMBERTON ENTERPRISES, INC., a corporation organized under the laws of the State
of Delaware ("Kimberton"), and MONSEY PRODUCTS OF ARIZONA LLC, a limited
liability company organized under the laws of the State of Arizona ("Monsey
Arizona"), jointly and severally (each of the Company, Monsey Products,
Kimberton and Monsey Arizona, a "Borrower" and collectively, the "Borrowers"),
promise to pay to the order of NATIONSBANK, N.A., a national banking association
(the "Lender"), the principal sum of TEN MILLION DOLLARS ($10,000,000) (the
"Principal Sum") or so much thereof as has been or may be advanced or readvanced
under the Capital Expenditure Loan (as that term is defined in the "Financing
Agreement"' as hereinafter defined), together with interest thereon at the rate
or rates hereinafter provided, in accordance with the following:
1. INTEREST. Commencing as of the date hereof and continuing until
repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear
interest at the Applicable Interest Rate (as that term is defined in the
"Financing Agreement," which is defined below).
2. PAYMENTS AND MATURITY. The unpaid Principal Sum, together with
interest thereon at the rate or rates provided above, shall be payable as
follows:
(a) Interest only on the unpaid Principal Sum shall be paid at the
times and in the manner provided in the Financing Agreement; and
(b) The Borrower shall make installment payments of principal (i)
which, commencing June 1, 2000, and continuing on the first day of each June,
September, December and March thereafter to maturity, are in the amount of five
percent (5%) of the outstanding principal balance of this Note outstanding on
May 31, 2000, and (ii) which, commencing September 1, 2000, shall increase
quarterly on the first day of each December, March, June and September
thereafter to maturity, by an amount equal to five percent (5%) of the aggregate
advances made under the Capital Expenditure Loan during the immediately
preceding three (3) month period; and
1
(c) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on the
earlier of April 30, 2003 or the Revolving Credit Termination Date.
Except when repaid in accordance with 2(c) above, the fact that the balance
hereunder may be reduced to zero from time to time pursuant to the Financing
Agreement will not affect the continuing validity of this Note or the Financing
Agreement, and the balance may be increased to the Principal Sum after any such
reduction to zero.
3. DEFAULT INTEREST. Upon the occurrence of an Event of Default (as
hereinafter defined), the unpaid Principal Sum shall bear interest thereafter at
the Post-Default Rate (as that term is defined in the Financing Agreement) until
such Event of Default is cured.
4. APPLICATION AND PLACE OF PAYMENTS. All payments made on account of
this Note shall be applied in the order provided for in the Financing
Agreement. All payments on account of this Note shall be paid in lawful money
of the United States of America in immediately available funds during regular
business hours of the Lender at its principal office in Baltimore, Maryland
or at such other times and places as the Lender may at any time and from time
to time designate in writing to the Borrowers.
5. PREPAYMENT. The Borrowers may prepay the Principal Sum at the times
and in the manner provided in the Financing Agreement.
6. FINANCING AGREEMENT AND OTHER FINANCING DOCUMENTS. This Note is the
"Capital Expenditure Note" described in an Amended and Restated Financing and
Security Agreement of even date herewith (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the
"Financing Agreement") by and among the Borrowers and the Lender. All terms
used in this Note which are not otherwise defined herein shall have the meaning
set forth in the Financing Agreement. The indebtedness evidenced by this Note
is included within the meaning of the term "Obligations" as defined in the
Financing Agreement. As further set forth in Section 2.5.10 of the Financing
Agreement, this Note does not create a novation with respect to the "Capital
Expenditure Note" (as that term is defined in the Original Financing Agreement
(as that term is defined in the Financing Agreement)).
7. SECURITY. This Note is secured as provided in the Financing
Agreement.
8. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an event of default (individually, an "Event of Default"
and collectively, the "Events of Default") under the terms of this Note:
(a) The failure of the Borrowers to pay to the Lender when due any
and all amounts payable by the Borrowers to the Lender under the terms of this
Note; or
2
(b) The occurrence of an "Event of Default" (as that term is defined
in the Financing Agreement).
9. SECURITY. This Note is secured as provided in the Financing
Agreement.
10. REMEDIES. Upon the occurrence of an Event of Default, the Lender
shall be entitled to exercise all rights, powers, and remedies provided under
the Financing Agreement, the other Financing Documents and applicable Laws (as
that term is defined in the Financing Agreement). The Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrowers,
guarantors and endorsers.
11. EXPENSES. The Borrowers agree to pay to the Lender as provided in the
Financing Agreement all Enforcement Costs (as that term is defined in the
Financing Agreement) incurred by the Lender in connection with the collection
and enforcement of this Note.
12. NOTICES. Any notice, request, or demand to or upon the Borrowers or
the Lender shall be deemed to have been properly given or made when delivered in
accordance with Section 8.1 of the Financing Agreement.
13. MISCELLANEOUS. Each right, power, and remedy of the Lender as
provided for in this Note or any of the other Financing Documents, or now or
hereafter existing under any applicable law or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or any of the other Financing Documents or now or
hereafter existing under any applicable law, and the exercise or beginning of
the exercise by the Lender of any one or more of such rights, powers, or
remedies shall not preclude the simultaneous or later exercise by the Lender of
any or all such other rights, powers, or remedies. No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant,
or agreement of this Note or any of the other Financing Documents, or to
exercise any right, power, or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude the Lender from exercising any such right, power,
or remedy at a later time or times. By accepting payment after the due date of
any amount payable under the terms of this Note, the Lender shall not be deemed
to waive the right either to require prompt payment when due of all other
amounts payable under the terms of this Note or to declare an Event of Default
for the failure to effect such prompt payment of any such other amount. No
course of dealing or conduct shall be effective to amend, modify, waive,
release, or change any provisions of this Note.
14. PARTIAL INVALIDITY. In the event any provision of this Note (or any
part of any provision) is held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision (or
3
remaining part of the affected provision) of this Note; but this Note shall be
construed as if such invalid, illegal, or unenforceable provision (or part
thereof) had not been contained in this Note, but only to the extent it is
invalid, illegal, or unenforceable.
15. CAPTIONS. The captions herein set forth are for convenience only and
shall not be deemed to define, limit, or describe the scope or intent of this
Note.
16. APPLICABLE LAW. The Borrowers acknowledge and agree that this Note,
as one of the Financing Documents, shall be governed by the laws of the State of
Maryland as provided in the Financing Agreement.
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by its duly authorized officers as of the date first written above.
ATTEST: HENRY COMPANY
By: By:
------------------------------- -----------------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and President
Secretary
ATTEST: MONSEY PRODUCTS CO.
By:
- ----------------------------------- -----------------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and Secretary President
ATTEST: KIMBERTON ENTERPRISES, INC.
By:
- ----------------------------------- -----------------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and Secretary President
ATTEST: MONSEY PRODUCTS OF ARIZONA LLC
By its Designated Member
MONSEY PRODUCTS CO.
By:
- ----------------------------------- -----------------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and Secretary President
4
EXHIBIT A-2
REVOLVING CREDIT NOTE
$25,000,000 ................................................ Baltimore, Maryland
April 22,1998
FOR VALUE RECEIVED, HENRY COMPANY, a corporation organized under the laws
of the State of California (the "Company'), MONSEY PRODUCTS CO., a corporation
organized under the laws of the State of Pennsylvania ("Monsey Products"),
KIMBERTON ENTERPRISES, INC., a corporation organized under the laws of the State
of Delaware (Kimberton"), and MONSEY PRODUCTS OF ARIZONA LLC, a limited
liability company organized under the laws of the State of Arizona ("Monsey
Arizona"), jointly and severally (each of the Company, Mousey Products,
Kimberton and Monsey Arizona, a "Borrower" and collectively, the "Borrowers"),
promise to pay to the order of NATIONSBANK, N.A., a national banking association
(the "Lender"), the principal sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000)
(the "Principal Sum"), or so much thereof as has been or may be advanced or
readvanced to or for the account of the Borrowers under the Revolving Loan (as
that term is defined in the "Financing Agreement" as hereinafter defined),
together with interest thereon at the rate or rates hereinafter provided, in
accordance with the following:
1. Interest. Commencing as of the date hereof and continuing until
repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear
interest at the Applicable Interest Rate (as that term is defined in the
"Financing Agreement", which is defined below).
2. Payments and Maturity. The unpaid Principal Sum, together with
interest thereon at the rate or rates provided above, shall be payable as
follows:
(a) Interest only on the unpaid Principal Sum shall be paid at the
times and in the manner provided in the Financing Agreement;
(b) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full an the
Revolving Credit Expiration Date (as defined in the Financing Agreement).
The fact that the balance hereunder may be reduced to zero from time to time
pursuant to the Financing Agreement will not affect the continuing validity of
this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
1
3. Default Interest. Upon the occurrence of an Event of Default (as
hereinafter defined), the unpaid Principal Sum shall bear interest thereafter at
the Post-Default Rate (as that term is defined in the Financing Agreement) until
such Event of Default is cured.
4. Application and Place of Payments. All payments, made on account
of this Note shall be applied in the order provided for in the Financing
Agreement. All payments on account of this Note shall be paid in lawful money
of the United States of America in immediately available funds during regular
business hours of the Lender at its principal office in Baltimore, Maryland
or at such other times and places as the Lander may at any time and from time
to time designate in writing to the Borrowers.
5. Prepayment. The Borrowers may prepay the Principal Sum at the times
and in the manner provided in the Financing Agreement.
6. Financing Agreement and Other Financing Documents. This Note is the
"Revolving Credit Note" described in an Amended and Restated Financing and
Security Agreement of even date herewith by and among the Borrowers and the
Lender (as amended, modified, restated, substituted, extended and renewed at any
time and from time to time, the "Financing Agreement"). The indebtedness
evidenced by this Note is included within the meaning of the term "Obligations"
as defined in the Financing Agreement. The term "Financing Documents as used in
this Note shall have the meaning provided in the Financing Agreement, As
further set forth in Section 2.5.10 of the Financing Agreement, this Note does
not create a novation with respect to the "Revolving Credit Note" (as that term
is defined in the Original Financing Agreement (as that term is defined in the
Financing Agreement)).
7. Events of Default. The occurrence of any one or more of the following
events shall constitute an event of default (individually, an "Event of Default"
and collectively, the "Events of Default") under the terms of this Note:
(a) The failure of the Borrowers to pay to the Lender when due any
and all amounts payable by the Borrowers to the Lender under the terms of this
Note; or
(b) The occurrence of an "Event of Default" (as that term is defined
in the Financing Agreement).
2
8. Security. This Note is secured as provided in the Financing
Agreement.
9. Remedies. Upon the occurrence of an Event of Default, the Lender
shall be entitled to exercise all rights, powers, and remedies provided under
the Financing Agreement, the other Financing Documents and applicable Laws (as
that term is defined in the Financing Agreement). The Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrowers,
guarantors and endorsers.
10. Expenses. The Borrowers agree to pay to the Lender as provided in the
Financing Agreement all Enforcement Costs (as that term is defined in the
Financing Agreement) incurred by the Lender in connection with the collection
and enforcement of this Note.
11. Notices. Any notice, request, or demand to or upon the Borrowers or
the Lender shall be deemed to have been properly given or made when delivered in
accordance with Section 8.1 of the Financing Agreement.
12. Miscellaneous. Each right, power, and remedy of the Lender as
provided for in this Note or any of the other Financing Documents, or now or
hereafter existing under any applicable law or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or any of the other Financing Documents or now or
hereafter existing under any applicable law, and the exercise or beginning of
the exercise by the Lender of any one or more of such rights, powers, or
remedies shall not preclude the simultaneous or later exercise by the Lender of
any or all such other rights, powers, or remedies. No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant,
or agreement of this Note or any of the other Financing Documents, or to
exercise any right, power, or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude the Lender from exercising any such right, power,
or remedy at a later time or times. By accepting payment after the due date of
any amount payable under the terms of this Note, the Lender shall not be deemed
to waive the right either to require prompt payment when due of all other
amounts payable under the terms of this Note or to declare an Event of Default
for the failure to effect such prompt
3
payment of any such other amount. No course of dealing or conduct shall be
effective to amend, modify, waive, release, or change any provisions of this
Note.
13. Partial Invalidity. In the event any provision of this Note (or any
part of any provision) is held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision (or remaining part of
the affected provision) of this Note; but this Note shall be construed as if
such invalid, illegal, or unenforceable provision (or part thereof) had not been
contained in this Note, but only to the extent it is invalid, illegal, or
unenforceable.
14. Captions. The captions herein set forth are for convenience only and
shall not be deemed to define, limit, or describe the scope or intent of this
Note.
15. Applicable Law. The Borrowers acknowledge and agree that this Note,
as one of the Financing Documents, shall be governed by the laws of the State of
Maryland as provided in the Financing Agreement.
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by its duly authorized officers as of the date first written above.
ATTEST: HENRY COMPANY
By: By:
------------------------------- ----------------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and President
Secretary
ATTEST: MONSEY PRODUCTS CO.
By:
- ----------------------------------- ----------------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and Secretary President
ATTEST: KIMBERTON ENTERPRISES, INC.
By:
- ----------------------------------- ----------------------------------
4
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and Secretary President
ATTEST: MONSEY PRODUCTS OF ARIZONA LLC
By its Designated Member
MONSEY PRODUCTS CO.
By:
- ----------------------------------- ----------------------------------
Jeffrey A. Wahba Richard B. Gordinier
Chief Financial Officer and Secretary President
5
EXHIBIT B
NATIONSBANK BUSINESS CREDIT
WIRE TRANSFER PROCEDURES
The transfer of funds by means of wire may be made by NationsBank (lender) at
the request of its customer (borrower). Such wire transfers are categorized by
lender as either repetitive or non-repetitive.
Repetitive:
Repetitive wire transfers may vary in amount, but are consistent in terms of the
payee, the location to which funds are wired, the bank name, account number and
the routing transit number.
Either borrower or lender may initiate a repetitive wire transfer. The borrower
may identify the repetitive nature of transfers and request they be established
as such via the "Repetitive Wire Transfer Authorization Form" (copy attached).
Lender, after observing numerous transfers to the same recipient and
destination, may initiate the repetitive process by faxing or mailing the
"Repetitive Wire Authorization Form" to the borrower for completion and return.
Although a first request for a repetitive wire transfer may be honored from a
faxed copy of the "Repetitive Wire Transfer Authorization Form", a copy of the
form containing an original signature must be received from the borrower. All
transfer authorization forms must be approved by and contain the signature of a
person authorized by the borrower to advance funds from borrower's line of
credit with the lender.
After receipt of the original "Repetitive Wire Transfer Authorization Form" by
the lender, subsequent wire transfers to the recipient named thereon may be
initiated by telephone request, provided the requesting party is identified by
the lender as a person authorized by borrower to advance funds from the
borrower's line of credit with lender.
Non-Repetitive:
Non-Repetitive wire transfers are directed to recipients on a one-time or
infrequent basis or are directed to varied destinations. Non-repetitive wire
transfers require that written notification be provided to lender by borrower,
showing payee, location, account number, routing transit number and name and
location of bank into which funds are to be transferred. Such written
notification may be provided by means of a "Non-Repetitive Wire Transfer
Authorization Form" (copy attached).
Required information may be faxed to lender in order to expedite the transfer;
however, a copy of the transfer authorization form with an original signature(s)
must be received by lender from
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borrower. The transfer authorization form must be approved by and contain the
signature of a person authorized by the borrower to advance funds from
borrower's line of credit with the lender.
For any non-repetitive wire transfer, Lender may, at its discretion, perform a
telephone verification with an authorized representative (the original signer or
another authorized representative) of borrower prior to initiating the transfer.
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EXHIBIT C
FINANCING AGREEMENT
____________ COMPLIANCE CERTIFICATE
THIS CERTIFICATE is made as of __________________, 199_ , by
____________________________________, a ________________ organized under the
laws of the State of ___________________ (the "Borrower"), to
_______________________________, a national banking association (the "Lender"),
pursuant to Section of the Amended and Restated Financing and Security
Agreement dated ______________, 199_, (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the
"Financing Agreement") by and between the Borrower and the Lender.
I, ____________________, hereby certify that I am the ______________ of the
Borrower and am a Responsible Officer (as that term is defined in the Financing
Agreement) authorized to certify to the Lender on behalf the Borrower as
follows:
(a) This Certificate is given to induce the Lender to make
advances to the Borrower under the Financing Agreement.
(b) This Certificate accompanies the _____________
financial statements for the period ended ___________________, 199__ (the
"Current Financials") which the Borrower is furnishing to the Lender pursuant to
Section 6.
1.1(__) of the Financing Agreement. The Current Financials have been prepared in
accordance with GAAP (as that term is defined in the Financing Agreement).
(c) As required by Section 6.
1.1(__) of the Financing Agreement, I have set forth on Schedule 1 a detailed
computation of each financial covenant in Financing Agreement and a cash flow
projection report.
(d) No change has occurred to the information contained in
the Collateral Disclosure List except as set forth on Schedule 2 to this
Certificate.
By way of example and not limitation, the Collateral Disclosure List, together
with Schedule 2, contains a listing of all of the Borrower's Patents,
Trademarks, Copyrights (as those terms are defined in the Financing Agreement),
all locations (owned, leased, warehouses or otherwise) where any Collateral (as
that term is defined in the Financing Agreement) is located, all Subsidiaries
(as that term is defined in the Financing Agreement).
(e) As of the date hereof, there exists no Default or Event
of Default, as defined in the Article 7 of the Financing Agreement, nor any
event which, upon notice or the lapse of time, or both, would constitute such an
Event of Default.
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(f) On the date hereof, the representations and warranties
contained in Article 4 of the Financing Agreement are true with the same effect
as though such representations and warranties had been made on the date hereof.
WITNESS my signature this _____ day of ____________, 199_.
______________________________
Name:
Title:
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Schedule 1
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Schedule 2
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Schedule 4.1.10
LITIGATION
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Schedule 4.1.13
OTHER INDEBTEDNESS
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Schedule 4.1.21
LIENS ON COLLATERAL
Unpaid
Principal
Asset Covered Lienholder Balance
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Schedule 6.2.5
OTHER PERMITTED INDEBTEDNESS
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ANNEX 1
FINANCIAL COVENANTS
1. CURRENT RATIO. The Company and its Subsidiaries on a consolidated
basis will at all times, tested as of the last day of each fiscal quarter,
maintain a Current Ratio of not less than 1.75 to 1.0.
2. ADJUSTED NET WORTH. The Company and its Subsidiaries on a
consolidated basis will at all times, tested as of the last day of each
fiscal quarter, maintain an Adjusted Net Worth of not less than the following:
Fiscal Quarter Ending Adjusted Net Worth
- -----------------------------------------------------------------------------
June 30, 1998 $ 8,000,000
September 30, 1998 $ 9,000,000
December 31, 1998 $10,000,000
March 31, 1999 and thereafter $10,000,000
PLUS 50% of the Borrowers' cumulative
annual net income (without reduction
for annual losses) for each fiscal year
commencing with the fiscal year ending
December 31, 1998.
3. DEBT SERVICE COVERAGE RATIO. The Company and its Subsidiaries on a
consolidated basis will maintain for each fiscal quarter of each fiscal year (a)
tested commencing with the quarter ending June 30, 1998, through and including
the quarter ending March 31, 1999, for the period commencing with the Closing
Date and ending on the last day of the applicable fiscal quarter, and (b) tested
commencing with the fiscal quarter ending June 30, 1999 and thereafter, for the
twelve month period ending on the last day of the applicable fiscal quarter, a
ratio of (i) EBITDA minus Capital Expenditures (other than those financed
pursuant to the Capital Expenditure Loan Facility) minus dividends to (ii) Debt
Service of not less than 1.25 to 1.0.
4. INTEREST COVERAGE RATIO. The Company and its Subsidiaries on a
consolidated basis will maintain for each fiscal quarter of each fiscal year (a)
tested commencing with the quarter ending June 30, 1998, through and including
the quarter ending March 31, 1999, for the period commencing with the Closing
Date and ending on the last day of the applicable fiscal quarter, and (b) tested
commencing with the fiscal quarter ending June 30, 1999 and continuing for each
fiscal quarter thereafter, for the twelve month period ending on the last day of
the
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applicable fiscal quarter, a ratio of (i) EBITDA minus Capital Expenditures
(other than those financed pursuant to the Capital Expenditure Loan Facility)
minus dividends to (ii) interest with respect to Indebtedness for Borrowed Money
scheduled to be due and payable during such period of not less than the
following:
Fiscal Quarter Ending Interest Coverage Ratio
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June 30, 1998 and September 30, 1998 1.25 to 1.0
December 31, 1998 through and including 1.50 to 1.0
September 30, 1999
December 31, 1999 through and including 1.75 to 1.0
September 30, 2000
December 31, 2000 and thereafter 2.0 to 1.0
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LIST OF EXHIBITS
A-1. Revolving Credit Note
A-2. Capital Expenditure Note
B. Security Procedures
C. Form of Compliance Certificate
LIST OF SCHEDULES
Schedule 1.1 Certain Defined Terms
Schedule 4.1.10 Litigation
Schedule 4.1.5 Conflicts
Schedule 4.1.13 Other Indebtedness
Schedule 4.1.17 Certain Bulk Sales
Schedule 4.1.19 Employee Relations
Schedule 4.1.20 Presence of Hazardous Materials
Schedule 4.1.21 Permitted Liens
Schedule 5.1.13 Appraisals
Schedule 6.2.5 Other Permitted Indebtedness
Schedule 6.2.11 Certain Permitted Liens