Exhibit 10.23
================================================================================
LOAN AND SECURITY AGREEMENT
among
HUDSON RESPIRATORY CARE INC.
as Borrower,
the Lenders Referred to herein
and
MW POST ADVISORY GROUP, LLC
as Administrative Agent
Dated as of October 7, 2003
================================================================================
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION............................................. 1
1.1 Definitions........................................................ 1
1.2 Accounting Terms.................................................. 22
1.3 Code.............................................................. 22
1.4 Construction...................................................... 22
1.5 Schedules and Exhibits............................................ 22
2. LOAN AND TERMS OF PAYMENT............................................... 22
2.1 Advances.......................................................... 22
2.2 [Intentionally Omitted]........................................... 23
2.3 Borrowing Procedures.............................................. 23
2.4 Payments.......................................................... 25
2.5 [Intentionally Omitted]............................................27
2.6 Interest Rates: Rates, Payments,
and Calculations.................................................. 27
2.7 [Intentionally Omitted]........................................... 28
2.8 Crediting Payments................................................ 28
2.9 Designated Account................................................ 28
2.10 Maintenance of Loan Account; Statements of Obligations............ 28
2.11 Fees.............................................................. 29
2.12 [Intentionally Omitted]........................................... 29
2.13 [Intentionally Omitted]........................................... 29
2.14 [Intentionally Omitted]............................................29
2.15 Designated Senior Debt............................................ 29
3. CONDITIONS; TERM OF AGREEMENT............................................30
3.1 Conditions Precedent to the Initial Extension of Credit........... 30
3.2 Conditions Subsequent to the Initial Extension of Credit.......... 34
3.3 Conditions Precedent to all Extensions of Credit...................34
3.4 Term...............................................................34
3.5 Effect of Termination..............................................35
3.6 Early Termination by Borrower......................................35
4. CREATION OF SECURITY INTERESTS.......................................... 35
4.1 Grant of Security Interests........................................35
4.2 Negotiable Collateral..............................................36
4.3 Collection of Accounts, General Intangibles, and
Negotiable Collateral..............................................36
4.4 Filing of Financing Statements; Commercial Tort Claims;
Delivery of Additional Documentation Required......................36
4.5 Power of Attorney................................................. 37
4.6 Right to Inspect.................................................. 38
4.7 Control Agreements................................................ 38
1
5. REPRESENTATIONS AND WARRANTIES.......................................... 39
5.1 No Encumbrances................................................... 39
5.2 Usury Exemption................................................... 39
5.3 [Intentionally omitted]........................................... 39
5.4 Equipment......................................................... 39
5.5 Location of Inventory and Equipment............................... 39
5.6 Inventory Records................................................. 39
5.7 State of Incorporation; Location of Chief Executive
Office; FEIN; Organizational ID Number; Commercial Tort
Claims.............................................................39
5.8 Due Organization and Qualification; Subsidiaries...................40
5.9 Due Authorization; No Conflict.....................................40
5.10 Litigation.........................................................42
5.11 No Material Adverse Change.........................................42
5.12 Fraudulent Transfer................................................42
5.13 Employee Benefits..................................................42
5.14 Environmental Condition............................................43
5.15 Brokerage Fees.....................................................43
5.16 Intellectual Property..............................................43
5.17 Leases.............................................................43
5.18 Deposit Accounts and Securities Accounts...........................43
5.19 Complete Disclosure................................................43
5.20 Indebtedness.......................................................44
5.21 Subordinated Notes Indenture.......................................44
5.22 CFCs...............................................................44
6. AFFIRMATIVE COVENANTS................................................... 44
6.1 Accounting System..................................................44
6.2 Collateral Reporting...............................................44
6.3 Financial Statements, Reports, Certificates........................45
6.4 Guarantor Reports..................................................47
6.5 Returns............................................................47
6.6 Maintenance of Properties..........................................47
6.7 Taxes..............................................................47
6.8 Insurance..........................................................47
6.9 Location of Inventory and Equipment................................49
6.10 Compliance with Laws...............................................49
6.11 Leases.............................................................49
6.12 Existence..........................................................49
6.13 Environmental......................................................49
6.14 Disclosure Updates.................................................49
6.15 Formation of Subsidiaries..........................................50
6.16 Amendment of Preferred Stock.......................................50
7. NEGATIVE COVENANTS...................................................... 50
7.1 Indebtedness.......................................................50
2
7.2 Liens..............................................................52
7.3 Restrictions on Fundamental Changes................................52
7.4 Disposal of Assets.................................................52
7.5 Change Name........................................................52
7.6 Nature of Business.................................................52
7.7 Prepayments and Amendments.........................................52
7.8 Change of Control..................................................53
7.9 Consignments.......................................................53
7.10 Distributions......................................................53
7.11 Accounting Methods.................................................53
7.12 Investments........................................................53
7.13 Transactions with Affiliates.......................................54
7.14 Suspension.........................................................54
7.15 [Intentionally Omitted]............................................54
7.16 Use of Proceeds....................................................54
7.17 Inventory and Equipment with Bailees...............................54
7.18 Financial Covenants................................................54
7.19 Payments on Affiliate Notes........................................55
7.20 Limitation on Indebtedness of Unrestricted Subsidiaries............55
8. EVENTS OF DEFAULT........................................................55
9. THE LENDER GROUP'S RIGHTS AND REMEDIES...................................57
9.1 Rights and Remedies................................................57
9.2 Remedies Cumulative................................................60
10. TAXES AND EXPENSES.......................................................60
11. WAIVERS; INDEMNIFICATION.................................................60
11.1 Demand; Protest; etc...............................................60
11.2 The Lender Group's Liability for Borrower Collateral...............60
11.3 Indemnification....................................................61
12. NOTICES..................................................................61
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.............................. 62
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...............................63
14.1 Assignments and Participations.....................................63
14.2 Successors.........................................................66
15. AMENDMENTS; WAIVERS..................................................... 66
15.1 Amendments and Waivers.............................................66
15.2 [Intentionally Omitted]............................................67
15.3 No Waivers; Cumulative Remedies....................................67
3
16. AGENT; THE LENDER GROUP..................................................67
16.1 Appointment and Authorization of Agent.............................67
16.2 Delegation of Duties...............................................68
16.3 Liability of Agent.................................................68
16.4 Reliance by Agent..................................................69
16.5 Notice of Default or Event of Default..............................69
16.6 Credit Decision....................................................70
16.7 Costs and Expenses; Indemnification................................70
16.8 Agent in Individual Capacity.......................................71
16.9 Successor Agent....................................................71
16.10 Lender in Individual Capacity......................................72
16.11 Withholding Taxes..................................................72
16.12 Collateral Matters.................................................74
16.13 Restrictions on Actions by Lenders; Sharing of Payments............75
16.14 Agency for Perfection..............................................75
16.15 Payments by Agent to the Lenders...................................76
16.16 Concerning the Collateral and Related Loan Documents...............76
16.17 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information............. 76
16.18 Several Obligations; No Liability................................. 77
17. GENERAL PROVISIONS...................................................... 78
17.1 Effectiveness..................................................... 78
17.2 Section Headings.................................................. 78
17.3 Interpretation.................................................... 78
17.4 Severability of Provisions........................................ 78
17.5 Amendments in Writing............................................. 78
17.6 Counterparts; Telefacsimile Execution............................. 78
17.7 Revival and Reinstatement of Obligations.......................... 78
17.8 Confidentiality................................................... 79
17.9 Integration....................................................... 79
4
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Schedule A-1 Lenders' Accounts
Schedule C-1 Revolver Commitments
Schedule D-1 Designated Account
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7(a) States of Organization
Schedule 5.7(b) Chief Executive Offices
Schedule 5.7(c) FEINs
Schedule 5.7(d) Commercial Tort Claims
Schedule 5.8(b) Capitalization of Borrower
Schedule 5.8(c) Capitalization of Borrower's
Subsidiaries
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Deposit Accounts and Securities
Accounts
Schedule 5.20 Permitted Indebtedness
5
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into
as of October 7, 2003, among HUDSON RESPIRATORY CARE INC., a California
corporation ("Borrower"), the Lenders referred to herein, and MW POST ADVISORY
GROUP, LLC, a Delaware limited liability company, as administrative agent for
the Lenders ("Agent").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Account" means an account (as that term is defined in the Code), and
any and all supporting obligations in respect thereof.
"Account Debtor" means any Person who is obligated under, with respect
to, or on account of, an Account, chattel paper, or a General Intangible.
"Additional Documents" has the meaning set forth in Section 4.4(c).
"Advance" means that portion of any Borrowing which is to be provided
to the Borrower by any Lender pursuant to its Revolver Commitment.
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" means the possession, directly or indirectly through
one or more intermediaries, of the power to direct the management and policies
of a Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, for purposes of Section 7.13 hereof: (a) any Person
which owns directly or indirectly 10% or more of the Stock having ordinary
voting power for the election of directors or other members of the governing
body of a Person or 10% or more of the partnership or other ownership interests
of a Person (other than as a limited partner of such Person) shall be deemed an
Affiliate of such Person, (b) each director (or comparable manager) of a Person
shall be deemed to be an Affiliate of such Person, and (c) each partnership or
joint venture in which a Person is a partner or joint venturer shall be deemed
an Affiliate of such Person.
"Affiliate Subordination Agreement" means a subordination agreement
executed and delivered by each holder of a Subordinated Convertible Note and
Agent, the form and substance of which is satisfactory to Agent.
1
"Agent" means MW Post Advisory Group, LLC, a Delaware limited
liability company, in its capacity as administrative agent hereunder, and any
successor thereto.
"Agent-Related Persons" means Agent, together with its Affiliates,
officers, directors, employees, attorneys, and agents.
"Agent's Liens" means the Liens granted by Borrower or its
Subsidiaries to Agent under this Agreement or the other Loan Documents.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Applicable Interest Rate" means, as to all Advances, a rate equal to
11%; provided, however, that with respect to any Advances that have been repaid
and subsequently reborrowed the higher of the following rates shall apply: a) a
fixed rate equal to 11%, or b) a fixed rate equal to the LIBOR Rate (determined
as of the date upon which the Advance is re-borrowed) plus 10.0%.
"Assignee" has the meaning set forth in Section 14.1(a).
"Assignment and Acceptance" means an Assignment and Acceptance
Agreement substantially in the form of Exhibit A-1.
"Authorized Person" means any officer or employee of Borrower.
"Availability" means, as of any date of determination, the amount that
Borrower is entitled to borrow as Advances hereunder (after giving effect to all
then outstanding Obligations and all sublimits and reserves then applicable
hereunder).
"Bankruptcy Code" means title 11 of the United States Code, as in
effect from time to time.
"Base LIBOR Rate" means the rate per annum, determined by Agent in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/100%), to be the rate at which Dollar deposits (for delivery on the
first day of the requested Interest Period) are offered to major banks in the
London interbank market 2 Business Days prior to the date of the requested
Advance, for a three month term in an amount comparable to the amount of the
Loan requested by Borrower in accordance with this Agreement, which
determination shall be conclusive in the absence of manifest error.
"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of
Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the
past six years.
"Board of Directors" means the board of directors (or comparable
managers) of Borrower or any committee thereof duly authorized to act on behalf
of the board of directors (or comparable managers).
2
"Books" means Borrower's and its Subsidiaries' now owned or hereafter
acquired books and records (including all of their Records indicating,
summarizing, or evidencing their assets (including the Collateral) or
liabilities, all of Borrower's or its Subsidiaries' Records relating to their
business operations or financial condition, and all of their goods or General
Intangibles related to such information).
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower Collateral" means all of Borrower's now owned or hereafter
acquired right, title, and interest in and to each of the following:
(a) all of its Accounts,
(b) all of its Books,
(c) all of its commercial tort claims,
(d) all of its Deposit Accounts,
(e) all of its Equipment,
(f) all of its General Intangibles,
(g) all of its Inventory,
(h) all of its Investment Property (including all of its
securities and Securities Accounts),
(i) all of its Negotiable Collateral,
(j) money or other assets of Borrower that now or hereafter come
into the possession, custody, or control of any member of the Lender Group, and
(k) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all Accounts, Books, Deposit Accounts, Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, Real
Property, money, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof; provided,
however, that Borrower Collateral does not include any Excluded Collateral.
"Borrower Preferred Stock" means (a) 300,000 shares of Borrower's
111/2% Senior PIK Preferred Stock due 2010 (liquidation preference $100 per
share) and such additional shares of Borrower's 11 1/2% Senior PIK Preferred
Stock due 2010 as may be issued in lieu of cash dividends thereon and (b) 3,000
shares of Borrower's 12% Junior Convertible Preferred Stock (liquidation
preference $1,000 per share) and such additional
3
shares of Borrower's 12% Junior Convertible Preferred Stock as may be issued in
lieu of cash dividends thereon.
"Borrowing" means a borrowing hereunder consisting of Advances made on
the same day by the Lenders (or Agent on behalf thereof).
"Business Day" means any day that is not a Saturday, Sunday,or other
day on which banks are authorized or required to close in the state of
California, except that, if a determination of a Business Day shall relate to
the determination of the Base LIBOR Rate in respect of any Loan, the term
"Business Day" also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.
"Capital Expenditures" means, with respect to any Person for any
period, the aggregate of all expenditures by such Person and its Subsidiaries
during such period that are capital expenditures as determined in accordance
with GAAP, whether such expenditures are paid in cash or financed.
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means that portion of the obligations
under a Capital Lease that is required to be capitalized in accordance with
GAAP.
"Cash Equivalents" means (a) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States or issued by any agency
thereof and backed by the full faith and credit of the United States, in each
case maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Rating Group ("S&P") or Moody's Investors Service, Inc.
("Moody's"), (c) commercial paper maturing no more than 270 days from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's, (d) certificates of deposit or
bankers' acceptances maturing within 1 year from the date of acquisition thereof
issued by any bank organized under the laws of the United States or any state
thereof having at the date of acquisition thereof combined capital and surplus
of not less than $250,000,000, (e) demand Deposit Accounts maintained with any
bank organized under the laws of the United States or any state thereof so long
as the amount maintained with any individual bank is less than or equal to
$100,000 and is insured by the Federal Deposit Insurance Corporation, and (f)
Investments in money market funds substantially all of whose assets are invested
in the types of assets described in clauses (a) through (e) above.
"Cash Management Account" has the meaning set forth for such term in
the WFF Loan Agreement.
4
"CFC" means a controlled foreign corporation (as that term is defined
in the IRC).
"Change of Control" means that (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 20%, or more, of the Stock of Borrower
having the right to vote for the election of members of the Board of Directors,
(b) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders, becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
20%, or more, of the Stock of Holding having the right to vote for the election
of members of Holding's board of directors, (c) a majority of the members of the
Board of Directors do not constitute Continuing Directors, or (d) Borrower
ceases to own, directly or indirectly, and control 100% of the outstanding Stock
of HRC and each of the Restricted Subsidiaries extant as of the Closing Date.
"Closing Date" means the date of the making of the initial Advance (or
other extension of credit) hereunder.
"Closing Date Business Plan" means the set of Projections of Borrower
for the 3 year period following the Closing Date (on a year by year basis, and
for the 1 year period following the Closing Date and the full year of 2004, on a
quarter by quarter basis), in form and substance (including as to scope and
underlying assumptions) satisfactory to Agent.
"Code" means the California Uniform Commercial Code, as in effect from
time to time.
"Collateral" means all assets and interests in assets and proceeds
thereof now owned or hereafter acquired by Borrower or the Restricted
Subsidiaries in or upon which a Lien is granted under any of the Loan Documents.
"Collateral Access Agreement" means a landlord waiver, bailee letter,
or acknowledgement agreement of any lessor, warehouseman, processor, consignee,
or other Person in possession of, having a Lien upon, or having rights or
interests in Borrower's or the Restricted Subsidiaries' Books, Equipment, or
Inventory, in each case, in form and substance satisfactory to Agent.
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Commercial Tort Claim Assignment" has the meaning set forth in
Section 4.4(b).
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C-1 delivered by the chief financial officer of Borrower to Agent.
5
"Continuing Director" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Borrower on the Closing Date, and
(b) any individual who becomes a member of the Board of Directors after the
Closing Date if such individual was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding any
such individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower and whose initial assumption of office resulted from such contest or
the settlement thereof.
"Control Agreement" means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by Borrower or one of the
Restricted Subsidiaries, Agent, and the applicable securities intermediary (with
respect to a Securities Account) or bank (with respect to a Deposit Account).
"Daily Balance" means, as of any date of determination and with
respect to any Obligation, the amount of such Obligation owed at the end of such
day.
"Default" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"Deposit Account" means any deposit account (as that term is defined
in the Code).
"Designated Account" means the Deposit Account of Borrower identified
on Schedule D-1.
"Designated Account Bank" has the meaning ascribed thereto on Schedule
D-1.
"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Agent regarding the extensions of credit to be made on
the Closing Date, the form and substance of which is satisfactory to Agent.
"Dollars" or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period, Borrower's and the
Restricted Subsidiaries' consolidated net earnings (or loss), minus
extraordinary gains and interest income, plus (a) non-cash extraordinary losses,
(b) Interest Expense (including any non-cash interest expense), (c) taxes based
on or determined by reference to income, (d) depreciation and amortization, (e)
non-recurring charges incurred in Borrower's fiscal year ending December 31,
2003 associated with the financing provided under the Loan Documents and the
repayment of Indebtedness under the Existing Credit Agreement, (f) non-recurring
charges incurred in Borrower's fiscal year ending December 31, 2003 associated
with the operations of Borrower and the Restricted Subsidiaries in an amount not
to exceed
6
$2,000,000, and (g) other non-cash charges (including noncash compensation
charges), in each case for such period and as determined in accordance with
GAAP.
"Eligible Transferee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender, (e) so
long as no Event of Default has occurred and is continuing, any other Person
approved by Agent and Borrower (which approval of Borrower shall not be
unreasonably withheld, delayed, or conditioned), and (f) during the continuation
of an Event of Default, any other Person approved by Agent.
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of Borrower, its Subsidiaries, or any of their predecessors in
interest, (b) from adjoining properties or businesses, or (c) from or onto any
facilities which received Hazardous Materials generated by Borrower, its
Subsidiaries, or any of their predecessors in interest.
"Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy, or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrower or its
Subsidiaries, relating to the environment, employee health and safety, or
Hazardous Materials, including CERCLA; RCRA; the Federal Water Pollution Control
Act, 33 USC Section 1251 et seq; the Toxic Substances Control Act, 15 USC
Section 2601 et seq; the Clean Air Act, 42 USC Section 7401 et seq.; the Safe
Drinking Water Act, 42 USC Section 3803 et seq.; the Oil Pollution Act of 1990,
33 USC Section 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 USC Section 11001 et seq.; the Hazardous Material
Transportation Act, 49 USC Section 1801 et seq.; and the Occupational Safety and
Health Act, 29 USC Section 651 et seq. (to the extent it regulates occupational
exposure to Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility
7
studies), fines, penalties, sanctions, and interest incurred as a result of any
claim or demand by any Governmental Authority or any third party, and which
relate to any Environmental Action.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Equipment" means equipment (as that term is defined in the Code) and
includes machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles), computer hardware, tools, parts, and goods
(other than consumer goods, farm products, or Inventory), wherever located,
including all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower or its Subsidiaries under IRC Section 414(b), (b) any trade or business
subject to ERISA whose employees are treated as employed by the same employer as
the employees of Borrower or its Subsidiaries under IRC Section 414(c), (c)
solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group of
which Borrower or any of its Subsidiaries is a member under IRC Section 414(m),
or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC,
any Person subject to ERISA that is a party to an arrangement with Borrower or
any of its Subsidiaries and whose employees are aggregated with the employees of
Borrower or its Subsidiaries under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect
from time to time.
"Excluded Collateral" means 33-1/3% of the issued and outstanding
Stock of the Mexican Subsidiaries and the proceeds thereof and (b) any licenses,
permits, or agreements solely in the event and to the extent that a grant of a
Lien on such license, permit, or agreement would result in a breach or
termination of the terms of, or constitute a default under, or termination of
any such license, permit, or agreement (other than to the extent that any such
term would be rendered ineffective pursuant to Section 9-406, 9-407, or 9-408 of
the Uniform Commercial Code (or any successor provision or provisions) of any
relevant jurisdiction) and, in any event, immediately upon the ineffectiveness,
lapse or termination of any such terms or potential default under such license,
permit, or agreement, the Excluded Collateral shall not include, and Borrower
shall be deemed to have granted a security interest in, all such licenses,
permits, and agreements; provided, however, that Excluded Collateral shall not
include (and, accordingly, Borrower Collateral shall include) any and all
proceeds of any of such assets; provided, further, that, any license, permit, or
agreement qualifying as
8
Excluded Collateral no longer shall constitute Excluded Collateral (and instead
shall constitute Borrower Collateral) from and after such time as the licensor
or other party to such license, permit, or agreement consents to the grant of a
Lien in favor of Agent in such license, permit, or agreement.
"Existing Agent" means Deutsche Bank Trust Company Americas, as
administrative agent for the lenders under the Existing Credit Agreement.
"Existing Credit Agreement" means the Amended and Restated Credit
Agreement dated May 14, 2002, among Borrower, the lenders party thereto, and
Existing Agent, as amended from time to time.
"Extraordinary Receipts" means any Collections received by Borrower or
any of its Subsidiaries not in the ordinary course of business (and not
consisting of proceeds described in Section 2.4(c)(i) hereof), including, (a)
foreign, United States, state or local tax refunds, (b) pension plan reversions,
(c) proceeds of insurance (including proceeds of the key man life insurance
policies) to the extent such proceeds exceed the Dollar amount set forth in
Section 6.8(b) and Agent elects to apply such proceeds to payment of the
Obligations, (d) judgments, proceeds of settlements or other consideration of
any kind in connection with any cause of action other than causes of actions to
collect Accounts, (e) condemnation awards (and payments in lieu thereof), (f)
indemnity payments and (g) any purchase price adjustment received in connection
with any purchase agreement.
"Family Member" means, with respect to any individual, any other
individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.
"Family Trusts" means, with respect to any individual, trusts or other
estate planning vehicles established for the benefit of such individual or
Family Members of such individual and in respect of which such individual serves
as trustee or in a similar capacity.
"Fee Letter" means that certain fee letter, dated as of even date
herewith, between Borrower and Agent, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"General Intangibles" means general intangibles (as that term is
defined in the Code), including payment intangibles, contract rights, rights to
payment, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trade secrets, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to
9
payment and other rights under any royalty or licensing agreements, infringement
claims, computer programs, information contained on computer disks or tapes,
software, literature, reports, catalogs, insurance premium rebates, tax refunds,
and tax refund claims, and any and all supporting obligations in respect
thereof, and any other personal property other than Accounts, Deposit Accounts,
goods, Investment Property, and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"Guarantor" means each of (a) Holding and (b) IH Holding.
"Guarantor Security Agreement" means the security agreement executed
and delivered by each Guarantor in favor of Agent, in each case, in form and
substance satisfactory to Agent.
"Guaranty" means that certain general continuing guaranty executed and
delivered by each Guarantor in favor of Agent, for the benefit of the Lender
Group, in form and substance satisfactory to Agent.
"Hazardous Materials" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Hedge Agreement" means any and all agreements or documents now
existing or hereafter entered into by Borrower or its Subsidiaries that provide
for an interest rate, credit, commodity or equity swap, cap, floor, collar,
forward foreign exchange transaction, currency swap, cross currency rate swap,
currency option, or any combination of, or option with respect to, these or
similar transactions, for the purpose of hedging Borrower's or its Subsidiaries'
exposure to fluctuations in interest or exchange rates, loan, credit exchange,
security, or currency valuations or commodity prices.
"Holding" means River Holding Corp., a Delaware corporation.
10
"Holding Preferred Stock" means (a) 300,000 shares of Holding's 11
1/2% Senior Exchangeable PIK Preferred Stock due 2010 (liquidation preference
$100 per share) and such additional shares of Holding's 11 1/2% Senior
Exchangeable PIK Preferred Stock due 2010 as may be issued in lieu of cash
dividends thereon and (b) 3,000 shares of Holding's 12% Junior Convertible
Cumulative Preferred Stock due 2010 (liquidation preference $1,000 per share)
and such additional shares of Holding's 12% Junior Convertible Cumulative
Preferred Stock due 2010 as may be issued in lieu of cash dividends thereon.
"Holding Stock Pledge Agreement" means a stock pledge agreement, in
form and substance satisfactory to Agent, executed and delivered by Holding and
Agent with respect to the pledge of the Stock of Borrower.
"HRC" means HRC Holding Inc., a Delaware corporation.
"HRC Notes" means those certain Unsecured Senior Promissory Notes due
2004 issued by HRC to certain Affiliates, shareholders, and officers of Borrower
in the aggregate principal amount of $10,100,000 and those certain HRC Holding
Inc. Promissory Notes issued by HRC to certain Affiliates of Borrower in the
aggregate principal amount of $2,264,241.
"IH Holding" means IH Holding LLC, a Delaware limited liability
company.
"Indebtedness" means, without duplication, (a) all obligations for
borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations in respect
of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all Capitalized Lease Obligations, (d) all obligations
or liabilities of others secured by a Lien on any asset of a Person or its
Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) all obligations to pay the deferred purchase price of assets (other than
trade payables incurred in the ordinary course of business and repayable in
accordance with customary trade practices), (f) all obligations owing under
Hedge Agreements, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with recourse) any obligation of any other Person that constitutes
Indebtedness under any of clauses (a) through (f) above. The amount of
Indebtedness attributed to a Person under clause (d) shall be equal to the fair
market value of the assets of such Person that are subject to the Lien.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
11
"Intercompany Subordination Agreement" means a subordination agreement
executed and delivered by Borrower, Holding, HRC, the Restricted Subsidiaries
and Agent, the form and substance of which is satisfactory to Agent.
"Intercreditor Agreement" means that certain intercreditor agreement
between WFF and Agent, the form and substance of which is satisfactory to WFF
and Agent.
"Interest Expense" means, for any period, the aggregate of the
interest expense of Borrower and its Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP.
"Inventory" means inventory (as that term is defined in the Code).
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practice), purchases or other
acquisitions of Indebtedness, Stock, or all or substantially all of the assets
of such other Person (or of any division or business line of such other Person),
and any other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP.
"Investment Property" means investment property (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time
to time.
"Lender" and "Lenders" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 14.1, and shall
include Post at all times, regardless of whether Post at any time has any
commitment to lend under this Agreement.
"Lender Group" means, individually and collectively, each of the
Lenders and Agent.
"Lender Group Expenses" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower or its
Subsidiaries under any of the Loan Documents that are paid, advanced, or
incurred by the Lender Group, (b) fees or charges paid or incurred by Agent in
connection with the Lender Group's transactions with Borrower or its
Subsidiaries, including, fees or charges for photocopying, notarization,
couriers and messengers, telecommunication, public record searches (including
tax lien, litigation, and UCC searches and including searches with the patent
and trademark office, the copyright office, or the department of motor
vehicles), filing, recording, publication,
12
appraisal (including periodic collateral appraisals or business valuations to
the extent of the fees and charges (and up to the amount of any limitation)
contained in this Agreement), real estate surveys, real estate title policies
and endorsements, and environmental audits, (c) costs and expenses incurred by
Agent in the disbursement of funds to Borrower or other members of the Lender
Group (by wire transfer or otherwise), (d) charges paid or incurred by Agent
resulting from the dishonor of checks, (e) reasonable costs and expenses paid or
incurred by the Lender Group to correct any default or enforce any provision of
the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) audit fees and expenses of Agent related to audit examinations
of the Books to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, (g) reasonable costs and expenses of
third party claims or any other suit paid or incurred by the Lender Group in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or the Lender Group's relationship with
Borrower or any its Subsidiaries, (h) Agent's reasonable costs and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, syndicating, or amending the Loan Documents; (i)
Agent's and each Lender's reasonable costs and expenses (including attorneys,
accountants, consultants, and other advisors fees and expenses) incurred in
terminating, enforcing (including attorneys, accountants, consultants, and other
advisors fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower or its
Subsidiaries or in exercising rights or remedies under the Loan Documents), or
defending the Loan Documents, irrespective of whether suit is brought, or in
taking any Remedial Action concerning the Collateral, and (j) any costs,
expenses or other amounts which are chargeable to the Agent pursuant to the
Intercreditor Agreement.
"Lender-Related Person" means, with respect to any Lender, such
Lender, together with such Lender's Affiliates, officers, directors, employees,
attorneys, and agents.
"Lenders' Accounts" means the Deposit Accounts of the Lenders
identified on Schedule A-1.
"LIBOR Rate" means, in respect of each relevant Advance, the rate per
annum determined by Agent (rounded upwards, if necessary, to the next 1/100%) by
dividing (a) the Base LIBOR Rate, by (b) 100% minus the Reserve Percentage.
"Lien" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, irrespective of
whether (a) such interest is based on the common law, statute, or contract, (b)
such interest is recorded or perfected, and (c) such interest is contingent upon
the occurrence of some future event or events or the existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term "Lien" includes the lien or security interest arising from a mortgage,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement, conditional sale or trust receipt, or from a
lease,
13
consignment, or bailment for security purposes and also includes reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Affiliate Subordination
Agreement, the Control Agreements, the Disbursement Letter, the Fee Letter, the
Guarantor Security Agreement, the Guaranty, the Holding Stock Pledge Agreement,
the Intercompany Subordination Agreement, the Mortgages, the Patent Security
Agreement, the Stock Pledge Agreement, the Trademark Security Agreement, any
note or notes executed by Borrower in connection with this Agreement and payable
to a member of the Lender Group, and any other agreement entered into, now or in
the future, by Borrower and the Lender Group in connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a
whole, (b) a material impairment of Borrower's and its Subsidiaries ability to
perform their obligations under the Loan Documents to which they are parties or
of the Lender Group's ability to enforce the Obligations or realize upon the
Collateral, or (c) a material impairment of the enforceability or priority of
the Agent's Liens with respect to the Collateral as a result of an action or
failure to act on the part of Borrower or its Subsidiaries.
"Maturity Date" has the meaning set forth in Section 3.4.
"Mexican Subsidiaries" means Industrias Hudson, S.A. de C.V. and
Hudson Respiratory Care Tecate, S. de R.L. de C.V.
"Mortgage Policy" has the meaning set forth in Section 3.1(u).
"Mortgages" means, individually and collectively, one or more
mortgages, deeds of trust, or deeds to secure debt, executed and delivered by
Borrower or its Subsidiaries in favor of Agent, in form and substance
satisfactory to Agent, that encumber the Real Property Collateral and the
related improvements thereto.
"Negotiable Collateral" means letters of credit, letter of credit
rights, instruments, promissory notes, drafts, documents, and chattel paper
(including electronic chattel paper and tangible chattel paper), and any and all
supporting obligations in respect thereof.
"Net Cash Proceeds" means, with respect to any sale or disposition by
any Person or any Subsidiary thereof of property or assets, the amount of
Collections received (directly or indirectly) from time to time (whether as
initial consideration or through the payment of deferred consideration) by or on
behalf of such Person or such Subsidiary, in connection therewith after
deducting therefrom only (i) the amount of any Indebtedness
14
secured by any Permitted Lien on any asset (other than (A) Indebtedness owing to
Agent or any Lender under this Agreement or the other Loan Documents and (B)
Indebtedness assumed by the purchaser of such asset) which is required to be,
and is, repaid in connection with such disposition, (ii) reasonable expenses
related thereto incurred by such Person or such Subsidiary in connection
therewith, (iii) taxes paid or payable to any taxing authorities by such Person
or such Subsidiary in connection therewith, in each case to the extent, but only
to the extent, that the amounts so deducted are, at the time of receipt of such
cash, actually paid or payable to a Person that is not an Affiliate and are
properly attributable to such transaction, and (iv) reasonable reserves as
determined in accordance with GAAP in respect of (a) liabilities relating to the
property or assets sold or disposed of that are retained by such Person and (b)
indemnification liabilities relating to the sale or disposition.
"Obligations" means all loans, Advances, debts, principal, interest
(including any interest that, but for the commencement of an Insolvency
Proceeding, would have accrued), premiums, liabilities (including all amounts
charged to Borrower's Loan Account pursuant hereto), obligations (including
indemnification obligations), fees (including the fees provided for in the Fee
Letter), charges, costs, Lender Group Expenses (including any fees or expenses
that, but for the commencement of an Insolvency Proceeding, would have accrued),
lease payments, guaranties, covenants, and duties of any kind and description
owing by Borrower to the Lender Group pursuant to or evidenced by the Loan
Documents and irrespective of whether for the payment of money, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all interest not paid when due and all Lender
Group Expenses that Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise. Any reference in this Agreement or in the Loan
Documents to the Obligations shall include all extensions, modifications,
renewals, or alterations thereof, both prior and subsequent to any Insolvency
Proceeding.
"Originating Lender" has the meaning set forth in Section 14.1(e).
"Participant" has the meaning set forth in Section 14.1(e).
"Patent Security Agreement" means a patent security agreement executed
and delivered by Borrower and Agent, the form and substance of which is
satisfactory to Agent.
"Pay-Off Letter" means a letter, in form and substance satisfactory to
Agent, from Existing Agent to Agent respecting the amount necessary to repay in
full all of the obligations of Borrower and its Subsidiaries owing under the
Existing Credit Agreement and obtain a release of all of the Liens existing
under the Existing Credit Agreement in and to the assets of Borrower and its
Subsidiaries.
"Permitted Discretion" means a determination made in the exercise of
reasonable (from the perspective of a secured asset-based lender) business
judgment.
"Permitted Dispositions" means (a) sales or other dispositions of
Equipment that is substantially worn, damaged, or obsolete in the ordinary
course of business, (b) sales of Inventory to buyers in the ordinary course of
business, (c) the use or transfer of money or
15
Cash Equivalents in a manner that is not prohibited by the terms of this
Agreement or the other Loan Documents, and (d) the licensing, on a non-exclusive
basis, of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of business.
"Permitted Holder" means each of (a) Holding, (b) FS Equity Partners
III, L.P., (c) FS Equity Partners IV, LP, and (d) Helen Hudson Lovaas,her Family
Members, and her Family Trusts.
"Permitted Intercompany Investments" means Investments by Borrower in
the Mexican Subsidiaries made in the ordinary course of business in amounts that
are consistent with past practices so long as (a) the Mexican Subsidiaries do
not conduct any business that is different from that which was conducted as of
the Closing Date and (b) neither of the Mexican Subsidiaries has cash on hand at
any time for a period of more than 7 days that exceeds $75,000.
"Permitted Investments" means (a) Investments in cash and Cash
Equivalents, (b) Investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, (d) Investments received in settlement of amounts due to
Borrower or any of its Subsidiaries effected in the ordinary course of business
or owing to Borrower or any of its Subsidiaries as a result of Insolvency
Proceedings involving an Account Debtor or upon the foreclosure or enforcement
of any Lien in favor of Borrower or its Subsidiaries, and (e) Permitted
Intercompany Investments.
"Permitted Liens" means (a) Liens held by Agent, (b) Liens for unpaid
taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event
of Default hereunder and are the subject of Permitted Protests, (c) Liens set
forth on Schedule P-1, (d) the interests of lessors under operating leases, (e)
purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as such Lien attaches only to the asset purchased or acquired and
the proceeds thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business and not in connection
with the borrowing of money, and which Liens either (i) are for sums not yet
delinquent, or (ii) are the subject of Permitted Protests, (g) Liens arising
from deposits made in compliance with obtaining worker's compensation or other
unemployment insurance, (h) Liens or deposits to secure performance of bids,
tenders, contracts, or leases incurred in the ordinary course of business and
not in connection with the borrowing of money, (i) Liens granted as security for
surety, indemnity, or appeal bonds in connection with obtaining such bonds in
the ordinary course of business, (j) Liens resulting from any judgment or award
that is not an Event of Default hereunder, (k) with respect to any Real
Property, easements, rights of way, reservations, zoning and other restrictions
on use, and such other charges and encumbrances as do not, in any case,
materially interfere with or impair the use or operation thereof, and (l) Liens
granted to WFF to secure Indebtedness under the WFF Loan Documents.
16
W02-LA:1CFL1\70612585.9
"Permitted Protest" means the right of Borrower or any of the
Restricted Subsidiaries to protest any Lien (other than any Lien that secures
the Obligations), taxes (other than payroll taxes or taxes that are the subject
of a United States federal tax lien), or rental payment, provided that (a) a
reserve with respect to such obligation is established on the Books of Borrower
or such Restricted Subsidiary in such amount as is required under GAAP, (b) any
such protest is instituted promptly and prosecuted diligently by Borrower or
such Restricted Subsidiary, as applicable, in good faith, and (c) Agent is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Agent's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate principal amount outstanding at any one time not in excess of
$2,000,000.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Post" means MW Post Advisory Group, LLC, a Delaware limited liability
company.
"Prepayment Premium" means, as of any date of determination, an amount
equal to (a) during the period from and after the date of the execution and
delivery of this Agreement up to the date that is the second anniversary of the
Closing Date, 4.0% times the Revolver Maximum Amount, (b) during the period from
and including the date that is the second anniversary of the Closing Date up to
the date that is the third anniversary of the Closing Date, 3.0% times the
Revolver Maximum Amount, and (c) during the period from and including the date
that is the third anniversary of the Closing Date up to 45 days prior to the
Maturity Date, 2.0% times the Revolver Maximum Amount.
"Projections" means Borrower's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
basis consistent with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Pro Rata Share" means, as of any date of determination:
(a) with respect to a Lender's obligation to make Advances and
receive payments of principal, interest, fees, costs, and expenses with respect
thereto, (i) prior to the Revolver Commitments being terminated or reduced to
zero, the percentage obtained by dividing (y) such Lender's Revolver Commitment,
by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and
after the time that the Revolver Commitments have been terminated or reduced to
zero, the percentage obtained by dividing (y) the aggregate outstanding
principal amount of such Lender's Advances by (z) the aggregate outstanding
principal amount of all Advances,
17
(b) with respect to all other matters as to a particular Lender
(including the indemnification obligations arising under Section 16.7), the
percentage obtained by dividing (i) such Lender's aggregate amount of Revolver
Commitments, by (ii) the aggregate amount of Revolver Commitments of all
Lenders; provided, however, that in the event the Revolver Commitments have been
terminated or reduced to zero, Pro Rata Share under this clause shall be the
percentage obtained by dividing (A) the outstanding principal amount of such
Lender's Advances, by (B) the outstanding principal amount of all Advances.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 30 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Qualified Cash" means, as of any date of determination, the amount of
unrestricted cash and Cash Equivalents of Borrower and its Subsidiaries that is
in Deposit Accounts or in Securities Accounts, or any combination thereof, and
which such Deposit Account or Securities Account is the subject of a Control
Agreement and is maintained by a branch office of the bank or securities
intermediary located within the United States.
"Real Property" means any estates or interests in real property now
owned or hereafter acquired by Borrower or its Subsidiaries and the improvements
thereto.
"Real Property Collateral" means the parcel or parcels of Real
Property identified on Schedule R-1 and any Real Property hereafter acquired by
Borrower or its Subsidiaries.
"Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Remedial Action" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.
"Report" has the meaning set forth in Section 16.17.
"Required Lenders" means, at any time, Lenders whose aggregate Pro
Rata Shares (calculated under clause (b) of the definition of "Pro Rata Shares")
equal or exceed 50.1%.
"Reserve Percentage" means, on any day, for any Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any
18
basic, supplemental, marginal, or emergency reserves) that are in effect on such
date with respect to eurocurrency funding (currently referred to as
"eurocurrency liabilities") of that Lender, but so long as such Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.
"Restricted Group" means Borrower and the Restricted Subsidiaries.
"Restricted Subsidiary" means any Subsidiary of Borrower other than an
Unrestricted Subsidiary.
"Revolver Commitment" means, with respect to each Lender, its Revolver
Commitment, and, with respect to all Lenders, their Revolver Commitments, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on Schedule C-1 or in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 14.1.
"Revolver Maximum Amount" means $30,000,000.
"Revolver Usage" means, as of any date of determination, the then
extant amount of outstanding Advances.
"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"Securities Account" means a securities account (as that term is
defined in the Code).
"Senior Notes" means those certain Unsecured Senior Promissory Notes
due 2004, issued by Borrower to certain Affiliates, shareholders, and officers
of Borrower in the aggregate principal amount of $12,000,000.
"Solvent" means, with respect to any Person on a particular date,
that, at fair valuations, the sum of such Person's assets is greater than all of
such Person's debts.
"Specified Locations" means Borrower's business premises located at
900 University, Arlington Heights, Illinois; 800 Mark Street, Elk Grove Village,
Illinois; 27731 Diaz Road, Temecula, California; and 28381 Vincent Moraga Drive,
Temecula, California.
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Stock Pledge Agreement" means a stock pledge agreement, in form and
substance satisfactory to Agent, executed and delivered by Borrower, IH Holding
and Agent with respect to the pledge of the Stock of HRC and the Restricted
Subsidiaries.
19
"Subordinated Convertible Notes" means those certain Senior
Subordinated Convertible Promissory Notes due 2005, issued by Borrower to
certain Affiliates, shareholders, and officers of Borrower in the aggregate
principal amount of $14,951,250.
"Subordinated Notes" means Borrower's 9-1/8% Senior Subordinated Notes
due 2008 issued pursuant to the Subordinated Notes Indenture.
"Subordinated Notes Indenture" means that certain Indenture dated as
of April 7, 1998, among Borrower, Holding, and United States Trust Company of
New York, as trustee.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
"Taxes" has the meaning set forth in Section 16.11.
"Temecula Mortgage" means a second-priority Mortgage encumbering the
Real Property Collateral that is commonly known as 27711 Diaz Road, Temecula,
California 92589.
"TFQ EBITDA" means, as of any date of determination, EBITDA of
Borrower and the Restricted Subsidiaries for the 4 fiscal quarter period most
recently ended.
"Trademark Security Agreement" means a second-priority trademark
security agreement executed and delivered by Borrower and Agent, the form and
substance of which is satisfactory to Agent.
"UCC Filing Authorization Letter" means a letter duly executed by
Borrower and each Guarantor authorizing Agent to file appropriate financing
statements on Form UCC-1 without the signature of Borrower or such Guarantor, as
applicable, in such office or offices as may be necessary or, in the opinion of
Agent, desirable to perfect the security interests purported to be created by
the Loan Documents.
"Unrestricted Subsidiary" means (a) any Subsidiary of Borrower that at
the time of determination is designated an Unrestricted Subsidiary by the Board
of Directors in the manner provided below and (b) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
Borrower (including any newly acquired or newly formed Subsidiary of Borrower)
to be an Unrestricted Subsidiary; provided, however, that at the time of such
designation and in the case of clauses (x) and (y), at all times thereafter:
20
(x) neither such Subsidiary nor any of its Subsidiaries owns any
Stock or Indebtedness of, or owns or holds any Lien on any property
of, Borrower or any Restricted Subsidiary of Borrower;
(y) neither Holding, Borrower, nor any Restricted Subsidiary has
guaranteed any Indebtedness or other obligation of such Subsidiary,
and no Indebtedness of such Subsidiary shall constitute Indebtedness
of Holding, Borrower, or any Restricted Subsidiary; and
(z) except in the case of HRC Holding Inc., Hudson Euro Co.
S.a.r.l. and Steamer Holding AB and any of their Subsidiaries, such
Subsidiary has total consolidated assets of $1,000 or less,
provided that no Person designated as a "Restricted Subsidiary" under the WFF
Loan Agreement or otherwise providing any guaranty of the obligations under the
WFF Loan Agreement or a lien on any of its assets in support of the WFF Loan
Agreement may be an "Unrestricted Subsidiary" under this Agreement.
"Unrestricted Subsidiaries EBITDA" means, with respect to any fiscal
period, the Unrestricted Subsidiaries' consolidated net earnings (or loss),
minus extraordinary gains and interest income, plus (a) non-cash extraordinary
losses, (b) Interest Expense (including any non-cash interest expense), (c)
taxes based on or determined by reference to income, (d) depreciation and
amortization, and (e) other non-cash charges (including noncash compensation
charges), in each case for such period and as determined in accordance with
GAAP.
"Unrestricted Subsidiaries TFQ EBITDA" means as of any date of
determination, Unrestricted Subsidiaries EBITDA for the 4 fiscal quarter period
most recently ended.
"Voidable Transfer" has the meaning set forth in Section 17.7.
"WFF" means Wells Fargo Foothill, Inc., a California corporation, its
successors and permitted assigns.
"WFF Loan Agreement" means the Loan and Security Agreement dated as of
even date herewith entered into between WFF, as arranger and administrative
agent for the lenders named therein, and Borrower, as at any time amended
subject to the terms of the Intercreditor Agreement, and any senior secured
credit facility of Borrower which refinances such Loan and Security Agreement
and which provides for credit facilities in an aggregate principal amount which
does not exceed the stated effective principal amount of the credit facilities
under the agreement so refinanced.
"WFF Loan Documents" means WFF Loan Agreement and the other "Loan
Documents" (as defined in the WFF Loan Agreement).
21
1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP; provided that for purposes of
construing the accounting terms that compose the definition of "EBITDA", such
terms shall be interpreted in accordance with GAAP applied on a basis consistent
with the interpretation of such terms used in Borrower's financial statements
for its fiscal year ended December 31, 2002. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its Subsidiaries on a
consolidated basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to the payment in full or repayment in
full of the Obligations shall mean the payment in full in cash of all
Obligations other than contingent indemnification Obligations and contingent
expense reimbursement Obligations. Any reference herein to any Person shall be
construed to include such Person's successors and assigns. Any requirement of a
writing contained herein or in the other Loan Documents shall be satisfied by
the transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Advances.
(a) Subject to the terms and conditions of this Agreement, on the
Closing Date each Lender agrees (severally, not jointly or jointly and
severally) to make Advances to Borrower in an amount equal to such Lender's Pro
Rata Share of $30,000,000.
22
The credit facilities described herein are revolving in nature and, subject to
the terms and conditions set forth herein, amounts which are borrowed and repaid
may be reborrowed.
(b) The Lenders shall have no obligation to make additional
Advances hereunder to the extent such additional Advances would cause the
Revolver Usage to exceed the Revolver Maximum Amount.
(c) Subject to the terms and conditions of this Agreement, any
amounts repaid under the Revolver Commitments at any time when no amounts are
outstanding under the WFF Loan Agreement may subsequently be reborrowed,
provided that, as of the date when such amounts are reborrowed, the entire
amount of any then existing lending commitments under the WFF Loan Agreement is
outstanding.
(d) Anything herein to the contrary notwithstanding, in no event
shall any Lender be obligated to make any Advances to Borrower if, after giving
effect to such Advances, the aggregate amount of (i) the Indebtedness owing to
the lenders under the WFF Loan Documents and (ii) the outstanding Advances
hereunder would exceed the amount of Indebtedness permitted under Section 4.03
of the Subordinated Notes Indenture.
2.2 [Intentionally Omitted].
2.3 Borrowing Procedures.
(a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent (which
notice must be received by Agent no later than 10:00 a.m. (California time) on
the Business Day prior to the date that is the requested Funding Date specifying
(i) the amount of such Borrowing, and (ii) the requested Funding Date, which
shall be a Business Day. In lieu of delivering the above-described written
request, any Authorized Person may give Agent telephonic notice of such request
by the required time. In such circumstances, Borrower agrees that any such
telephonic notice will be confirmed in writing within 24 hours of the giving of
such notice and the failure to provide such written confirmation shall not
affect the validity of the request. Borrower may request only 1 Borrowing of
Advances during any period of 30 consecutive days and each such Borrowing must
be in a minimum amount of $2,000,000 and integral multiples of $2,000,000.
(b) Making of Loans.
(i) Promptly after receipt of a request for a Borrowing
pursuant to Section 2.3(a), Agent shall notify the Lenders, not later
than 1:00 p.m. (California time) on the Business Day immediately
preceding the Funding Date applicable thereto, by telecopy, telephone,
or other similar form of transmission, of the requested Borrowing.
Each Lender shall make the amount of such Lender's Pro Rata Share of
the requested Borrowing available to Agent in immediately available
funds not later than 10:00 a.m. (California time) on the Funding Date
applicable thereto. After Agent's receipt of the
23
proceeds of such Advances, Agent shall make the proceeds thereof
available to Borrower on the applicable Funding Date by transferring
immediately available funds equal to such proceeds received by Agent
to Borrower's Designated Account; provided, however, that, subject to
the provisions of Section 2.3(f), Agent shall not request any Lender
to make, and no Lender shall have the obligation to make, any Advance
if Agent shall have actual knowledge that (1) one or more of the
applicable conditions precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing
unless such condition has been waived, or (2) the requested Borrowing
would exceed the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to
the Closing Date or, with respect to any Borrowing after the Closing
Date, prior to 9:00 a.m. (California time) on the date of such
Borrowing, that such Lender will not make available as and when
required hereunder to Agent for the account of Borrower the amount of
that Lender's Pro Rata Share of the Borrowing, Agent may assume that
each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but
shall not be so required), in reliance upon such assumption, make
available to Borrower on such date a corresponding amount. If and to
the extent any Lender shall not have made its full amount available to
Agent in immediately available funds and Agent in such circumstances
has made available to Borrower such amount, Lender shall on the
Business Day following such Funding Date make such amount available to
Agent, together with interest at the rate applicable to the Revolving
Loans for each day during such period. A notice submitted by Agent to
any Lender with respect to amounts owing under this subsection shall
be conclusive, absent manifest error. If such amount is so made
available, such payment to Agent shall constitute such Lender's
Advance on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to Agent on the Business Day
following the Funding Date, Agent will notify Borrower of such failure
to fund and, upon demand by Agent, Borrower shall pay such amount to
Agent for Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Advances composing
such Borrowing. The failure of any Lender to make any Advance on any
Funding Date shall not relieve any other Lender of any obligation
hereunder to make an Advance on such Funding Date, but no Lender shall
be responsible for the failure of any other Lender to make the Advance
to be made by such other Lender on any Funding Date.
(iii) [Intentionally Omitted]
(c) [Intentionally Omitted].
24
(d) [Intentionally Omitted].
(e) Notation. Each Lender shall record on its books the principal
amount of the Advances owing to each Lender, and such records shall, absent
manifest error, conclusively be presumed to be correct and accurate. In
addition, each Lender is authorized, at such Lender's option, to note the date
and amount of each payment or prepayment of principal of such Lender's Advances
in its books and records, including computer records.
(f) Lenders' Failure to Perform. All Advances shall be made by
the Lenders contemporaneously and in accordance with their Pro Rata Shares. It
is understood that (i) no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make any Advance (or other extension
of credit) hereunder, nor shall the Revolver Commitment of any Lender be
increased or decreased as a result of any failure by any other Lender to perform
its obligations hereunder, and (ii) no failure by any Lender to perform its
obligations hereunder shall excuse any other Lender from its obligations
hereunder.
(g) [Intentionally Omitted].
2.4 Payments.
(a) Payments by Borrower.
(i) Except as otherwise expressly provided herein, all
payments by Borrower shall be made to the Lenders' Accounts, in each
case in the amount then due to each Lender, and shall be made in
immediately available funds, no later than 11:00 a.m. (California
time) on the date specified herein. Any payment received by any Lender
later than 11:00 a.m. (California time) shall be deemed to have been
received on the following Business Day and any applicable interest or
fee shall continue to accrue until such following Business Day.
(ii) [Intentionally omitted].
(b) Apportionment and Application of Payments.
(i) Except as otherwise provided in the Loan Documents,aggregate
principal and interest payments and payments of fees and expenses
shall be apportioned ratably among the Lenders (according to the
unpaid principal balance of the Obligations to which such payments
relate held by each Lender).
(ii) To the extent Agent receives funds on behalf of the Lenders,
Agent promptly shall distribute to each Lender, pursuant to the
applicable wire instructions received from each Lender in writing,
such funds as it may be entitled to receive.
25
(c) Mandatory Prepayments.
(i) Immediately upon any sale or disposition by Borrower or any
of the Restricted Subsidiaries of property or assets (other than sales
or dispositions of Inventory in the ordinary course of business or a
sale of the Stock of HRC), Borrower shall either (a) prepay the
outstanding principal amount of the obligations WFF Loan Agreement
(and correspondingly reduce the lending commitments thereunder), or
(b) prepay the outstanding principal amount of the Advances, in each
case in an amount equal to 100% of the Net Cash Proceeds received by
such Person in connection with such sales or dispositions to the
extent that the aggregate amount of Net Cash Proceeds received by
Borrower and the Restricted Subsidiaries (and not paid to WFF or the
Agent as a prepayment of either the obligations under the WFF Loan
Agreement or of the Advances) for all such sales or dispositions
exceeds $50,000 in any fiscal year, provided that (A) if any such sale
or disposition is a Permitted Disposition of Equipment that is not
subject to a Lien of the type described in clause (e) of the
definition of "Permitted Liens", Borrower may elect to use the
proceeds of such sale or disposition, up to a maximum of $400,000
during any fiscal year of Borrower, to purchase new Equipment so long
as Borrower completes the purchase of such new Equipment within 90
days of such sale or disposition; and (B) if any such sale or
disposition is a Permitted Disposition of Equipment that is subject to
a Lien of the type described in clause (e) of the definition of
"Permitted Liens", Borrower may elect to use the proceeds of such sale
or disposition to purchase new Equipment so long as Borrower completes
the purchase of such new Equipment within 180 days of such sale or
disposition. Nothing contained in this paragraph (i) shall permit
Borrower or any of the Restricted Subsidiaries to sell or otherwise
dispose of any property or assets other than in accordance with
Section 7.4.
(ii) Upon the receipt by Borrower or any of the Restricted
Subsidiaries of any Extraordinary Receipts, unless the WFF Loan
Agreement requires the repayment of the obligations thereunder from
such Extraordinary Receipts, Borrower shall prepay the outstanding
principal of the Advances in an amount equal to 100% of such
Extraordinary Receipts, net of any reasonable expenses incurred in
collecting such Extraordinary Receipts, to the extent that the
aggregate amount of Extraordinary Receipts (other than proceeds of
insurance) received by Borrower and the Restricted Subsidiaries (and
not paid to Agent as a prepayment of the Advances) from and after the
Closing Date exceeds $300,000.
(d) Application of Mandatory Prepayments. [Intentionally
Omitted].
26
(e) Sale of Stock of HRC. Upon any sale or other disposition of
the Stock of HRC, Borrower shall use the proceeds of such sale or other
disposition a) first, to prepay the Obligations under this Agreement until the
same are paid in full (with a corresponding reduction in the Revolver
Commitments hereunder) and b) second, in the manner set forth in the
Intercreditor Agreement.
2.5 [Intentionally Omitted].
2.6 Interest Rates: Rates, Payments, and Calculations.
(a) Interest Rates. Except as provided in clause (c) below, all
Obligations that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to the Applicable Interest Rate.
(b) [Intentionally Omitted].
(c) Default Rate. Upon the occurrence and during the continuation
of an Event of Default (and at the election of the Required Lenders), all
Obligations that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to 3 percentage points above the per annum rate otherwise applicable
hereunder.
(d) Payment. Interest and all other fees payable hereunder shall
be due and payable in cash, in arrears, on the first day of each month at any
time that Obligations or Revolver Commitments are outstanding. Borrower hereby
authorizes Agent, from time to time without prior notice to Borrower, to charge
such interest and fees, all Lender Group Expenses (as and when incurred), the
fees and costs provided for in Section 2.11 (as and when accrued or incurred),
and all other payments as and when due and payable under any Loan Document to
Borrower's Loan Account, which amounts thereafter shall constitute Advances
hereunder and shall accrue interest at the rate then applicable to Advances. Any
interest not paid in cash when due shall be compounded by being charged to
Borrower's Loan Account and shall thereafter constitute Advances hereunder and
shall accrue interest at the rate then applicable to Advances hereunder.
(e) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or
27
manner of payment exceeds the maximum allowable under applicable law, then, ipso
facto, as of the date of this Agreement, Borrower is and shall be liable only
for the payment of such maximum as allowed by law, and payment received from
Borrower in excess of such legal maximum, whenever received, shall be applied to
reduce the principal balance of the Obligations to the extent of such excess.
2.7 [Intentionally Omitted].
2.8 Crediting Payments. The receipt of any payment item by any Lender or
Agent shall not be considered a payment on account unless such payment item is a
wire transfer of immediately available federal funds made to such Lender's
Account or, if to Agent, to an account designated by Agent, or unless and until
such payment item is honored when presented for payment. Should any payment item
not be honored when presented for payment, then Borrower shall be deemed not to
have made such payment and interest shall be calculated accordingly. Anything to
the contrary contained herein notwithstanding, any payment item shall be deemed
received by a Lender or Agent only if it is received into such Lender's Account,
or if to Agent, into an account designated by Agent, on a Business Day on or
before 11:00 a.m. (California time). If any payment item is received into a
Lender's Account or into Agent's designated account on a non-Business Day or
after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have
been received by such Lender or Agent, as applicable, as of the opening of
business on the immediately following Business Day.
2.9 Designated Account. On the Closing Date through WFF in accordance with
written instructions from Borrower, and thereafter directly, Agent is authorized
to make the Advances under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person or,
without instructions, if pursuant to Section 2.6(d). Borrower agrees to
establish and maintain the Designated Account with the Designated Account Bank
for the purpose of receiving the proceeds of the Advances requested by Borrower
and made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and
Borrower, any Advance requested by Borrower and made by Agent or the Lenders
hereunder shall be made to the Designated Account, provided that the initial
Advances hereunder shall be remitted to WFF for further credit to the Borrower
or the Borrower's account, pursuant to written instructions delivered by the
Borrower.
2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrower (the "Loan Account") on
which Borrower will be charged with all Advances made by Agent or the Lenders to
Borrower or for Borrower's account, and with all other payment Obligations
hereunder or under the other Loan Documents, including, accrued interest, fees
and expenses, and Lender Group Expenses. Agent shall render statements regarding
the Loan Account to Borrower, including principal, interest, fees, and including
an itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and the Lender Group unless, within 30 days after receipt thereof by
Borrower,
28
Borrower shall deliver to Agent written objection thereto describing the error
or errors contained in any such statements.
2.11 Fees. Borrower shall pay to Agent the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter) and shall be apportioned among
the Lenders in accordance with the terms of letter agreements between Agent and
individual Lenders:
(a) Unused Line Fee - Revolver. On the first day of each calendar
quarter during the term of this Agreement, an unused line fee in an amount equal
to 0.50% per annum times the result of (i) the Revolver Maximum Amount, less
(ii) the average Daily Balance of Advances that were outstanding during the
immediately preceding quarter; provided that if this Agreement is terminated on
any date that is not the first day of a calendar quarter, the ratable portion of
the foregoing fee that has accrued through the date of termination shall be
payable on the date of termination,
(b) Fee Letter Fees. As and when due and payable under the terms
of the Fee Letter, the fees set forth in the Fee Letter, and
(c) Audit, Appraisal, and Valuation Charges. To the extent that
any audit, appraisal or valuation may be conducted by the Lender Group pursuant
to Section 4.6, audit, appraisal, and valuation fees and charges as follows (i)
a fee of $850 per day, per auditor, plus out-of-pocket expenses for each
financial audit of Borrower performed by personnel employed by Agent, (ii) if
implemented, a fee of $850 per day, per applicable individual, plus
out-of-pocket expenses for the establishment of electronic collateral reporting
systems, (iii) a fee of $1,500 per day per appraiser, plus out-of-pocket
expenses, for each appraisal of the Collateral, or any portion thereof,
performed by personnel employed by Agent, and (iv) the actual charges paid or
incurred by Agent if it elects to employ the services of one or more third
Persons to perform financial audits of Borrower or its Subsidiaries, to
establish electronic collateral reporting systems, to appraise the Collateral,
or any portion thereof, or to assess Borrower's or its Subsidiaries' business
valuation.
2.12 [Intentionally Omitted].
2.13 [Intentionally Omitted]
2.14 [Intentionally Omitted].
2.15 Designated Senior Debt. The Lender Group and Borrower agree that the
Obligations constitute "Designated Senior Debt" as defined in and for all
purposes under the Subordinated Notes Indenture.
29
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit.The obligation
of the Lender Group (or any member thereof) to make the initial Advance (or
otherwise to extend any credit provided for hereunder), is subject to the
fulfillment, to the satisfaction of Agent, of each of the conditions precedent
set forth below:
(a) the Closing Date shall occur on or before October 10, 2003;
(b) Agent shall have received a UCC Filing Authorization Letter,
duly executed by Borrower and each Guarantor, together with appropriate
financing statements on Form UCC-1 duly filed in such office or offices as may
be necessary or, in the opinion of Agent, desirable to perfect the Agent's Liens
in and to the Collateral, and Agent shall have received searches reflecting the
filing of all such financing statements;
(c) Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly executed, and each such document
shall be in full force and effect:
(i) the Affiliate Subordination Agreement,
(ii) this Agreement,
(iii) the Control Agreements,
(iv) the Disbursement Letter,
(v) (intentionally omitted),
(vi) the Guarantor Security Agreement,
(vii) the Guaranty,
(viii) the Holding Stock Pledge Agreement, together with all
certificates representing the shares of Stock pledged thereunder, as
well as Stock powers with respect thereto endorsed in blank,
(ix) the Intercompany Subordination Agreement,
(x) the Intercreditor Agreement,
(xi) the Temecula Mortgage,
(xii) (intentionally omitted),
(xiii) the Patent Security Agreement,
30
(xiv) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the termination by
Existing Lender of its Liens in and to the properties and assets of
Borrower and its Subsidiaries (or an agreement by the Existing Agent
to deliver such documentation upon receipt of payment in full of the
Indebtedness under the Existing Credit Agreement or, in the case of
UCC termination statements, authorization for Agent to file UCC
termination statements upon receipt of such payment),
(xv) the Stock Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, as well as Stock
powers with respect thereto endorsed in blank, and
(xvi) the Trademark Security Agreement;
(d) Agent shall have received a certificate from the Secretary of
Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(e) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(f) Agent shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(g) Agent shall have received certificates of status with respect
to Borrower, each dated within 30 days of the Closing Date, such certificates to
be issued by the appropriate officer of the jurisdictions (other than the state
of Illinois and the jurisdiction of organization of Borrower) in which its
failure to be duly qualified or licensed would constitute a Material Adverse
Change, which certificates shall indicate that Borrower is in good standing in
such jurisdictions;
(h) Agent shall have received a certificate from the Secretary of
each Guarantor attesting to the resolutions of such Guarantor's Board of
Directors authorizing its execution, delivery, and performance of the Loan
Documents to which such Guarantor is a party and authorizing specific officers
of such Guarantor to execute the same;
(i) Agent shall have received copies of each Guarantor's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Guarantor;
(j) Agent shall have received a certificate of status with
respect to each Guarantor, dated within 10 days of the Closing Date, such
certificate to be issued by the
31
appropriate officer of the jurisdiction of organization of such Guarantor, which
certificate shall indicate that such Guarantor is in good standing in such
jurisdiction;
(k) Agent shall have received certificates of status with respect
to each Guarantor, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of such Guarantor) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Guarantor is in good standing in such
jurisdictions;
(l) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.8, the form
and substance of which shall be satisfactory to Agent;
(m) Agent shall have received an opinion of Borrower's counsel in
form and substance satisfactory to Agent;
(n) Agent shall have received satisfactory evidence (including a
certificate of the chief financial officer of Borrower) that all tax returns
required to be filed by Borrower and its Subsidiaries have been timely filed and
all taxes upon Borrower and its Subsidiaries or their properties, assets,
income, and franchises (including Real Property taxes, sales taxes, and payroll
taxes) have been paid prior to delinquency, except such taxes that are the
subject of a Permitted Protest;
(o) [Intentionally Omitted].
(p) Agent shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Borrower's and its Subsidiaries books and records and verification of Borrower's
representations and warranties to the Lender Group, the results of which shall
be satisfactory to Agent, and (ii) an inspection of each of the locations where
Borrower's and its Subsidiaries' Inventory is located, the results of which
shall be satisfactory to Agent;
(q) Agent shall have received completed reference checks with
respect to Borrower's senior management, the results of which are satisfactory
to Agent in its sole discretion;
(r) Agent shall have received an appraisal of the Liquidation
Percentage applicable to Borrower's and its Subsidiaries' Inventory and an
appraisal of Borrower's and its Subsidiaries' Equipment, the results of which
shall be satisfactory to Agent;
(s) Agent shall have received Borrower's Closing Date Business
Plan;
(t) Borrower shall have paid all Lender Group Expenses incurred
and billed in connection with the transactions evidenced by this Agreement;
32
(u) Agent shall have received (i) an appraisal of the Real
Property Collateral reasonably satisfactory to Agent, and (ii) a mortgagee title
insurance policy (or marked commitments to issue the same) for the Real Property
Collateral issued by a title insurance company satisfactory to Agent ("Mortgage
Policy") in an amount not to exceed the fair market value of the Real Property
Collateral assuring Agent that the Temecula Mortgage is a valid and enforceable
mortgage Lien on such Real Property Collateral free and clear of all defects and
encumbrances except Permitted Liens, and the Mortgage Policy otherwise shall be
in form and substance reasonably satisfactory to Agent;
(v) Agent shall have received a phase-I environmental report with
respect to each parcel composing the Real Property Collateral; the environmental
consultants retained for such reports, the scope of the reports, and the results
thereof shall be reasonably acceptable to Agent;
(w) The Subordinated Convertible Notes shall have been amended or
re-issued to extend the maturity date thereof to March 31, 2008, and Agent shall
have received copies of such amendments or re-issued notes certified by the
chief financial officer of Borrower;
(x) The Senior Notes shall have been amended or re-issued to
extend the maturity date thereof to March 31, 2008, and Agent shall have
received copies of such amendments or re-issued notes certified by the chief
financial officer of Borrower;
(y) The HRC Notes shall have been amended or re-issued to extend
the maturity date thereof to March 31, 2008, and Agent shall have received
copies of such amendments or re-issued notes certified by the chief financial
officer of Borrower;
(z) The agreements governing the Borrower Preferred Stock and the
Holding Preferred Stock shall have been amended to extend the period of time
within which cash dividends are not paid thereunder in a manner satisfactory to
Agent, and Agent shall have received copies of such amendments certified by the
chief financial officer of Borrower;
(aa) Borrower and each of its Subsidiaries shall have received
all licenses, approvals or evidence of other actions required by any Govern
mentalAuthority in connection with the execution and delivery by Borrower or its
Subsidiaries of the Loan Documents or with the consummation of the transactions
contemplated thereby;
(bb) The conditions to the initial extension of credit set forth
in Section 3.1 of the WFF Loan Agreement shall have been satisfied, and the
lenders under the WFF Loan Agreement shall have concurrently funded the initial
loans thereunder; and
(cc) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent.
33
3.2 Conditions Subsequent to the Initial Extension of Credit. Borrower
shall use its best efforts to cause the execution and delivery to Agent of a
Collateral Access Agreement with respect to the Bonded Logistics warehouse in
Charlotte, North Carolina within 90 days of the Closing Date. The obligation of
the Lender Group (or any member thereof) to continue to make Advances (or
otherwise extend credit hereunder) is subject to the fulfillment, on or before
the date applicable thereto, of each of the conditions subsequent set forth
below (the failure by Borrower to so perform or cause to be performed
constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Agent
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.8, the form and substance of which shall
be satisfactory to Agent and its counsel;
(b) within 30 days of the Closing Date, Agent shall have received
a certificate of status with respect to Borrower issued by the appropriate
officer of the state of Illinois which certificate shall indicate that Borrower
is in good standing in Illinois; and
(c) within 90 days of the Closing Date, Agent shall have received
Collateral Access Agreements with respect to the Specified Locations.
3.3 Conditions Precedent to all Extensions of Credit.The obligation of the
Lender Group (or any member thereof) to make any Advances hereunder at any time
(or to extend any other credit hereunder) shall be subject to the following
conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature restricting or prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental Authority
against Borrower, Agent, any Lender, or any of their Affiliates;
(d) no Material Adverse Change shall have occurred; and
(e) the other conditions precedent to Advances set forth in
Section 2.1 shall have been satisfied.
3.4 Term. This Agreement shall continue in full force and effect for a
term ending on October 1, 2007 (the "Maturity Date"). The foregoing
notwithstanding, the Lender Group, upon the election of the Required Lenders,
shall have the right to terminate its
34
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this Agreement,
all Obligations immediately shall become due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or discharge
Borrower or its Subsidiaries of their duties, Obligations, or covenants
hereunder and the Agent's Liens in the Collateral shall remain in effect until
all Obligations have been paid in full and the Lender Group's obligations to
provide additional credit hereunder have been terminated. When this Agreement
has been terminated and all of the Obligations have been paid in full and the
Lender Group's obligations to provide additional credit under the Loan Documents
have been terminated irrevocably, Agent will, at Borrower's sole expense,
execute and deliver any UCC termination statements, lien releases, mortgage
releases, re-assignments of trademarks, discharges of security interests, and
other similar discharge or release documents (and, if applicable, in recordable
form) as are requested by Borrower to release, as of record, the Agent's Liens
and all notices of security interests and liens previously filed by Agent with
respect to the Obligations.
3.6 Early Termination by Borrower. Borrower has the option, at any time
upon 90 days prior written notice to Agent, to terminate this Agreement by
making payment in full to Agent of the Obligations, together with the Prepayment
Premium. If Borrower has sent a notice of termination pursuant to the provisions
of this Section, then the Revolver Commitments shall terminate and Borrower
shall be obligated to repay the Obligations in full, together with the
Prepayment Premium, on the date set forth as the date of termination of this
Agreement in such notice. In the event of the termination of this Agreement and
repayment of the Obligations at any time prior to the Maturity Date, for any
other reason, including (a) termination upon the election of the Required
Lenders to terminate after the occurrence and during the continuation of an
Event of Default, (b) foreclosure and sale of Collateral, (c) sale of the
Collateral in any Insolvency Proceeding, or (d) restructure, reorganization, or
compromise of the Obligations by the confirmation of a plan of reorganization or
any other plan of compromise, restructure, or arrangement in any Insolvency
Proceeding, then, in view of the impracticability and extreme difficulty of
ascertaining the actual amount of damages to the Lender Group or profits lost by
the Lender Group as a result of such early termination, and by mutual agreement
of the parties as to a reasonable estimation and calculation of the lost profits
or damages of the Lender Group, Borrower shall pay the Prepayment Premium to
Agent, measured as of the date of such termination.
4. CREATION OF SECURITY INTERESTS.
4.1 Grant of Security Interests.
(a) Borrower hereby grants to Agent, for the benefit of the
Lender Group, a continuing security interest in all of its right, title, and
interest in all currently existing and hereafter acquired or arising Borrower
Collateral in order to secure prompt
35
repayment of any and all of the Obligations in accordance with the terms and
conditions of the Loan Documents and in order to secure prompt performance by
Borrower of each of its covenants and duties under the Loan Documents. The
Lender Group acknowledges that the grant contained in this Section 4 is subject
to subordination in priority of distribution in the manner and to the extent set
forth in the Intercreditor Agreement.
(b) The Agent's Liens in and to the Borrower Collateral shall
attach to all Borrower Collateral without further act on the part of Agent or
Borrower. Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, except for Permitted Dispositions, Borrower and its
Subsidiaries have no authority, express or implied, to dispose of any item or
portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Borrower Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and if
and to the extent that Agent determines that perfection or priority of Agent's
security interest is dependent on or enhanced by possession, Borrower,
immediately upon the request of Agent, shall endorse and deliver physical
possession of such Negotiable Collateral to the Agent or to WFF for the benefit
of WFF, Agent and the Lenders under the Intercreditor Agreement.
4.3 Collection of Accounts, General Intangibles,and Negotiable Collateral.
At any time after the occurrence and during the continuation of an Event of
Default, Agent or Agent's designee may, subject to the terms of the
Intercreditor Agreement, (a) notify Account Debtors of Borrower that Borrower's
Accounts, chattel paper, or General Intangibles have been assigned to Agent or
that Agent has a security interest therein, or (b) collect Borrower's Accounts,
chattel paper, or General Intangibles directly and charge the collection costs
and expenses to the Loan Account. Borrower agrees that it will hold in trust for
WFF, as agent under the WFF Loan Agreement, and for the Agent, as the Lender
Group's trustee, any of its or its Subsidiaries' Collections that it receives
and immediately will deliver such Collections to WFF in their original form as
received by Borrower or its Subsidiaries.
4.4 Filing of Financing Statements; Commercial Tort Claims; Delivery of
Additional Documentation Required.
(a) Borrower authorizes Agent to file, subject to the
Intercreditor Agreement, any financing statement necessary or desirable to
effectuate the transactions contemplated by the Loan Documents, and any
continuation statement or amendment with respect thereto, in any appropriate
filing office without the signature of Borrower where permitted by applicable
law. Borrower hereby ratifies the filing of any financing statement filed
without the signature of Borrower prior to the date hereof.
(b) If Borrower or the Restricted Subsidiaries acquire any
commercial tort claims after the date hereof, Borrower shall promptly (but in
any event within 3 Business Days after such acquisition) deliver to Agent a
written description of such commercial tort claim and shall deliver a written
agreement, in form and substance satisfactory to Agent, pursuant to which
Borrower or the Restricted Subsidiary, as applicable, shall pledge and
36
collaterally assign all of its right, title and interest in and to such
commercial tort claim to Agent, as security for the Obligations (a "Commercial
Tort Claim Assignment").
(c) At any time upon the request of Agent, Borrower shall execute
or deliver to Agent, and shall cause the Restricted Subsidiaries to execute or
deliver to Agent, any and all financing statements, original financing
statements in lieu of continuation statements, fixture filings, security
agreements, pledges, assignments, Commercial Tort Claim Assignments,
endorsements of certificates of title, and all other documents (collectively,
the "Additional Documents") that Agent may request in its Permitted Discretion,
in form and substance satisfactory to Agent, to create, perfect, and continue
perfected or to better perfect the Agent's Liens in the assets of Borrower and
the Restricted Subsidiaries (whether now owned or hereafter arising or acquired,
tangible or intangible, real or personal), to create and perfect Liens in favor
of Agent in any Real Property acquired after the Closing Date, and in order to
fully consummate all of the transactions contemplated hereby and under the other
Loan Documents. To the maximum extent permitted by applicable law, Borrower
authorizes Agent to execute any such Additional Documents in Borrower's name and
authorizes Agent to file such executed Additional Documents in any appropriate
filing office. In addition, on such periodic basis as Agent shall require,
Borrower shall (i) provide Agent with a report of all new material patentable,
copyrightable, or trademarkable materials acquired or generated by Borrower or
the Restricted Subsidiaries during the prior period, (ii) cause all material
patents, copyrights, and trademarks acquired or generated by Borrower or the
Restricted Subsidiaries that are not already the subject of a registration with
the appropriate filing office (or an application therefor diligently prosecuted)
to be registered with such appropriate filing office in a manner sufficient to
impart constructive notice of Borrower's or the applicable Restricted
Subsidiary's ownership thereof, and (iii) cause to be prepared, executed, and
delivered to Agent supplemental schedules to the applicable Loan Documents to
identify such patents, copyrights, and trademarks as being subject to the
security interests created thereunder.
4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Agent (and any of Agent's officers, employees, or agents designated by
Agent) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign Borrower's name on any invoice or bill of lading
relating to the Borrower Collateral, drafts against Account Debtors, or notices
to Account Debtors, (c) send requests for verification of Borrower's or the
Restricted Subsidiaries' Accounts, (d) endorse Borrower's name on any of its
payment items (including all of its Collections) that may come into the Lender
Group's possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under Borrower's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting Borrower's
or the Restricted Subsidiaries' Accounts, chattel paper, or General Intangibles
directly with Account Debtors, for amounts and upon terms that Agent determines
to be reasonable, and Agent may cause to
37
be executed and delivered any documents and releases that Agent determines to be
necessary. The appointment of Agent as Borrower's attorney, and each and every
one of its rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and the Lender Group's obligations to extend credit hereunder are terminated.
The Lender Group acknowledges that the exercise of the power of attorney granted
in this Section may at some times be subject to the provisions of the
Intercreditor Agreement.
4.6 Right to Inspect. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time hereafter to inspect the Books and make copies or abstracts thereof and to
check, test, and appraise the Collateral, or any portion thereof, in order to
verify Borrower's and its Subsidiaries' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral;
provided that so long as no Event of Default has occurred and is continuing,(a)
the Agent and the Lenders shall not be permitted to independently audit or
appraise the Collateral to the extent that WFF has, within the eight month
period prior to the date of any such audit or inspection, conducted an audit or
appraisal of the relevant Collateral and has shared the results of the audit or
appraisal with the Lender Group (with the understanding that neither WFF, the
lenders party to the WFF Loan Agreement, their auditors, appraisers or agents
shall have any liability to the Lender Group in respect of any such audit or
appraisal or the adequacy or accuracy thereof), (b) in any event, Borrower shall
not be required to pay for more than 2 inspections/audits of the Collateral per
year (including both inspections/audits conducted by WFF and those conducted by
the Agent) and (b) appraisals of the Collateral shall be conducted no more
frequently than once per year (including both appraisals conducted by WFF and
those conducted by the Agent).
4.7 Control Agreements. Borrower agrees that it will not, and will not
permit the Restricted Subsidiaries to, transfer assets out of any of their
Deposit Accounts or Securities Accounts; provided, however, that so long as no
Event of Default has occurred and is continuing or would result therefrom,
Borrower and the Restricted Subsidiaries may use such assets (and the proceeds
thereof) to the extent not prohibited by this Agreement or the other Loan
Documents and, if the transfer is to another bank or securities intermediary, so
long as Borrower (or a Restricted Subsidiary, as applicable), Agent, and the
substitute bank or securities intermediary have entered into a Control
Agreement. Borrower agrees that it will and will cause the Restricted
Subsidiaries to take any or all reasonable steps that Agent requests in order
for Agent to obtain control in accordance with Sections 9-104, 9-105, 9-106, and
9-107 of the Code with respect to any of its or their Securities Accounts,
Deposit Accounts, electronic chattel paper, Investment Property, and
letter-of-credit rights. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other Investment Property
shall be modified by Borrower without the prior written consent of Agent. Upon
the occurrence and during the continuance of a Default or Event of Default,
Agent may notify any bank or securities intermediary to liquidate the applicable
Deposit Account or Securities Account or any related Investment Property
maintained or held thereby and remit the proceeds thereof to the Agent for the
benefit of the Lenders.
38
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement,
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete, in all material respects, as of the
date hereof, and shall be true, correct, and complete, in all material respects,
as of the Closing Date, and at and as of the date of the making of each Advance
(or other extension of credit) made thereafter, as though made on and as of the
date of such Advance (or other extension of credit) (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 No Encumbrances. Borrower and the Restricted Subsidiaries have good
and indefeasible title to their personal property assets and good and marketable
title to their Real Property, in each case, free and clear of Liens except for
Permitted Liens.
5.2 Usury Exemption. The Obligations are exempt from the usury limitations
imposed by the California State Constitution pursuant to Section 25118 of the
California Corporations Code. The Borrower represents and warrants to the Lender
Group that it has, by reason of its own business and financial experience, and
that of its counsel and other professional advisors, the capacity to protect its
own interests in connection with the transactions contemplated by this
Agreement, and that its acceptance of the interest rates and other pricing
components associated with the Obligations has been made in the full exercise of
that capacity, and with the advice of its counsel.
5.3 [Intentionally omitted].
5.4 Equipment. All of the Equipment of Borrower and the Restricted
Subsidiaries is used or held for use in their business and is fit for such
purposes ordinary wear and tear excepted.
5.5 Location of Inventory and Equipment. The Inventory and Equipment of
Borrower and the Restricted Subsidiaries are not stored with a bailee,
warehouseman, or similar party and are located only at, or in-transit between,
the locations identified on Schedule 5.5 (as such Schedule may be updated
pursuant to Section 6.9).
5.6 Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its and the
Restricted Subsidiaries' Inventory and the book value thereof.
5.7 State of Incorporation; Location of Chief Executive Office; FEIN;
Organizational ID Number; Commercial Tort Claims.
(a) The jurisdiction of organization of Borrower and each of its
Subsidiaries is set forth on Schedule 5.7(a).
39
(b) The chief executive office of Borrower and each of its
Subsidiaries is located at the address indicated on Schedule 5.7(b) (as such
Schedule may be updated pursuant to Section 6.9).
(c) Borrower's and each of its Subsidiaries' FEIN and organizational
identification number, if any, are identified on Schedule 5.7(c).
(d) As of the Closing Date, Borrower and the Restricted Subsidiaries
do not hold any commercial tort claims, except as set forth on Schedule 5.7(d).
5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and qualified to do
business in any state where the failure to be so qualified reasonably could be
expected to have a Material Adverse Change; provided that until such time as the
condition subsequent set forth in Section 3.2(b) is satisfied, it is hereby
acknowledged that Borrower is not qualified to do business in the state of
Illinois.
(b) Set forth on Schedule 5.8(b), is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. Other than as described on Schedule 5.8(b), there
are no subscriptions, options, warrants, or calls relating to any shares of
Borrower's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on Schedule 5.8(c), is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization, (ii) the number of shares of each class of
common and preferred Stock authorized for each of the Restricted Subsidiaries
and HRC, and (iii) the number and the percentage of the outstanding shares of
each such class owned directly or indirectly by Borrower. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
Subsidiaries' capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Neither Borrower nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of Borrower's Subsidiaries'
capital Stock or any security convertible into or exchangeable for any such
capital Stock.
5.9 Due Authorization; No Conflict.
40
(a) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of Borrower.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the other Loan Documents to which it is a party do not and will
not (i) violate any provision of federal, state, or local law or regulation
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of Borrower, (iii) result in or require the creation or imposition of
any Lien of any nature whatsoever upon any properties or assets of Borrower,
other than Permitted Liens, or (iv) require any approval of Borrower's
interestholders or any approval or consent of any Person under any material
contractual obligation of Borrower, other than consents or approvals that have
been obtained and that are still in force and effect.
(c) Other than the filing of financing statements and the
recordation of the Mortgages, the execution, delivery, and performance by
Borrower of this Agreement and the other Loan Documents to which Borrower is a
party do not require any registration with, consent, or approval of, or notice
to, or other action with or by, any Governmental Authority, other than consents
or approvals that have been obtained and that are still in force and effect.
(d) This Agreement and the other Loan Documents to which
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Agent's Liens are validly created, perfected, and first
priority (except as contemplated by the Intercreditor Agreement) Liens, subject
only to Permitted Liens.
(f) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which it is a party have been duly authorized by all
necessary action on the part of such Guarantor.
(g) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to such
Guarantor, the Governing Documents of such Guarantor, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Guarantor,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation of
such Guarantor, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of such Guarantor,
other than Permitted Liens, or (iv) require any approval of such Guarantor's
interestholders or any approval or
41
consent of any Person under any material contractual obligation of such
Guarantor, other than consents or approvals that have been obtained and that are
still in force and effect.
(h) Other than the filing of financing statements and the
recordation of the Mortgages, the execution, delivery, and performance by each
Guarantor of the Loan Documents to which such Guarantor is a party do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any Governmental Authority, other than consents or
approvals that have been obtained and that are still in force and effect.
(i) The Loan Documents to which each Guarantor is a party, and
all other documents contemplated hereby and thereby, when executed and delivered
by such Guarantor will be the legally valid and binding obligations of such
Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
5.10 Litigation. Other than those matters disclosed on Schedule 5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Borrower, threatened against Borrower, or any of its Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), and (b) matters arising after the Closing Date that,
if decided adversely to Borrower, or any of its Subsidiaries, as applicable,
reasonably could not be expected to result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Borrower and its Subsidiaries that have been delivered by Borrower to the Lender
Group have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects,
Borrower's and its Subsidiaries' financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change since the date of the latest financial statements submitted to
the Lender Group on or before the Closing Date.
5.12 Fraudulent Transfer.
(a) Borrower and the Restricted Subsidiaries, taken as a whole,
are Solvent.
(b) No transfer of property is being made by Borrower or its
Subsidiaries and no obligation is being incurred by Borrower or its Subsidiaries
in connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower or its Subsidiaries.
5.13 Employee Benefits. None of Borrower, any of the Restricted
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan.
42
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a) to
Borrower's knowledge, none of Borrower's or the Restricted Subsidiaries' assets
has ever been used by Borrower, the Restricted Subsidiaries, or by previous
owners or operators in the disposal of, or to produce, store, handle, treat,
release, or transport, any Hazardous Materials, where such production, storage,
handling, treatment, release or transport was in violation of applicable
Environmental Law, except for any such violation that reasonably could not be
expected to result in a Material Adverse Change (b) to Borrower's knowledge,
none of Borrower's or the Restricted Subsidiaries' properties or assets has ever
been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) neither Borrower
nor any of the Restricted Subsidiaries has received notice that a Lien arising
under any Environmental Law has attached to any revenues or to any Real Property
owned or operated by Borrower or the Restricted Subsidiaries, and (d) neither
Borrower nor the Restricted Subsidiaries has received any unresolved summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
Borrower or its Subsidiaries resulting in the releasing or disposing of
Hazardous Materials into the environment that allegedly is in violation of
applicable Environmental Law.
5.15 Brokerage Fees. Neither Borrower nor any of the Restricted
Subsidiaries has utilized the services of any broker or finder in connection
with Borrower's obtaining financing from the Lender Group under this Agreement
and no brokerage commission or finders fee is payable by Borrower or the
Restricted Subsidiaries in connection herewith.
5.16 Intellectual Property. Borrower and the Restricted Subsidiaries own,
or hold licenses in, all trademarks, trade names, copyrights, patents, patent
rights, and licenses that are necessary to the conduct of their business as
currently conducted. Attached hereto as Schedule 5.16 (as updated from time to
time) is a true, correct, and complete listing of all material patents, patent
applications, trademarks, trademark applications, copyrights, and copyright
registrations as to which Borrower or one of the Restricted Subsidiaries is the
owner or is an exclusive licensee.
5.17 Leases. Borrower and the Restricted Subsidiaries enjoy peaceful and
undisturbed possession under all leases material to their business and to which
they are parties or under which they are operating. All of such leases are valid
and subsisting and no material default by Borrower or the Restricted
Subsidiaries exists under any of them.
5.18 Deposit Accounts and Securities Accounts. Set forth on Schedule 5.18
are all of Borrower's and the Restricted Subsidiaries' Deposit Accounts and
Securities Accounts, including, with respect to each bank or securities
intermediary (i) the name and address of such Person, and (ii) the account
numbers of the Deposit Accounts or Securities Accounts maintained with such
Person.
5.19 Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Borrower or its Subsidiaries in writing to Agent or
any Lender (including all information contained in the Schedules hereto or in
the other Loan Documents, but excluding
43
any Projections) for purposes of or in connection with this Agreement, the other
Loan Documents, or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of Borrower or its Subsidiaries in writing to Agent or any Lender will
be, true and accurate, in all material respects, on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances under which such
information was provided. On the Closing Date, the Closing Date Projections
represent, and as of the date on which any other Projections are delivered to
Agent, such additional Projections represent Borrower's good faith best estimate
of its and its Subsidiaries future performance for the periods covered thereby.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list
of all Indebtedness of Borrower and its Subsidiaries outstanding immediately
prior to the Closing Date that is to remain outstanding after the Closing Date
and such Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.
5.21 Subordinated Notes Indenture. The Obligations are "Senior Debt" (as
defined in the Subordinated Notes Indenture) and, therefore, the repayment of
the Subordinated Notes is subordinated to the prior payment in full in cash of
the Obligations to the extent and in the manner provided in Article 10 of the
Subordinated Notes Indenture. The Indebtedness owing to the Lender Group under
the Loan Documents is "Permitted Debt" (as defined in the Subordinated Notes
Indenture). The defined term "Credit Facility" (as defined in the Subordinated
Notes Indenture) includes the credit facility evidenced by this Agreement and
the other Loan Documents.
5.22 CFCs. As of the Closing Date, none of Borrower's Restricted
Subsidiaries that are CFCs could execute and deliver guaranties of the
Obligations or grant Liens in their assets to secure the Obligations without
creating a tax obligation under Section 956 of the IRC.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until termination of all of the
Revolver Commitments and payment in full of the Obligations, Borrower shall and
shall cause each of the Restricted Subsidiaries to do all of the following:
6.1 Accounting System. Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent. Borrower also shall keep an inventory
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to its and its Subsidiaries' Inventory.
6.2 Collateral Reporting. Upon request by the Agent, provide Agent (and
if so requested by Agent, with copies for each Lender) concurrently with
delivery to WFF, all reports under Section 6.2 of the WFF Loan Agreement.
44
6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with
copies to each Lender:
(a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of Borrower's fiscal
quarters) after the end of each month during each of Borrower's fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and the
Restricted Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial officer of
Borrower to the effect that:
(A) the financial statements delivered hereunder have been
prepared in accordance with GAAP (except for the lack of
footnotes and being subject to year-end audit adjustments) and
fairly present in all material respects the consolidated
financial condition of Borrower and the Restricted Subsidiaries,
(B) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of
any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in Section 7.18 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such
period with the applicable financial covenants contained in Section
7.18,
(b) as soon as available, but in any event within 90 days after
the end of each of Borrower's fiscal years, consolidated and consolidating
financial statements of Borrower and its Subsidiaries for each such fiscal year,
audited by independent certified public accountants reasonably acceptable to
Agent and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP (such audited financial statements to
include a balance sheet, income statement, and statement of cash flow and, if
prepared, such accountants' letter to management),
(c) as soon as available, but in any event prior to the start of
each of Borrower's fiscal years, copies of Borrower's Projections, in form and
substance (including as to scope and underlying assumptions) satisfactory to
Agent, in its sole discretion, for the forthcoming fiscal year, month by month,
certified by the chief financial officer of Borrower as being such officer's
good faith best estimate of the financial performance of Borrower during the
period covered thereby,
45
(d) if and when filed by Borrower,
(i) Form 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(ii) any other filings made by Borrower with the SEC,
(iii) copies of Borrower's federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Borrower to its
shareholders generally,
(e) if and when filed by Borrower or its Subsidiaries and as
requested by Agent, satisfactory evidence of payment of applicable excise taxes
in each jurisdiction in which (i) Borrower or its Subsidiaries conducts business
or is required to pay any such excise tax, (ii) where Borrower's or its
Subsidiaries' failure to pay any such applicable excise tax would result in a
Lien on the properties or assets of Borrower or its Subsidiaries, or (iii) where
Borrower's or its Subsidiaries' failure to pay any such applicable excise tax
reasonably could be expected to result in a Material Adverse Change,
(f) as soon as Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that Borrower proposes to take with respect
thereto,
(g) promptly after the commencement thereof, but in any event
within 5 days after the service of process with respect thereto on Borrower or
any of its Subsidiaries, notice of all actions, suits, or proceedings brought by
or against Borrower or any of its Subsidiaries before any Governmental Authority
which, if determined adversely to Borrower or such Subsidiary, reasonably could
be expected to result in a Material Adverse Change,
(h) promptly after receipt thereof, any notices, complaints,
orders, or other communications from the U.S. Food and Drug Administration with
respect to any material violation of or non-compliance with regulations
applicable to Borrower or its Subsidiaries or permits or licenses held by
Borrower or its Subsidiaries, and
(i) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Borrower or its Subsidiaries.
In addition to the financial statements referred to above, Borrower
agrees to deliver financial statements prepared on both a consolidated and
consolidating basis and agrees that no Subsidiary of Borrower will have a fiscal
year different from that of Borrower. Borrower agrees to cooperate with Agent to
allow Agent to consult with its independent certified public accountants if
Agent reasonably requests the right to do so and that, in such connection, its
independent certified public accountants are authorized to communicate with
Agent and to release to Agent whatever financial information concerning Borrower
or its
46
Subsidiaries Agent reasonably may request, provided, in all cases, that Borrower
shall have received notice of any such proposed consultation and have the right
to be present at such consultation.
6.4 Guarantor Reports. Cause each Guarantor to deliver its annual
financial statements at the time when Borrower provides its audited financial
statements to Agent, but only to the extent such Guarantor's financial
statements are not consolidated with Borrower's financial statements, and copies
of all federal income tax returns as soon as the same are available and in any
event no later than 30 days after the same are required to be filed by law.
6.5 Returns. Cause returns and allowances, as between Borrower and the
Restricted Subsidiaries and their Account Debtors, to be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement; provided that Borrower
may change such customary practices with the written consent of WFF.
6.6 Maintenance of Properties. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct to its business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the provisions of all leases to which it is a party as lessee
so as to prevent any loss or forfeiture thereof or thereunder.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower,
its Subsidiaries, or any of their respective assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. Borrower will and will cause its Subsidiaries to make timely
payment or deposit of all tax payments and withholding taxes required of it and
them by applicable laws, including those laws concerning F.I.C.A., F.U.T.A.,
state disability, and local, state, and federal income taxes, and will, upon
request, furnish Agent with proof satisfactory to Agent indicating that Borrower
and its Subsidiaries have made such payments or deposits.
6.8 Insurance.
(a) At Borrower's expense, maintain insurance respecting its and
its Subsidiaries' assets wherever located, covering loss or damage by fire,
theft, explosion, and all other hazards and risks as ordinarily are insured
against by other Persons engaged in the same or similar businesses. Borrower
also shall maintain business interruption, public liability, and product
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation. All such policies of insurance involving Borrower or
the Restricted Subsidiaries shall be in such amounts and with such insurance
companies as are reasonably satisfactory to Agent. Borrower shall deliver copies
of all such policies to Agent with a satisfactory lender's loss payable
endorsement naming Agent as loss payee or additional insured, as appropriate.
Each policy of insurance or endorsement shall contain a
47
clause requiring the insurer to give not less than 30 days prior written notice
to Agent in the event of cancellation of the policy for any reason whatsoever.
(b) Borrower shall give Agent prompt notice of any loss covered
by such insurance. Subject to the last sentence of this clause (b):
(i) Agent shall have the exclusive right to adjust any losses
claimed under any such insurance policies in excess of $250,000 (or in any
amount after the occurrence and during the continuation of an Event of Default),
without any liability to Borrower whatsoever in respect of such adjustments;
(ii) Any monies received as payment for any loss in an amount that is
less than $250,000 under any insurance policy mentioned above (other than
liability insurance policies) or as payment of any award or compensation for
condemnation or taking by eminent domain, shall be paid over to Agent to be
disbursed to Borrower under staged payment terms reasonably satisfactory to
Agent for application to the cost of repairs, replacements, or restorations,
unless an Event of Default shall have occurred and be continuing in which event,
at the option of the Required Lenders, such payment may be applied to the
repayment of the Obligations; and
(iii) Any monies received as payment for any loss in an amount that is
equal to or greater than $250,000 under any insurance policy mentioned above
(other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over to
Agent to be applied at the option of the Required Lenders either to the
prepayment of the Obligations or shall be disbursed to Borrower under staged
payment terms reasonably satisfactory to Agent for application to the cost of
repairs, replacements, or restorations. Any such repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items of property destroyed prior to
such damage or destruction.
Notwithstanding clauses (i), (ii) and (iii) above, the rights of the Lender
Group under this clause (b) shall not be construed in derogation of the rights
of WFF to receive insurance proceeds in respect of the Collateral, and to
exclusively adjust and administer any such insurance, to the extent that the
Intercreditor Agreement accords priority to WFF in respect of such Collateral.
(c) Borrower will not and will not suffer or permit the
Restricted Subsidiaries to take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 6.8, unless Agent is included thereon as named insured with the loss
payable to Agent under a lender's loss payable endorsement or its equivalent.
Borrower immediately shall notify Agent whenever such separate insurance is
taken out, specifying the insurer thereunder and full particulars as to the
policies evidencing the same, and copies of such policies promptly shall be
provided to Agent.
48
6.9 Location of Inventory and Equipment. Keep Borrower's and the
Restricted Subsidiaries' Inventory and Equipment only at the locations
identified on Schedule 5.5 and their chief executive offices only at the
locations identified on Schedule 5.7(b); provided, however, that Borrower may
amend Schedule 5.5 and Schedule 5.7 so long as such amendment occurs by written
notice to Agent not less than 30 days prior to the date on which such Inventory
or Equipment is moved to such new location or such chief executive office is
relocated, so long as such new location is within the continental United States,
and so long as, at the time of such written notification, Borrower provides
Agent a Collateral Access Agreement with respect thereto.
6.10 Compliance with Laws. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Change.
6.11 Leases. Pay when due all rents and other amounts payable under any
material leases to which Borrower or any of the Restricted Subsidiaries is a
party or by which Borrower's or any such Restricted Subsidiaries' properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
6.12 Existence. At all times preserve and keep in full force and effect
Borrower's and the Restricted Subsidiaries valid existence and good standing and
any rights and franchises material to their businesses.
6.13 Environmental.
(a) Keep any property either owned or operated by Borrower or
the Restricted Subsidiaries free of any Environmental Liens or post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material respects,
with Environmental Laws and provide to Agent documentation of such compliance
which Agent reasonably requests, (c) promptly notify Agent of any release of a
Hazardous Material in any reportable quantity from or onto property owned or
operated by Borrower or the Restricted Subsidiaries and take any Remedial
Actions required under any applicable Environmental Law to abate such release,
and (d) promptly, but in any event within 5 days of its receipt thereof, provide
Agent with written notice of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of Borrower or the Restricted Subsidiaries, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against Borrower or the Restricted Subsidiaries, and (iii) notice of a
violation, citation, or other administrative order which reasonably could be
expected to result in a Material Adverse Change.
6.14 Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, notify Agent if any written information,
exhibit, or report furnished to the Lender Group contained any untrue statement
of a material fact or omitted to
49
state any material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made. The foregoing to the
contrary notwithstanding, any notification pursuant to the foregoing provision
will not cure or remedy the effect of the prior untrue statement of a material
fact or omission of any material fact nor shall any such notification have the
affect of amending or modifying this Agreement or any of the Schedules hereto.
6.15 Formation of Subsidiaries. At the time that Borrower or any Guarantor
forms any direct or indirect Subsidiary or acquires any direct or indirect
domestic Subsidiary after the Closing Date (excluding Unrestricted
Subsidiaries), Borrower or such Guarantor shall (a) cause such new Subsidiary to
provide to Agent a joinder to the Guaranty and the Guarantor Security Agreement,
together with such other security documents (including Mortgages with respect to
any Real Property of such new Subsidiary), as well as appropriate UCC-1
financing statements (and with respect to all property subject to a Mortgage,
fixture filings), all in form and substance satisfactory to Agent (including
being sufficient to grant Agent a first priority Lien (subject to Permitted
Liens) in and to the assets of such newly formed or acquired Subsidiary), (b)
provide to Agent a pledge agreement and appropriate certificates and powers or
UCC-1 financing statements, hypothecating all of the direct or beneficial
ownership interest in such new Subsidiary, in form and substance satisfactory to
Agent, and (c) provide to Agent all other documentation, including one or more
opinions of counsel satisfactory to Agent, which in its opinion is appropriate
with respect to the execution and delivery of the applicable documentation
referred to above (including policies of title insurance or other documentation
with respect to all property subject to a Mortgage). Any document, agreement, or
instrument executed or issued pursuant to this Section 6.15 shall be a Loan
Document and shall be subject to the terms of the Intercreditor Agreement.
6.16 Amendment of Preferred Stock Cause the agreements governing the
Borrower Preferred Stock and the Holding Preferred Stock to be amended on an
annual basis, beginning in the first quarter of 2004, to extend the period of
time within which cash dividends are not paid thereunder for an additional year.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, until termination of all of the
Revolver Commitments and payment in full of the Obligations, Borrower will not
and will not permit any of its Restricted Subsidiaries to do any of the
following:
7.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents,
(b) Indebtedness to WFF under the WFF Loan Agreement (but not
any refinancings thereof by lenders other than refinancings by WFF or syndicates
of lenders of which WFF or Wells Fargo Bank, N.A. holds (as of the date of the
consummation thereof)
50
the largest lending commitment of any lender or group of affiliated lenders),
and guarantee obligations by the Restricted Subsidiaries with respect thereto in
an aggregate principal amount not to exceed $32,000,000, less any permanent
reductions to the lending commitments thereunder which hereafter occur (but not
any scheduled reductions to the lending commitments thereunder prior to the
maturity date thereof).
(c) Indebtedness set forth on Schedule 5.20,
(d) Permitted Purchase Money Indebtedness,
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not, in Agent's
judgment, materially impair the prospects of repayment of the Obligations by
Borrower or materially impair Borrower's creditworthiness (this requirement
being deemed satisfied if the terms and conditions of any such refinancing,
renewal, or extension are the same as or more favorable than the terms in the
Indebtedness being refinanced, renewed or extended), (ii) such refinancings,
renewals, or extensions do not result in an increase in the then extant
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions that, taken as a whole, are materially more burdensome or restrictive
to Borrower, (iv) if the Indebtedness that is refinanced, renewed, or extended
was subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension Indebtedness must include
subordination terms and conditions that are at least as favorable to the Lender
Group as those that were applicable to the refinanced, renewed, or extended
Indebtedness, and (v) the Indebtedness that is refinanced, renewed, or extended
is not recourse to any Person that is liable on account of the Obligations other
than those Persons which were obligated with respect to the Indebtedness that
was refinanced, renewed, or extended,
(f) endorsement of instruments or other payment items for
deposit,
(g) Indebtedness composing Permitted Investments,
(h) Indebtedness of Borrower evidenced by the Subordinated
Notes,
(i) Indebtedness of Borrower evidenced by the Subordinated
Convertible Notes,
(j) Indebtedness of Borrower evidenced by the Senior Notes,
(k) Indebtedness of HRC evidenced by the HRC Notes,
51
(l) other unsecured Indebtedness not to exceed $1,500,000
outstanding at any time;
provided that, notwithstanding the foregoing provisions of this subsection the
Unrestricted Subsidiaries shall not provide any guarantees of the obligations
under the WFF Loan Agreement.
7.2 Liens. Create, incur, assume, or suffer to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(e) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 Restrictions on Fundamental Changes.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or substantially
all of its assets.
7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of Borrower's or
the Restricted Subsidiaries assets.
7.5 Change Name. Change Borrower's or any of the Restricted Subsidiaries'
names, FEINs, organizational identification number, state of organization or
organizational identity; provided, however, that Borrower or any of the
Restricted Subsidiaries may change their names upon at least 30 days prior
written notice to Agent of such change and so long as, at the time of such
written notification, Borrower or the Restricted Subsidiary provides any
financing statements necessary to perfect and continue perfected the Agent's
Liens.
7.6 Nature of Business. Make any change in the principal nature of its or
their business.
7.7 Prepayments and Amendments. Except in connection with a refinancing
permitted by Section 7.1(e),
(a) prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of Borrower or the Restricted Subsidiaries (including without
limitation the WFF Loan Agreement and the Subordinated Notes), other than the
Obligations in accordance with this Agreement, provided that the obligations
under the WFF Loan Agreement (i) may
52
be prepaid and reduced to the extent of any mandatory prepayment obligations
described in the WFF Loan Agreement as the same is in effect as of the date of
this Agreement, and (ii) may revolve (and be reallocated amongst sublimits) to
the extent that any such repayments (or reallocations) do not result in a
reduction of the overall lending commitments under the WFF Loan Agreement, and
(iii) may reduce the overall commitments under the WFF Loan Agreement as
contemplated by Section 2.1(h) thereof to an amount which is not less than
$25,000,000.
(b) directly or indirectly, amend, modify, alter, increase, or
change in any respect that may be adverse to the Lender Group any of the terms
or conditions of any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Section 7.1(c),
(d), (i), (j), or (k), or amend, modify, alter, increase, change in any respect,
waive the provisions of, or otherwise modify the provisions of the Subordinated
Notes Indenture without the prior written consent of the Lender Group.
7.8 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.9 Consignments. Consign any of its or their Inventory or sell any of
its or their Inventory on bill and hold, sale or return, sale on approval, or
other conditional terms of sale.
7.10 Distributions. Make any distribution or declare or pay any dividends
(in cash or other property, other than common Stock or with respect to dividends
on Borrower's 111/2% Senior PIK Preferred Stock, such Preferred Stock) on, or
purchase, acquire, redeem, or retire any of Borrower's Stock, of any class,
whether now or hereafter outstanding.
7.11 Accounting Methods. Modify or change its fiscal year or its method of
accounting (other than as may be required to conform to GAAP) or enter into,
modify, or terminate any agreement currently existing, or at any time hereafter
entered into with any third party accounting firm or service bureau for the
preparation or storage of Borrower's or the Subsidiaries' accounting records
without said accounting firm or service bureau agreeing to provide Agent
information regarding Borrower's and the Subsidiaries' financial condition.
7.12 Investments. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that Borrower and the Restricted Subsidiaries shall not have Permitted
Investments (other than in the Cash Management Accounts) in Deposit Accounts or
Securities Accounts in an aggregate amount in excess of $1,000 at any one time
unless Borrower or the Restricted Subsidiary, as applicable, and the applicable
securities intermediary or bank have entered into Control Agreements governing
such Permitted Investments in order to perfect (and further establish) the
Agent's Liens in such Permitted Investments. Subject to the foregoing proviso,
Borrower shall not and shall not permit the Restricted Subsidiaries to establish
or maintain any Deposit Account or Securities Account unless Agent shall have
received a Control Agreement in respect of such Deposit Account or Securities
Account.
53
7.13 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any transaction with any Affiliate of Borrower except for
transactions that are in the ordinary course of Borrower's business, upon fair
and reasonable terms, that are fully disclosed to Agent, and that are no less
favorable to Borrower than would be obtained in an arm's length transaction with
a non-Affiliate.
7.14 Suspension. Suspend or go out of a substantial portion of its or
their business.
7.15 [Intentionally Omitted]
7.16 Use of Proceeds. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) to repay, in full, the outstanding
principal, accrued interest, and accrued fees and expenses owing under or
pursuant to the Existing Credit Agreement, and (ii) to pay transactional fees,
costs, and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.
7.17 Inventory and Equipment with Bailees. Except as provided on Schedule
5.5, store the Inventory or Equipment of Borrower or the Restricted Subsidiaries
at any time now or hereafter with a bailee, warehouseman, or similar party
without Agent's prior written consent.
7.18 Financial Covenants.
(a) Fail to maintain or achieve:
(i) Minimum EBITDA. EBITDA, measured on a quarter-end basis, of
at least the required amount set forth in the following table for the
applicable period set forth opposite thereto:
- -----------------------------------------------------------------------
Applicable Amount Applicable Period
- -----------------------------------------------------------------------
$5,000,000 For the 1 quarter period
ending September 30, 2003
- -----------------------------------------------------------------------
$10,000,000 For the 2 quarter period
ending December 31, 2003
- -----------------------------------------------------------------------
$16,500,000 For the 3 quarter period
ending March 31, 2004
- -----------------------------------------------------------------------
$23,000,000 For the 4 quarter period
ending June 30, 2004
- -----------------------------------------------------------------------
$24,500,000 For the 4 quarter period
ending September 30, 2004
- -----------------------------------------------------------------------
$25,000,000 For the 4 quarter period
ending December 31, 2004 and each 4
quarter period ending at the end of a
calendar quarter thereafter
- -----------------------------------------------------------------------
54
(b) Make:
(i) Capital Expenditures. Capital Expenditures in any fiscal
year in excess of the amount set forth in the following table for the
applicable period:
- ---------------------------------------------------------------------------
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2003 2004 2005 2006 2007
- ---------------------------------------------------------------------------
$ 6,500,000 $ 9,000,000 $ 10,000,000 $ 11,000,000 $ 11,000,000
- ---------------------------------------------------------------------------
; provided that the foregoing notwithstanding, Borrower may elect to
make Capital Expenditures during its 2003 fiscal year that exceed $6,500,000 up
to a maximum of $7,500,000, but in such event the amount permitted above for its
2004 fiscal year shall be reduced by an amount equal to the actual amount of
Borrower's Capital Expenditures during fiscal year 2003 minus $6,500,000;
provided, further, that any unused portion of the amount of Capital Expenditures
permitted during any fiscal year may be carried over and added to the maximum
amount allowed for the next succeeding fiscal year (but not to any subsequent
fiscal year).
7.19 Payments on Affiliate Notes. Make any payments of principal or cash
payments of interest to the holders of the Subordinated Convertible Notes, the
Senior Notes, or the HRC Notes.
7.20 Limitation on Indebtedness of Unrestricted Subsidiaries. Permit the
Unrestricted Subsidiaries to create, incur, assume, or suffer to exist any
Indebtedness if, after giving pro forma effect to the incurrence of any such
Indebtedness as of the last day of the then most recently ended fiscal quarter
for which Borrower has delivered to Agent financial statements with respect to
the Unrestricted Subsidiaries, the aggregate principal amount of the
Indebtedness of the Unrestricted Subsidiaries would exceed the result of 5 times
the Unrestricted Subsidiaries TFQ EBITDA, determined as of such date.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
55
8.1 If Borrower fails to pay when due and payable, or when declared due
and payable, all or any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 If Borrower fails to perform, keep, or observe any term, provision,
condition, covenant, or agreement beyond any specified cure or grace period
applicable thereto contained in this Agreement or in any of the other Loan
Documents;
8.3 If any material portion of Borrower's or any of the Restricted
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by Borrower or any of the
Restricted Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Borrower, or any of
the Restricted Subsidiaries, and any of the following events occur: (a) Borrower
or such Restricted Subsidiary consents to the institution of such Insolvency
Proceeding against it, (b) the petition commencing the Insolvency Proceeding is
not timely controverted; provided, however, that, during the pendency of such
period, each member of the Lender Group shall be relieved of its obligations to
extend credit hereunder, (c) the petition commencing the Insolvency Proceeding
is not dismissed within 60 calendar days of the date of the filing thereof;
provided, however, that, during the pendency of such period, each member of the
Lender Group shall be relieved of its obligations to extend credit hereunder,
(d) an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower or any of the Restricted Subsidiaries, or
(e) an order for relief shall have been entered therein;
8.6 If Borrower or any of the Restricted Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's or any of the Restricted Subsidiaries' assets by
the United States, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower's or any of the Restricted
Subsidiaries' assets and the same is not paid before such payment is delinquent;
8.8 If one or more judgments or other claims involving an aggregate
amount of $500,000, or more, becomes a Lien or encumbrance upon any material
portion of Borrower's or any Restricted Subsidiary's assets and the same is not
released, discharged, bonded against, or stayed pending appeal before the
earlier of 30 days after the date it first arises or 5
56
days prior to the date on which such asset is subject to being forfeited by
Borrower or such Restricted Subsidiary;
8.9 (a) If there is a default in one or more agreements to which Borrower
is a party with one or more third Persons relative to Borrower's Indebtedness
involving an aggregate amount of $750,000, or more, and such default (i) occurs
at the final maturity of the obligations thereunder, or (ii) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder, or
(b) If there is a default in any other agreement to which Borrower is
a party with one or more third Persons and such default results in a right by
such third Person(s), irrespective of whether exercised, to terminate such
agreement and such termination could reasonably be expected to result in a
Material Adverse Change;
8.10 If Borrower or any of the Restricted Subsidiaries makes any payment
on account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.11 If any warranty, representation, statement, or Record made to the
Lender Group by Borrower, the Restricted Subsidiaries, or any officer, employee,
agent, or director of Borrower or any of the Restricted Subsidiaries is
inaccurate in any material respect as of the date made or deemed made;
8.12 If the obligation of any Guarantor under the Guaranty is limited or
terminated by operation of law or by such Guarantor thereunder;
8.13 If this Agreement or any other Loan Document that purports to create
a Lien, shall, for any reason, fail or cease to create a valid and perfected
and, except to the extent permitted by the terms hereof or thereof, first
priority Lien on or security interest in the Collateral covered hereby or
thereby; or
8.14 Any provision of any Loan Document shall at any time for any reason
be declared to be null and void, or the validity or enforceability thereof shall
be contested by Borrower or the Restricted Subsidiaries, or a proceeding shall
be commenced by Borrower or the Restricted Subsidiaries, or by any Governmental
Authority having jurisdiction over Borrower or the Restricted Subsidiaries,
seeking to establish the invalidity or unenforceability thereof, or Borrower or
its Subsidiaries shall deny that Borrower or the Restricted Subsidiaries has any
liability or obligation purported to be created under any Loan Document.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, authorize and
instruct Agent to do any one or more of the
57
following on behalf of the Lender Group (and Agent, acting upon the instructions
of the Required Lenders, shall, subject to the terms of the Intercreditor
Agreement, do the same on behalf of the Lender Group), all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of the Lender Group, but without
affecting any of the Agent's Liens in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with
Borrower's Account Debtors for amounts and upon terms which Agent considers
advisable, and in such cases, Agent will credit Borrower's Loan Account with
only the net amounts received by Agent in payment of such disputed Accounts
after deducting all Lender Group Expenses incurred or expended in connection
therewith;
(e) Cause Borrower to hold all of its returned Inventory in
trust for the Lender Group and segregate all such Inventory from all other
assets of Borrower or in Borrower's possession;
(f) Without notice to or demand upon Borrower, make such
payments and do such acts as Agent considers necessary or reasonable to protect
its security interests in the Collateral. Borrower agrees to assemble the
Collateral if Agent so requires, and to make the Collateral available to Agent
at a place that Agent may designate which is reasonably convenient to both
parties. Borrower authorizes Agent to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any Lien that in Agent's
determination appears to conflict with the Agent's Liens in and to the
Collateral and to pay all expenses incurred in connection therewith and to
charge Borrower's Loan Account therefor. With respect to any of Borrower's owned
or leased premises, Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of the Lender Group's rights or remedies provided herein, at law,
in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting an acceptance of any collateral in full or
partial satisfaction of an obligation (within the meaning of the Code), set off
and apply to the Obligations any and all (i) balances and deposits of Borrower
held by the Lender Group, or (ii) Indebtedness at any time owing to or for the
credit or the account of Borrower held by the Lender Group;
(h) (intentionally omitted)
58
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Borrower Collateral. Borrower hereby grants to Agent a license or
other right to use, without charge, Borrower's labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Borrower Collateral,
in completing production of, advertising for sale, and selling any Borrower
Collateral and Borrower's rights under all licenses and all franchise agreements
shall inure to the Lender Group's benefit;
(j) Sell the Borrower Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Agent determines is commercially reasonable. It is not necessary that the
Borrower Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the Borrower
Collateral as follows:
(i) Agent shall give Borrower a notice in writing of the time
and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the
Borrower Collateral, the time on or after which the private sale or
other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least 10 days
before the earliest time of disposition set forth in the notice; no
notice needs to be given prior to the disposition of any portion of
the Borrower Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a
recognized market;
(l) Agent, on behalf of the Lender Group, may credit bid and
purchase at any public sale;
(m) Agent may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Borrower Collateral or to operate
same and, to the maximum extent permitted by law, may seek the appointment of
such a receiver without the requirement of prior notice or a hearing; and
(n) The Lender Group shall have all other rights and remedies
available at law or in equity or pursuant to any other Loan Document.
; provided, however, that upon the occurrence of any Event of Default described
in Section 8.4 or Section 8.5, in addition to the remedies set forth above,
without any notice to Borrower or any other Person or any act by the Lender
Group, the Revolver Commitments shall automatically terminate and the
Obligations then outstanding, together with all accrued and unpaid interest
thereon and all fees and all other amounts due under this Agreement and the
other Loan Documents, shall automatically and immediately become due and
payable,
59
without presentment, demand, protest, or notice of any kind, all of which are
expressly waived by Borrower.
9.2 Remedies Cumulative. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements shall
be cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to Borrower, may do any or all of the following: (a)
make payment of the same or any part thereof, (b) [[intentionally omitted]], or
(c) in the case of the failure to comply with Section 6.8 hereof, obtain and
maintain insurance policies of the type described in Section 6.8 and take any
action with respect to such policies as Agent deems prudent. Any such amounts
paid by Agent shall constitute Lender Group Expenses and any such payments shall
not constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which Borrower may in any way be liable.
11.2 The Lender Group's Liability for Borrower Collateral. Borrower hereby
agrees that: (a) so long as Agent complies with its obligations, if any, under
the Code, the Lender Group shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Borrower Collateral, (ii) any loss
or damage thereto occurring or arising in any manner or fashion from any cause,
(iii) any diminution in the value thereof, or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all
risk of loss, damage, or destruction of the Borrower Collateral shall be borne
by Borrower.
60
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons, and each Participant (each,
an "Indemnified Person") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, or administration (including any restructuring or workout with
respect hereto) of this Agreement, any of the other Loan Documents, or the
transactions contemplated hereby or thereby or the monitoring of Borrower's and
its Subsidiaries' compliance with the terms of the Loan Documents, and (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities"). The
foregoing to the contrary notwithstanding, Borrower shall have no obligation to
any Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrower with respect thereto. WITHOUT LIMITATION,
THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF
ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrower or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Borrower or Agent, as applicable, may designate to each other
in accordance herewith), or telefacsimile to Borrower or Agent, as the case may
be, at its address set forth below:
If to Borrower: HUDSON RESPIRATORY CARE, INC.
27711 Diaz Road
Temecula, California 92589
Attn: Chief Financial Officer
61
Fax No. (909) 699-8462
with copies to: BINGHAM MCCUTCHEN
355 South Grand Avenue
Los Angeles, California 90071-3106
Attn: Roger Lustberg, Esq.
Fax No. (213) 680-6499
If to Agent: MW POST ADVISORY GROUP, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, California 90025
Attn: Allan Schweitzer, CFA
Fax No. (310) 996-9669
with copies to: SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attn: William M. Scott IV, Esq.
Fax No. (213) 617-4276
Agent and Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this Section 12,
other than notices by Agent in connection with enforcement rights against the
Borrower Collateral under the provisions of the Code, shall be deemed received
on the earlier of the date of actual receipt or 3 Business Days after the
deposit thereof in the mail. Borrower acknowledges and agrees that notices sent
by the Lender Group in connection with the exercise of enforcement rights
against Borrower Collateral under the provisions of the Code shall be deemed
sent when deposited in the mail or personally delivered, or, where permitted by
law, transmitted by telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA.
62
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY BORROWER COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING
SUCH ACTION OR WHERE SUCH BORROWER COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 13(b).
(c) BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
(a) Any Lender may assign and delegate to one or more assignees
(each an "Assignee") that are Eligible Transferees all, or any ratable part of
all, of the Obligations, the Revolver Commitments and the other rights and
obligations of such Lender hereunder and under the other Loan Documents, in a
minimum amount of $1,000,000; provided, however, that Borrower and Agent may
continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses, and related information with
respect to the Assignee, have been given to Borrower and Agent by such Lender
and the Assignee, (ii) such Lender and its Assignee have delivered to Borrower
and Agent an Assignment and Acceptance, and (iii) the assignor Lender or
Assignee has paid to Agent for Agent's separate account a processing fee in the
amount of $5,000. Anything contained herein to the contrary notwithstanding, the
payment of any fees shall not be required and the Assignee need not be an
Eligible Transferee if such assignment is in connection with any
63
merger, consolidation, sale, transfer, or other disposition of all or any
substantial portion of the business or loan portfolio of the assigning Lender.
(b) From and after the date that Agent notifies the assignor
Lender (with a copy to Borrower) that it has received an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.3 hereof) and be released from any future obligations
under this Agreement (and in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Agreement and the other Loan Documents, such Lender shall cease to be
a party hereto and thereto), and such assignment shall effect a novation between
Borrower and the Assignee; provided, however, that nothing contained herein
shall release any assigning Lender from obligations that survive the termination
of this Agreement, including such assigning Lender's obligations under Article
16 and Section 17.8 of this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other Loan Document furnished pursuant hereto, (3)
such Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance, (4) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement, (5)
such Assignee appoints and authorizes Agent to take such actions and to exercise
such powers under this Agreement as are delegated to Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) Immediately upon Agent's receipt of the required processing
fee payment and the fully executed Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition
64
of the Assignee and the resulting adjustment of the Revolver Commitments arising
therefrom. The Revolver Commitment allocated to each Assignee shall reduce the
Revolver Commitment of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in its Obligations, the Revolver Commitment of such Lender, and the other rights
and interests of that Lender (the "Originating Lender") hereunder and under the
other Loan Documents (provided that no written consent of Agent shall be
required in connection with any sale of any such participating interests by a
Lender to an Eligible Transferee); provided, however, that (i) the Originating
Lender shall remain a "Lender" for all purposes of this Agreement and the other
Loan Documents and the Participant receiving the participating interest in the
Obligations, the Revolver Commitment, and the other rights and interests of the
Originating Lender hereunder shall not constitute a "Lender" hereunder or under
the other Loan Documents and the Originating Lender's obligations under this
Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrower,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or substantially all of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender, or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums, and (v) all amounts payable by Borrower hereunder shall be determined
as if such Lender had not sold such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any rights under this Agreement or
the other Loan Documents or any direct rights as to the other Lenders, Agent,
Borrower, the Collections of Borrower or its Subsidiaries, the Collateral, or
otherwise in respect of the Obligations. No Participant shall have the right to
participate directly in the making of decisions by the Lenders among themselves.
65
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may, subject to the provisions of
Section 17.8, disclose all documents and information which it now or hereafter
may have relating to Borrower and its Subsidiaries and their respective
businesses.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR Section203.24, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
14.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release Borrower from its Obligations. A Lender may assign this Agreement and
the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to Section 14.1 hereof and, except as expressly required pursuant to
Section 14.1 hereof, no consent or approval by Borrower is required in
connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Borrower and then any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all of the Lenders affected thereby and
Borrower, do any of the following:
(a) increase or extend the Revolver Commitment of any Lender,
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on, any loan
or other extension of credit hereunder, or reduce any fees or other amounts
payable hereunder or under any other Loan Document,
(d) change the percentage of the Revolver Commitments that is
required to take any action hereunder,
66
(e) amend or modify this Section or any provision of the
Agreement providing for consent or other action by all Lenders,
(f) release Collateral other than as permitted by Section 16.12,
(g) change the definition of "Required Lenders" or "Pro Rata
Share",
(h) contractually subordinate any of the Agent's Liens,
(i) release Borrower or any Guarantor from any obligation for the
payment of money under or pursuant to this Agreement or any other Loan Document,
(j) change the definition of Revolver Maximum Amount, or
(k) amend any of the provisions of Section 16.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrower, shall not require consent
by or the agreement of Borrower.
15.2 [Intentionally Omitted].
15.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent's and each
Lender's rights thereafter to require strict performance by Borrower of any
provision of this Agreement. Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 Appointment and Authorization of Agent. Each Lender hereby designates
and appoints Post as its representative under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to execute and
deliver each of the other Loan Documents on its behalf and to take such other
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Section 16. The
provisions
67
of this Section 16 (other than the proviso to Section 16.11(e))are solely for
the benefit of Agent, and the Lenders, and Borrower and its Subsidiaries shall
have no rights as a third party beneficiary of any of the provisions contained
herein. Any provision to the contrary contained elsewhere in this Agreement or
in any other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Agent; it being expressly understood and agreed that the use of the word
"Agent" is for convenience only, that Post is merely the representative of the
Lenders, and only has the contractual duties set forth herein. Except as
expressly otherwise provided in this Agreement, Agent shall have and may use its
sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions that Agent
expressly is entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents. Without limiting the generality of the foregoing, or
of any other provision of the Loan Documents that provides rights or powers to
Agent, Lenders agree that Agent shall have the right to exercise the following
powers as long as this Agreement remains in effect: (a) maintain, in accordance
with its customary business practices, ledgers and records reflecting the status
of the Obligations, the Collateral, the Collections of Borrower and its
Subsidiaries, and related matters, (b) execute or file any and all financing or
similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders as
provided in the Loan Documents, (d) exclusively receive, apply, and distribute
the Collections of Borrower and its Subsidiaries as provided in the Loan
Documents, (e) open and maintain such bank accounts and cash management
arrangements as Agent deems necessary and appropriate in accordance with the
Loan Documents for the foregoing purposes with respect to the Collateral and the
Collections of Borrower and its Subsidiaries, (f) perform, exercise, and enforce
any and all other rights and remedies of the Lender Group with respect to
Borrower, the Obligations, the Collateral, the Collections of Borrower and its
Subsidiaries, or otherwise related to any of same as provided in the Loan
Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem
necessary or appropriate for the performance and fulfillment of its functions
and powers pursuant to the Loan Documents.
16.2 Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any
68
of the Lenders for any recital, statement, representation or warranty made by
Borrower or any Subsidiary or Affiliate of Borrower, or any officer or director
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the Books or properties of Borrower or the
books or records or properties of any of Borrower's Subsidiaries or Affiliates.
16.4 Reliance by Agent. Agent shall be entitled to rely,and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such action.
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the requisite Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.
16.5 Notice of Default or Event of Default. Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders and, except
with respect to Events of Default of which Agent has actual knowledge, unless
Agent shall have received written notice from a Lender or Borrower referring to
this Agreement, describing such Default or Event of Default, and stating that
such notice is a "notice of default." Agent promptly will notify the Lenders of
its receipt of any such notice or of any Event of Default of which Agent has
actual knowledge. If any Lender obtains actual knowledge of any Event of
Default, such Lender promptly shall notify the other Lenders and Agent of such
Event of Default. Each Lender shall be solely responsible for giving any notices
to its Participants, if any. Subject to Section 16.4, Agent shall take such
action with respect to such Default or Event of Default as may be requested by
the Required Lenders in accordance with Section 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not
be
69
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable.
16.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person party to a Loan Document, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower and any
other Person party to a Loan Document. Except for notices, reports, and other
documents expressly herein required to be furnished to the Lenders by Agent,
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of Borrower and any
other Person party to a Loan Document that may come into the possession of any
of the Agent-Related Persons.
16.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender
Group Expenses to the extent Agent reasonably deems necessary or appropriate for
the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including court costs, attorneys fees and
expenses, fees and expenses of financial accountants, advisors, consultants, and
appraisers, costs of collection by outside collection agencies, auctioneer fees
and expenses, and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrower is obligated to reimburse Agent
or Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent
is authorized and directed to deduct and retain sufficient amounts from the
Collections of Borrower and its Subsidiaries received by Agent to reimburse
Agent for such out-of-pocket costs and expenses prior to the distribution of any
amounts to Lenders. In the event Agent is not reimbursed for such costs and
expenses from the Collections of Borrower and its Subsidiaries received by
Agent, each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Borrower and without limiting the obligation of Borrower to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such
70
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct nor shall any Lender be liable for the obligations of any
other Lender which fails to make an Advance or other extension of credit
hereunder. Without limitation of the foregoing, each Lender shall reimburse
Agent upon demand for such Lender's Pro Rata Share of any costs or out-of-pocket
expenses (including attorneys, accountants, advisors, and consultants fees and
expenses) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment, or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that Agent is not reimbursed for such expenses by or on behalf of Borrower. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of Agent.
16.8 Agent in Individual Capacity. Post and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in, and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Borrower and its
Subsidiaries and Affiliates and any other Person party to any Loan Documents as
though Post were not Agent hereunder, and, in each case, without notice to or
consent of the other members of the Lender Group. The other members of the
Lender Group acknowledge that, pursuant to such activities, Post or its
Affiliates may receive information regarding Borrower or its Affiliates and any
other Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include Post in its individual capacity.
16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the
Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers, and duties of the retiring Agent and
the term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers, and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 16 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.
71
16.10 Lender in Individual Capacity. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates and any other Person party to any Loan
Documents as though such Lender were not a Lender hereunder without notice to or
consent of the other members of the Lender Group. The other members of the
Lender Group acknowledge that, pursuant to such activities, such Lender and its
respective Affiliates may receive information regarding Borrower or its
Affiliates and any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrower or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver such Lender will use its reasonable
best efforts to obtain), such Lender not shall be under any obligation to
provide such information to them.
16.11 Withholding Taxes.
(a) If any Lender is a "foreign person" within the meaning of the
IRC and such Lender claims exemption from, or a reduction of, U.S. withholding
tax under Sections 1441 or 1442 of the IRC, such Lender agrees with and in favor
of Agent and Borrower, to deliver to Agent and Borrower:
(i) if such Lender claims an exemption from withholding tax
pursuant to its portfolio interest exception, (A) a statement of the
Lender, signed under penalty of perjury, that it is not a (I) a "bank"
as described in Section 881(c)(3)(A) of the IRC, (II) a 10%
shareholder of Borrower (within the meaning of Section 871(h)(3)(B) of
the IRC), or (III) a controlled foreign corporation related to
Borrower within the meaning of Section 864(d)(4) of the IRC, and (B) a
properly completed and executed IRS Form W-8BEN, before the first
payment of any interest under this Agreement and at any other time
reasonably requested by Agent or Borrower;
(ii) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed
and executed IRS Form W-8BEN before the first payment of any interest
under this Agreement and at any other time reasonably requested by
Agent or Borrower;
(iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI
before the first payment of any interest is due under this Agreement
and at any other time reasonably requested by Agent or Borrower;
72
(iv) such other form or forms as may be required under the IRC
or other laws of the United States as a condition to exemption from,or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrower to such Lender, such Lender
agrees to notify Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender. To the extent of
such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(e) All payments made by Borrower hereunder or under any note
will be made without setoff, counterclaim, or other defense, except as required
by applicable law other than for Taxes (as defined below). All such payments
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction (other
than the United States) or by any political subdivision or taxing authority
thereof or therein (other than of the United States) with respect to such
payments (but excluding, any tax imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein (i) measured by or based on
the net income or net profits of a Lender, or (ii) to the extent that such tax
results from a change in the circumstances of the Lender, including a change in
the residence, place of organization, or principal place of
73
business of the Lender, or a change in the branch or lending office of the
Lender participating in the transactions set forth herein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or imposed,
Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement or under any note, including any amount paid pursuant to this Section
16.11(e) after withholding or deduction for or on account of any Taxes, will not
be less than the amount provided for herein; provided, however, that Borrower
shall not be required to increase any such amounts payable to Agent or any
Lender (i) that is not organized under the laws of the United States, if such
Person fails to comply with the other requirements of this Section 16.11, or
(ii) if the increase in such amount payable results from Agent's or such
Lender's own willful misconduct or gross negligence. Borrower will furnish to
Agent as promptly as possible after the date the payment of any Taxes is due
pursuant to applicable law certified copies of tax receipts evidencing such
payment by Borrower.
16.12 Collateral Matters.
(a) The Lenders hereby irrevocably authorize Agent, at its option
and in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Revolver Commitments and payment in full by Borrower of all
Obligations, (ii) constituting property being sold or disposed of if a release
is required or desirable in connection therewith and if Borrower certifies to
Agent that the sale or disposition is permitted under Section 7.4 of this
Agreement or the other Loan Documents (and Agent may rely conclusively on any
such certificate, without further inquiry), (iii) constituting property in which
Borrower or its Subsidiaries owned no interest at the time the Agent's Lien was
granted nor at any time thereafter, or (iv) constituting property leased to
Borrower or its Subsidiaries under a lease that has expired or is terminated in
a transaction permitted under this Agreement. Except as provided above, Agent
will not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or substantially all
of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders.
Upon request by Agent or Borrower at any time, the Lenders will confirm in
writing Agent's authority to release any such Liens on particular types or items
of Collateral pursuant to this Section 16.12; provided, however, that (1) Agent
shall not be required to execute any document necessary to evidence such release
on terms that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of Borrower in respect of)
all interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower or is cared
for, protected, or insured or has been encumbered, or that the Agent's Liens
have been properly or sufficiently or
74
lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent pursuant to any of
the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission, or event related thereto, subject to the terms
and conditions contained herein, Agent may act in any manner it may deem
appropriate, in its sole discretion given Agent's own interest in the Collateral
in its capacity as one of the Lenders and that Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing, except as
otherwise provided herein.
16.13 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the
express written consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the written request of Agent, set off against
the Obligations, any amounts owing by such Lender to Borrower or any deposit
accounts of Borrower now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do so
in writing by Agent, take or cause to be taken any action, including, the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.
(b) If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations, except for any such proceeds or
payments received by such Lender from Agent pursuant to the terms of this
Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1) turn
the same over to Agent, in kind, and with such endorsements as may be required
to negotiate the same to Agent, or in immediately available funds, as
applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in accordance
with their Pro Rata Shares; provided, however, that to the extent that such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.
16.14 Agency for Perfection. Agent hereby appoints each other Lender as its
agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting the Agent's Liens in assets which, in accordance with Article 9 of
the Code can be perfected only by possession or control. Should any Lender
obtain possession or control of any such Collateral, such Lender shall notify
Agent thereof, and, promptly upon Agent's request
75
therefor shall deliver possession or control of such Collateral to Agent or in
accordance with Agent's instructions.
16.15 Payments by Agent to the Lenders. All payments to be made by Agent to
the Lenders shall be made by bank wire transfer of immediately available funds
pursuant to such wire transfer instructions as each party may designate for
itself by written notice to Agent. Concurrently with each such payment, Agent
shall identify whether such payment (or any portion thereof) represents
principal, premium, or interest of the Obligations.
16.16 Concerning the Collateral and Related Loan Documents. Each member of
the Lender Group authorizes and directs Agent to enter into this Agreement and
the other Loan Documents. Each member of the Lender Group agrees that any action
taken by Agent in accordance with the terms of this Agreement or the other Loan
Documents relating to the Collateral and the exercise by Agent of its powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information. By becoming a party to this Agreement,
each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "Report" and collectively, "Reports"), if any, prepared by Agent,
and Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i)
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrower
and will rely significantly upon the Books, as well as on representations of
Borrower's personnel,
(d) agrees to keep all Reports and other material, non-public
information regarding Borrower and its Subsidiaries and their operations,
assets, and existing and contemplated business plans in a confidential manner in
accordance with Section 17.8, and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or fail to take or any conclusion the indemnifying Lender may reach or draw
from any Report in connection with any loans or other credit accommodations that
the indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender's participation in, or the
76
indemnifying Lender's purchase of, a loan or loans of Borrower, and (ii) to pay
and protect, and indemnify, defend and hold Agent, and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses, and other amounts (including, attorneys fees and
costs) incurred by Agent and any such other Lender preparing a Report as the
direct or indirect result of any third parties who might obtain all or part of
any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
promptly shall provide a copy of same to such Lender, (y) to the extent that
Agent is entitled, under any provision of the Loan Documents, to request
additional reports or information from Borrower, any Lender may, from time to
time, reasonably request Agent to exercise such right as specified in such
Lender's notice to Agent, whereupon Agent promptly shall request of Borrower the
additional reports or information reasonably specified by such Lender, and, upon
receipt thereof from Borrower, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.
16.18 Several Obligations; No Liability. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Revolver Commitments, to make an amount of such credit not to exceed,
in principal amount, at any one time outstanding, the amount of their respective
Revolver Commitments. Nothing contained herein shall confer upon any Lender any
interest in, or subject any Lender to any liability for, or in respect of, the
business, assets, profits, losses, or liabilities of any other Lender. Each
Lender shall be solely responsible for notifying its Participants of any matters
relating to the Loan Documents to the extent any such notice may be required,
and no Lender shall have any obligation, duty, or liability to any Participant
of any other Lender. Except as provided in Section 16.7, no member of the Lender
Group shall have any liability for the acts of any other member of the Lender
Group. No Lender shall be responsible to Borrower or any other Person for any
failure by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Revolver Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
77
17. GENERAL PROVISIONS.
17.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by Borrower, Agent, and each Lender whose signature is provided
for on the signature pages hereof.
17.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.
17.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against the Lender Group or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
17.5 Amendments in Writing.This Agreement only can be amended by a writing
signed by Agent (on behalf of the requisite Lenders) and Borrower.
17.6 Counterparts; Telefacsimile Execution. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
17.7 Revival and Reinstatement of Obligations.If the incurrence or payment
of the Obligations by Borrower or any Guarantor or the transfer to the Lender
Group of any property should for any reason subsequently be declared to be void
or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that the Lender Group is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Lender Group related thereto, the liability of Borrower
and Guarantors automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made.
78
17.8 Confidentiality. The Agent and the Lenders each individually (and not
jointly or jointly and severally) agree that material, non-public information
regarding Borrower and its Subsidiaries, their operations, assets, and existing
and contemplated business plans shall be treated by Agent and the Lenders in a
confidential manner, and shall not be disclosed by Agent and the Lenders to
Persons who are not parties to this Agreement, except: (a) to attorneys for and
other advisors, accountants, auditors, and consultants to any member of the
Lender Group, (b) to Subsidiaries and Affiliates of any member of the Lender
Group, provided that any such Subsidiary or Affiliate shall have agreed to
receive such information hereunder subject to the terms of this Section 17.8,
(c) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation, (d) as may be agreed to in advance by Borrower or
its Subsidiaries or as requested or required by any Governmental Authority
pursuant to any subpoena or other legal process, (e) as to any such information
that is or becomes generally available to the public (other than as a result of
prohibited disclosure by Agent or the Lenders), (f) in connection with any
assignment, prospective assignment, sale, prospective sale, participation or
prospective participations, or pledge or prospective pledge of any Lender's
interest under this Agreement, provided that any such assignee, prospective
assignee, purchaser, prospective purchaser, participant, prospective
participant, pledgee, or prospective pledgee shall have agreed in writing to
receive such information hereunder subject to the terms of this Section, (g) in
connection with any litigation or other adversary proceeding involving parties
hereto which such litigation or adversary proceeding involves claims related to
the rights or duties of such parties under this Agreement or the other Loan
Documents, and (h) to WFF and the lenders under the WFF Loan Agreement. The
provisions of this Section 17.8 shall survive for 2 years after the payment in
full of the Obligations. Anything contained herein or in any other Loan Document
to the contrary notwithstanding, the obligations of confidentiality contained
herein and therein, as they relate to the transactions contemplated hereby,
shall not apply to the federal tax structure or federal tax treatment of such
transactions, and each party hereto (and any employee, representative, or agent
of any party hereto) may disclose to any and all Persons, without limitation of
any kind, the federal tax structure and federal tax treatment of such
transactions (including all written materials related to such tax structure and
tax treatment). The preceding sentence is intended to cause the transactions
contemplated hereby to not be treated as having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision) of the Treasury Regulations promulgated under Section 6011 of the
IRC, and shall be construed in a manner consistent with such purpose. In
addition, each party hereto acknowledges that it has no proprietary or exclusive
rights to the tax structure of the transactions contemplated hereby or any tax
matter or tax idea related thereto. Agent and the Lenders may deliver to WFF and
the lenders under the WFF Loan Agreement any field audits, examination reports
or appraisals with respect to Borrower.
17.9 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
[Signature pages to follow.]
79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
HUDSON RESPIRATORY CARE INC.,
a California corporation
By:
---------------------------------
Title:
MW POST ADVISORY GROUP, LLC,
a Delaware limited liability company, as
Agent and as a Lender
By:
---------------------------------
Title: Lawrence Post, Chief Executive
Officer
Lenders:
STATE OF SOUTH DAKOTA RETIREMENT SYSTEM
FUND
THE OPPORTUNITY FUND, LLC
MW POST PORTFOLIO FUND, LTD
POST OPPORTUNITY FUND, LP
POST BALANCED FUND, LP
POST HIGH YIELD, LP
MW POST OPPORTUNITY OFFSHORE FUND, LTD
POST TOTAL RETURN FUND, LP
HFR DS OPPORTUNITY MASTER TRUST DTD
1/15/02
By:
---------------------------------
Title: Lawrence Post, as authorized
signatory for each Lender
Signature Page
Loan and Security Agreement
Schedule A-1
------------
Lenders' Accounts
The account designated by each Lender from time to time as the account
into which Borrower shall make all payments to such Lender. Unless and until any
Lender notifies Borrower to the contrary, such Lender's Account shall be that
certain deposit account described in Annex I to this Schedule A-1.
Schedule A-1
ANNEX I
to
SCHEDULE A-1
Name of Lender: STATE OF SOUTH DAKOTA RETIREMENT SYSTEM FUND
Tax ID: 46-0349112
Wire instructions (all): Citibank/NYC
ABA 021 000 089
Citibank DDA #36857348
F/A/O: State of South Dakota Retirement System
Fund
MW Post Advisory Group, LLC, Citibank,
NA Custodian
Account #312705
Attn: Stephen Castle (813) 604-1451
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
Stephen Castle
Citibank/NA
3800 Citibank Center Tampa, 2/nd/
Floor Tampa, Florida 33612-9122
(813) 604-1451, (813) 604-1291 (fax)
Schedule A-1
Name of Lender: THE OPPORTUNITY FUND, LLC
Tax ID: 95-4732322
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to Opportunity Fund, LLC
Account #102-00600-16
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
Schedule A-1
Name of Lender: MW POST PORTFOLIO FUND, LTD.
Tax ID: N/A (offshore)
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to MW Post Portfolio Fund
Account #102-27468-10
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
D'Angelo Remak
Fortis Fund Management
011 5999-463-9341
011-5999-463-9419 (fax)
Schedule A-1
Name of Lender: POST OPPORTUNITY FUND, LP
Tax ID: 95-4797293
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to Post Opportunity Fund, LP
Account #102-22532-13
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
Schedule A-1
Name of Lender: POST BALANCED FUND, LP
Tax ID: 95-4331329
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to Post Balanced Fund
Account #102-16395-11
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
Schedule A-1
Name of Lender: POST HIGH YIELD, LP
Tax ID: 98-0204751
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to Post High Yield
Account #102-05740-16
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
Schedule A-1
Name of Lender: MW POST OPPORTUNITY OFFSHORE FUND, LTD
Tax ID: N/A (offshore)
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to MW Post Opportunity Offshore
Fund
Account #102-27842-17
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
D'Angelo Remak
Fortis Funds Management
011 5999-463-9341
911-5999-463-9419 (fax)
Schedule A-1
Name of Lender: POST TOTAL RETURN FUND, LP
Tax ID: 95-4581334
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to Post Total Return Fund, LP
Account #102-05176-19
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
Schedule A-1
Name of Lender: HFR DS OPPORTUNITY MASTER TRUST DTD 1/15/02
Tax ID: N/A (offshore)
Wire instructions: Citibank/NYC
ABA 021 000 089
F/A/O: Bear Stearns
Account #0925-3186
Further Credit to HFR DS Opportunity Master
Trust
Account #102-29068-10
All notices to: Allan E. Schweitzer
aschweitzer@mwpostllc.com
Mark Porrazzo
mporrazzo@mwpostllc.com
MW Post Advisory Group
11755 Wilshire Boulevard, Suite 1400
Los Angeles, CA 90025
(310) 996-9600
(310) 996-9629 (fax)
Manuj Sharma
HFR Asset Management, LLC
10 S. Riverside Plz, Ste. 1450
Chicago, IL 60606
Direct Line 312.628.0305
Main Line 312.327.0430
Fax Line 312.327.0435
Schedule A-1
Schedule C-1
------------
Revolver Commitments
===================================================================
Revolver
Lender Commitment
===================================================================
State of South Dakota Retirement System
Fund $ 3,500,000
===================================================================
The Opportunity Fund, LLC $ 4,500,000
===================================================================
MW Post Portfolio Fund, LTD $ 1,100,000
===================================================================
Post Opportunity Fund, LP $ 7,650,000
===================================================================
Post Balanced Fund, LP $ 3,250,000
===================================================================
Post High Yield, LP $ 3,200,000
===================================================================
MW Post Opportunity Offshore Fund, LTD $ 4,300,000
===================================================================
Post Total Return Fund, LP $ 1,750,000
===================================================================
HFR DS Opportunity Master Trust DTD
1/15/02 $ 750,000
===================================================================
All Lenders $ 30,000,000
===================================================================
Schedule C-1
Schedule D-1
------------
Designated Account
Borrower's Hudson RCI Concentration Account, Account number
4726032766, maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) that has been
designed as such, in writing, by Borrower to Agent.
"Designated Account Bank" means, as of the Closing Date, Wells Fargo
Bank, whose office is located at Carlsbad, California and whose ABA number is
121000248.
Schedule D-1