EXHIBIT 10.7
TERM LOAN AGREEMENT
Dated as of October 23, 1997
by and among
DIVERSIFIED FOOD GROUP, L.L.C.,
CERTAIN SUBSIDIARIES OF DIVERSIFIED FOOD
GROUP, L.L.C.
and
▇▇▇▇▇▇▇▇▇ LLC,
as Lender
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS; CERTAIN TERMS...................................... 1
SECTION 1.01. Definitions............................................... 1
SECTION 1.02. Construction.............................................. 13
SECTION 1.03. Accounting and Other Terms................................ 14
SECTION 1.04. Time References........................................... 14
ARTICLE II THE LOAN....................................................... 14
SECTION 2.01. The Loan.................................................. 14
SECTION 2.02. Making the Loan........................................... 14
SECTION 2.03. Notes; Repayment of Loan.................................. 15
SECTION 2.04. Interest.................................................. 15
(a) Interest Rate..................................................... 15
(b) Default Interest.................................................. 15
(c) Interest Payment and Deferral..................................... 15
(d) General........................................................... 16
SECTION 2.05. Prepayment of Loan........................................ 16
(a) Mandatory Prepayment; Disposition of Assets, etc.................. 16
(b) Optional Prepayment............................................... 16
(c) Interest with Prepayment.......................................... 17
SECTION 2.06. Fees...................................................... 17
(a) Closing Fee....................................................... 17
(b) Servicing Fee..................................................... 17
(c) Exit Fee.......................................................... 17
ARTICLE III PAYMENTS AND OTHER COMPENSATION............................... 17
SECTION 3.01. Payments; Computations and Statements..................... 17
SECTION 3.02. Contribution.............................................. 18
ARTICLE IV CONDITIONS OF CLOSING.......................................... 19
SECTION 4.01. Conditions Precedent to Closing........................... 19
(a) Payment of Fees, Etc.............................................. 19
(b) Representations and Warranties; No Event of Default............... 20
(c) Legality.......................................................... 20
(d) Delivery of Documents............................................. 20
(e) Senior Debt Closing............................................... 21
(f) Material Adverse Effect........................................... 21
(g) Closing Deadline.................................................. 21
(h) Due Diligence..................................................... 21
(i) Consents.......................................................... 21
(j) Minimum Availability.............................................. 22
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................. 22
SECTION 5.01. Representations and Warranties............................ 22
(a) Organization, Good Standing, Etc.................................. 22
(b) Authorization, Etc................................................ ▇▇
-▇-
(▇) ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇............................................ ▇▇
(▇) Enforceability of Loan Documents.................................. 22
(e) Locations; Places of Business; Chief Executive Office............. 23
(f) Subsidiaries...................................................... 23
(g) Litigation........................................................ 23
(h) Financial Condition............................................... 23
(i) Compliance with Law, Etc.......................................... 24
(j) ERISA............................................................. 24
(k) Taxes, Etc........................................................ 25
(1) Regulation U...................................................... 25
(m) Adverse Agreements, Etc........................................... 25
(n) Permits, Etc...................................................... 25
(o) Title to Properties............................................... 25
(p) Full Disclosure................................................... 26
(q) Environmental Matters............................................. 26
(r) Schedules......................................................... 26
(s) Insurance......................................................... 26
(t) Use of Proceeds................................................... 27
(u) Tradenames........................................................ 27
(v) Solvency.......................................................... 27
(w) Power to Carry on Businesses...................................... 27
(x) Location of Bank Accounts......................................... 27
(y) No Event of Default............................................... 27
(z) Intellectual Property............................................. 27
(aa) Material Contracts............................................... 28
(bb) Senior Loan Documents............................................ 28
ARTICLE VI COVENANTS OF THE BORROWER AND GUARANTORS....................... 28
SECTION 6.01 Affirmative Covenants...................................... 29
(a) Reporting Requirements............................................ 29
(b) Compliance with Laws, Etc. ....................................... 32
(c) Preservation of Existence, Etc. .................................. 32
(d) Keeping of Records and Books of Account........................... 32
(e) Inspection Rights................................................. 32
(f) Maintenance of Properties, Etc. .................................. 32
(g) Maintenance of Insurance.......................................... 33
(h) Environmental..................................................... 33
(i) Further Assurances................................................ 33
(j) Executive Committee............................................... 34
(k) ▇▇▇▇▇'▇ Intercreditor Agreement................................... 34
SECTION 6.02. Negative Covenants........................................ 34
(a) Liens, Etc........................................................ 34
(b) Indebtedness...................................................... 35
(c) Guaranties, Etc................................................... 36
(d) Merger, Consolidation, Sale of Assets, Etc. ...................... 36
(e) Change in Nature of Business...................................... 36
-ii-
(f) Loans, Advances, Investments, Etc. ............................... 37
(g) Lease Obligations................................................. 37
(h) Capital Expenditures.............................................. 37
(i) Dividends, Prepayments, Etc. ..................................... 37
(g) Federal Reserve Regulations....................................... 38
(k) Transactions with Affiliates...................................... 38
(l) Environmental..................................................... 38
(m) ERISA............................................................. 38
(n) Financial Covenants............................................... 38
ARTICLE VII GUARANTY...................................................... 40
SECTION 7.01. Guaranty.................................................. 40
SECTION 7.02. Obligations Unconditional................................. 41
SECTION 7.03. Waivers................................................... 41
SECTION 7.04. Subrogation............................................... 42
SECTION 7.05. No Waiver; Remedies....................................... 42
SECTION 7.06. Stay of Acceleration...................................... 42
ARTICLE VIII EVENTS OF DEFAULT............................................ 42
SECTION 8.01. Events of Default......................................... 42
ARTICLE IX MISCELLANEOUS.................................................. 45
SECTION 9.01. Notices, Etc.............................................. 45
SECTION 9.02. Amendments, Etc........................................... 46
SECTION 9.03. No Waiver; Remedies, Etc.................................. 46
SECTION 9.04. Expenses; Taxes; Attorneys' Fees.......................... 47
SECTION 9.05. Right of Set-off.......................................... 47
SECTION 9.06. Severability.............................................. 48
SECTION 9.07. Assignments and Participations............................ 48
SECTION 9.08. Counterparts.............................................. 49
SECTION 9.09. GOVERNING LAW............................................. 49
SECTION 9.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS
AND VENUE................................................. 49
SECTION 9.11. WAIVER OF JURY TRIAL, ETC. ............................... 50
SECTION 9.12. Consent by the Lender..................................... 50
SECTION 9.13. No Party Deemed Drafter................................... 50
SECTION 9.14. Reinstatement; Certain Payments........................... 51
SECTION 9.15. Indemnification........................................... 51
SECTION 9.16. Records................................................... 51
SECTION 9.17. Binding Effect............................................ 52
SECTION 9.18. Preemptive Rights......................................... 52
SECTION 9.19. Warrants.................................................. 52
-iii-
Schedule 5.01(e) Locations
Schedule 5.01(f) Subsidiaries
Schedule 5.01(g) Litigation
Schedule 5.01(h) Projections
Schedule 5.01(j) ERISA
Schedule 5.01(o) Properties
Schedule 5.01(q) Environmental Matters
Schedule 5.01(s) Insurance
Schedule 5.01(u) Tradenames
Schedule 5.01(x) Bank Accounts
Schedule 5.01(z) Intellectual Property
Schedule 5.01(aa) Material Contracts
Schedule 5.01(bb) ▇▇▇▇▇'▇ Acquisition Documents
Schedule 6.02(a) Existing Liens
Schedule 6.02(b) Existing Indebtedness
Schedule 6.02(c) Existing Guarantees
Schedule 6.02(k) Affiliate Transactions
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Form of Members' Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Senior Intercreditor Agreement
Exhibit F Form of Opinion of Counsel
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TERM LOAN AGREEMENT
Term Loan Agreement, dated as of October 23, 1997, by and among
Diversified Food Group, L.L.C., a Delaware limited liability company (the
"Borrower"), Classic Confectionery, L.L.C., a Delaware limited liability company
("Classic"), Restauranic, Inc., an Illinois corporation ("Restauranic"), Great
American Ice Cream Company, LLC, a Delaware limited liability company ("Great
American"), and ▇▇▇▇▇'▇ Kosher Food, L.L.C., a Delaware limited liability
company ("New ▇▇▇▇▇'▇" and, together with Classic, Restauranic and Great
American, each, a "Guarantor", and collectively, the "Guarantors") and ▇▇▇▇▇▇▇▇▇
LLC (the "Lender").
RECITALS
The Borrower and the Guarantors have asked the Lender to make a term
loan to the Borrower on the Closing Date (as hereinafter defined) in the
original principal amount of $6,000,000. $5,000,000 of the proceeds from the
term loan will be used to repay the Senior Debt (as hereinafter defined). The
remaining proceeds from the term loan (less all fees and expenses paid from the
proceeds of the term loan on the Closing Date, including any fees and expenses
the payment of which is required pursuant to Section 4.01 (a) hereof) will be
used to repay the amortizations of the Senior Debt on a pro rata basis. The
Lender is willing to extend such credit to the Borrower subject to the terms and
conditions hereinafter set forth. Accordingly, the Borrower, the Guarantors and
the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Action" has the meaning specified therefor in Section 9.12.
"Affiliate" means, as to any Person, any other Person that 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" of a Person means the power, directly or indirectly, either to (i)
vote 10% or more of the Capital Stock having ordinary voting power for the
election of directors of such Person or (ii) direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Aggregate Deficit Amount" has the meaning specified therefor in
Section 3.02(a) hereof.
"Aggregate Excess Amount" has the meaning specified therefor in
Section 3.02(a) hereof.
"Agreement" means this Term Loan Agreement, as amended, supplemented,
restated or otherwise modified from time to time.
"Authorized Officer" means any officer of the relevant Loan Party or,
where no Loan Party is specified, any officer of the Borrower.
"Available RC Commitments" has the meaning specified therefor in the
Senior Credit Agreement.
"Benefit Amount" has the meaning specified therefor in Section 3.02(a)
hereof.
"Board" means the Board of Governors of the Federal Reserve System of
the United States.
"Borrower" has the meaning specified therefor in the preamble hereto.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required to
close.
"Capital Expenditures" means, with respect to any Person for any
period, the sum, without duplication, of the aggregate amount of all
expenditures of such Person during such period which, in accordance with GAAP,
is required to be included in, or is properly included by such Person as
additions to, property, plant or equipment or other similar fixed asset accounts
of such Person. For purposes of the definition, the purchase price of equipment
which is purchased simultaneously with the trade-in of existing equipment owned
by such Person or with insurance proceeds shall be included in Capital
Expenditures only to the extent that the gross amount of such purchase price
exceeds the amount of the trade-in credit or insurance proceeds applied to such
purchase, as the case may be.
"Capitalized Lease" means any lease which is required under GAAP to be
capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" means obligations for the payment of
rent for any real or personal property under leases or agreements to lease that,
in accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with such principles.
"Capital Stock" means any and all shares, interests, participations,
warrants, options or other equivalents (however designated) of capital stock of
a corporation or any and all equivalent ownership interests in a Person (other
than a corporation).
"Cash Payable Interest Rate" means 12% per annum.
2
"Change of Control" shall be deemed to have occurred at such time as
(a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended) other than members of the
Borrower (including Affiliates, spouses and lineal descendants thereof) owning
more than 20% of the membership interests in the Borrower on the date hereof
either (i) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of 20% or
more of the Capital Stock of the Borrower then outstanding or (ii) obtains the
power (whether or not exercised) to direct or cause the direction of the
management and policies of the Borrower, whether by contract or otherwise, (b)
▇▇▇▇ and ▇▇▇▇▇ and their respective spouses or lineal descendants shall cease to
own, collectively, at least 45% of the issued and outstanding Capital Stock of
the Borrower, or (c) the managing members of the Borrower do not include ▇▇▇▇
or, in the event of ▇▇▇▇'▇ death or disability, ▇▇▇▇▇.
"CIBC" means Canadian Imperial Bank of Commerce.
"Closing Date" has the meaning specified therefor in Section 4.01
hereof.
"Closing Fee" has the meaning specified therefore in Section 2.06(a).
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time.
"▇▇▇▇▇'▇" means ▇▇▇▇▇'▇ Famous Frozen Foods, Inc., a New Jersey
corporation.
"▇▇▇▇▇'▇ Intercreditor Agreement" means the Intercreditor Agreement,
among the Lender, the Loan Parties and ▇▇▇▇▇'▇, in form and substance
satisfactory to the Lender, in which ▇▇▇▇▇'▇ agrees, inter alia, that all
purchase money financing provided to the Borrower by ▇▇▇▇▇'▇ is fully
subordinated to the repayment in full and in cash of the Obligations.
"▇▇▇▇▇'▇ Purchase Money Note" means that certain 8.5% Convertible
Unsecured Subordinated Note, dated October 9, 1997, issued by the Borrower in
favor of ▇▇▇▇▇'▇.
"Consolidated Current Assets" means all assets that, as of the date of
determination thereof and in accordance with GAAP, should be classified as
current assets on a consolidated balance sheet of the Borrower and its
Subsidiaries.
"Consolidated Current Liabilities" means all Indebtedness and other
liabilities that, as of the date of determination thereof and in accordance with
GAAP should be classified as current liabilities on a consolidated balance sheet
of the Borrower and its Subsidiaries, including, without limitation, all
Indebtedness (including, without limitation, the Obligations) payable on demand
or within one year after such date (whether by final maturity, required
prepayment or otherwise) without any option on the part of the obligor to extend
or renew beyond such year.
"Consolidated EBITDA" means, for any period, the sum for such period
of (a) Consolidated Net Income, and (b) the sum of, without duplication, (i)
income tax expense, (ii) interest expense, (iii) depreciation expense, (iv)
amortization expense, (v) extraordinary or
3
unusual non-cash losses, which include the cumulative effect on earnings from
the adoption of GAAP pronouncements, in each case as used in determining such
Consolidated Net Income.
"Consolidated Indebtedness" means, at any time, the sum of (a) the
aggregate Indebtedness of the Borrower and its Consolidated Subsidiaries at such
time determined on a consolidated basis in accordance with GAAP, excluding the
▇▇▇▇▇'▇ Purchase Money Note plus (b) without duplication, the aggregate amount
of Revolving Credit Commitments (as defined in the Senior Credit Agreement).
"Consolidated Interest Expense" means, for any period, the amount
which, in conformity with GAAP, would be set forth opposite the caption
"interest expense" or any like caption (including without limitation, imputed
interest included in payment under Capitalized Leases) on a consolidated income
statement of the Borrower and the Subsidiaries for such period excluding the
amortization of any original issue discount.
"Consolidated Lease Expense" means, for any period, the aggregate
amount of fixed or contingent rentals payable by the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis in accordance with
GAAP, for such period with respect to leases of real and personal property.
"Consolidated Net Income" means, for any period, the consolidated net
income (or deficit) of the Borrower and its Subsidiaries for such period (taken
as a cumulative whole), determined in accordance with GAAP; provided that there
shall be excluded (a) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with the Borrower
or any Subsidiary, (except with respect to any such merger or consolidation
accounted for on a pooling of interest basis), (b) the income (or deficit) of
any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has
an ownership interest, except to the extent that any such income has been
actually received by the Borrower or such Subsidiary in the form of dividends or
similar distributions, (c) the undistributed earnings of any Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the time permitted by the terms of any Contractual
Obligation or Requirement of Law applicable to such Subsidiary, (d) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of income accrued during such period,
(e) any aggregate net gain (but not any aggregate net loss) during such period
arising from the sale, exchange or other disposition of capital assets (such
term to include all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets and all securities),
(f) any write-up of any asset, (g) any net gain from the collection of the
proceeds of life insurance policies, (h) any gain arising from the acquisition
of any securities, or the extinguishment, under GAAP, of any Indebtedness, of
the Borrower or any Subsidiary, (i) in the case of a successor to the Borrower
by consolidation or merger or as a transferee of its assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets,
and (j) any deferred credit representing the excess of equity in any Subsidiary
at the date of acquisition over the cost of the investment in such Subsidiary.
4
"Consolidated Senior Indebtedness" means, at any time, the aggregate
at such time of (i) all Indebtedness of the Borrower secured by a Lien on any
assets of the Borrower, (ii) all Indebtedness of the Borrower to which the
repayment of the Obligations is contractually subordinated and (iii) all
Indebtedness of the Borrower's Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Subsidiaries" means, with respect to any Person, those
Subsidiaries of such Person whose accounts are or should in accordance with GAAP
be consolidated with those of such Person.
"Consolidated Total Assets" means, with respect to the Borrower and
its Consolidated Subsidiaries, the aggregate net book value of the assets (other
than goodwill and other intangible assets (other than accounts receivable)
classified as such in accordance with GAAP) of the Borrower and its Consolidated
Subsidiaries on a consolidated basis after making all appropriate adjustments in
accordance with GAAP (including, without limitation, reserves for doubtful
receivables, obsolescence, depreciation and amortization (except with respect to
goodwill and other intangible assets excluded above) and excluding the amount of
any write-up or revaluation of any asset).
"Consolidated Total Liabilities" means, for the Borrower and its
Consolidated Subsidiaries, at any date, without duplication, all obligations
which in conformity with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet of the Borrower and its
Consolidated Subsidiaries and including, without limitation, in any event, all
Consolidated Indebtedness at such date whether or not the same would be shown.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Contribution Percentage" has the meaning specified therefor in
Section 3.02(a) hereof.
"Contributor" has the meaning specified therefor in Section 3.02(a)
hereof.
"Debt-to-EBITDA Ratio" means, on any date, the ratio of (a)
Consolidated Indebtedness on such date to (b) Consolidated EBITDA for the twelve
month period ending on the last day of the calendar month immediately prior to
the month in which such determination is made.
"Default" means an event which, with the giving of notice or the lapse
of time or both, would constitute an Event of Default.
"Dollar," "Dollars" and the symbol "$" means lawful money of the
United States of America.
5
"Employee Plan" means an employee benefit plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained (or was
maintained at any time during the six (6) calendar years preceding the date of
any borrowing hereunder) for employees of a Loan Party or any ERISA Affiliate.
"Environmental Actions" refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
governmental agency, department, bureau, office or other authority, or any third
party involving violations of Environmental Laws or Releases of Hazardous
Materials from (i) any assets, properties or businesses of the Borrower or any
of its Subsidiaries or any predecessor in interest; (ii) from adjoining
properties or businesses; or (iii) from or onto any facilities which received
Hazardous Materials generated by the Borrower or any of its Subsidiaries or any
predecessor in interest.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9601, et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. (S) 1801, et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. (S) 6901, et seq.), the Federal Water
Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C.
(S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.)
and the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.), as such
laws may be amended or supplemented from time to time, and any other present or
future federal (United States or Canada), state, provincial, local or foreign
statute, ordinance, rule, regulation, order, judgment, decree, permit, license
or other binding determination of any Governmental Authority imposing liability
or establishing standards of conduct for protection of the environment.
"Environmental Liabilities and Costs" shall mean 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, expert and consulting
and costs of investigation and feasibility 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 condition or
a Release of Hazardous Materials from or onto (i) any property presently or
formerly owned by the Borrower or any of its Subsidiaries or (ii) any facility
which received Hazardous Materials generated by the Borrower or any of its
Subsidiaries.
"Environmental Lien" shall mean any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means, with respect to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
such Person is a member
6
and which would be deemed to be a "controlled group" within the meaning of
Sections 414(b), (c), (m) and (o) of the Code.
"Event of Default" means any of the Events set forth in Section 8.01
hereof.
"Financial Statements" means the unaudited financial statements of
Borrower and its Consolidated Subsidiaries for the six month period ended June
30, 1997, and of the Borrower for the twelve month period ended on the Friday
closest to December 31, 1996.
"Fiscal Year" means the twelve-month period of the Borrower ending on
the Friday nearest to December 31 of each year or such other fiscal year of the
Borrower that is agreed to in writing by the Lender.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States, applied on a consistent basis, provided that
for the purposes of Section 6.02(n) and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements.
"▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, an individual residing at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Governing Documents" means, as to any Person, its articles or
certificate of incorporation and by-laws, its partnership agreement, its
certificate of formation and operating agreement, and/or the other
organizational or governing documents of such Person.
"Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof and any department, commission,
board, bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranteed Obligations" means (i) with respect to the Borrower, all
Obligations of the Borrower, including, without limitation, all amounts now or
hereafter owing by the Borrower in respect of the Loan Documents and (ii) with
respect to each Guarantor, all Obligations of the Borrower including, without
limitation, all amounts now or hereafter owing by the Borrower in respect of the
Loan Documents.
"Guarantors" has the meaning specified therefor in the preamble
hereto.
"Hazardous Materials" shall include (a) any element, compound or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous
substance or chemical, hazardous waste, special waste, or solid waste under
Environmental Laws; (b) petroleum and its refined products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic
including but not limited to corrosivity, ignitability, toxicity or reactivity
as well as any radioactive or explosive materials; and (e) any raw materials,
building components, including but
7
not limited to asbestos-containing materials and manufactured products
containing Hazardous Substances.
"Hedging Agreement" means any interest rate swap, collar, cap, floor
or forward rate agreement or other agreement regarding the hedging of interest
rate risk exposure executed in connection with hedging the interest rate
exposure of the Borrower, and any confirming letter executed pursuant to such
agreement, all as amended, supplemented, restated or otherwise modified from
time to time.
"Indebtedness" means, without duplication, as to any Person (i)
indebtedness for borrowed money; (ii) indebtedness for the deferred purchase
price of property or services (other than current trade payables incurred in the
ordinary course of business and payable in accordance with customary practices);
(iii) indebtedness evidenced by bonds, debentures, notes or other similar
instruments (other than performance, surety and appeal or other similar bonds
arising in the ordinary course of business); (iv) obligations and liabilities
secured by a Lien upon property owned by such Person, whether or not owing by
such Person and even though such Person has not assumed or become liable for the
payment thereof; (v) obligations and liabilities directly or indirectly
guaranteed by such Person; (vi) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights
and remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property; (vii) Capitalized Lease Obligations; (viii) all
liabilities in respect of letters of credit, acceptances and similar obligations
created for the account of such Person; and (ix) net liabilities of such Person
under Hedging Agreements and foreign currency exchange agreements, as calculated
on a basis satisfactory to the Lender and in accordance with accepted practice.
"Indemnified Matters" has the meaning specified therefor in
Section 9.15.
"Indemnitees" has the meaning specified therefor in Section 9.15.
"Intercreditor Agreements" means the ▇▇▇▇▇'▇ Intercreditor Agreement
and the Senior Intercreditor Agreement.
"Interest Coverage Ratio" means, on any date, the ratio of (a)
Consolidated EBITDA for the twelve month period ending on the last day of the
calendar month immediately prior to the month in which such determination is
made less the Capital Expenditures made by the Borrower and its Consolidated
Subsidiaries during such twelve month period to (b) Consolidated Interest
Expense for such twelve month period.
"Inventory" means all goods and merchandise of the Borrower including,
but not limited to, all raw materials, work-in-process, piece goods, trim,
finished goods, whether now owned or hereafter acquired and all such property
the sale or other disposition of which would give rise to accounts receivable or
cash.
"Kraff" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual residing at ▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
8
"Lease" means any lease of real property to which the Borrower or a
Guarantor is a party as lessor or lessee.
"Lender" has the meaning specified therefor in the preamble hereto.
"Lender Account" means an account in the name of the Lender designated
by the Lender from time to time as the account into which the Borrower shall
make all payments to the Lender under this Agreement.
"Lien" means any mortgage, deed of trust, pledge, lien, security
interest, charge, encumbrance, security arrangement, restriction, covenant,
encroachment or other title imperfection of any nature whatsoever, including but
not limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security.
"Loan" means the loan made by the Lender to the Borrower on the
Closing Date pursuant to Article II hereof.
"Loan Account" means an account maintained hereunder by the Lender on
its books of account at the Lender's office in the name of the Borrower in
which the Borrower will be charged with all Loans made to, and all other
Obligations incurred by, the Borrower.
"Loan Documents" means this Agreement, the Note, the Warrant
Agreement, the Members' Agreement, the Registration Rights Agreement, the
Intercreditor Agreements and all other instruments, agreements and other
documents executed and delivered pursuant hereto or thereto.
"Loan Party" means, collectively, the Borrower and the Guarantors.
"Material Adverse Effect" means a material adverse effect upon (i) the
business, operations, financial condition prospects or properties of the
Borrower or any Guarantor, (ii) the ability of the Borrower or any Guarantor to
perform its obligations under any Loan Document to which it is a party or (iii)
the legality, validity or enforceability of this Agreement or any other Loan
Document.
"Material Contract" means, with respect to any Person, each contract
or agreement to which such Person is a party involving aggregate consideration
payable to or by such Person of $250,000 or more (other than purchase orders in
the ordinary course of the business of the Borrower and other than contracts
that by their terms may be terminated by any party thereto in the ordinary
course of its business upon less than 60 days' notice) or otherwise material to
the business, operations, financial condition, performance, prospects or
properties of such Person.
"Maturity Date" means the seventh anniversary of the Closing Date.
"Members' Agreement" means that certain Members' Agreement, dated as
of the date hereof, among the Lender and ▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇, as the same may
be amended,
9
supplemented or otherwise modified from time to time, attached as Exhibit C
hereto, in form and substance satisfactory to the Lender.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA for which the Borrower or any ERISA Affiliate has
contributed to, or has been obligated to contribute to, at any time during the
preceding six (6) years.
"Net Sales Proceeds" shall mean, for any asset sale or disposition,
the amount of cash and other payments received (directly or indirectly) by the
Borrower or a Guarantor (or, in the case of Section 2.06(c), holder of Capital
Stock of the Borrower) net of the sum of (a) the principal amount of any
Indebtedness secured by any Lien permitted by Section 6.02(a) hereof on such
asset (other than Indebtedness assumed by the purchaser of such asset) which is
required to be, and is, repaid in connection with the sale or other disposition
thereof (other than Indebtedness under this Agreement), (b) reasonable expenses
incurred by the Borrower or a Guarantor (or such holder) in connection
therewith, and (c) transfer taxes paid by the Borrower or a Guarantor (or such
holder) in connection therewith.
"New ▇▇▇▇▇'▇" has the meaning specified therefor in the preamble
hereto.
"Note" means the promissory note of the Borrower, substantially in the
form of Exhibit A hereto, made payable to the order of the Lender and evidencing
the Indebtedness resulting from the making by the Lender to the Borrower of the
Loan and delivered to the Lender pursuant to Article IV hereof, as such
promissory note may be modified or extended from time to time, and any
promissory note or notes issued in exchange or replacement therefor.
"Obligations" means (a) the joint and several obligations of the Loan
Parties to pay, as and when due and payable (by scheduled maturity, required
prepayment, acceleration, demand or otherwise), all amounts from time to time
owing by them in respect of any Loan Document, whether for principal, interest
(including without limitation all interest that accrues after the commencement
of any case, proceeding or other action relating to bankruptcy, insolvency or
reorganization of a Loan Party), fees, indemnification payments, expense
reimbursements or otherwise, and (b) the joint and several obligations of the
Loan Parties to perform or observe all of their obligations from time to time
existing under any Loan Document.
"Obligor" has the meaning specified therefor in Section 3.02(a)
hereof.
"Office" means with respect to the Lender, its office located at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such other office or offices of the
Lender as may be designated in writing from time to time by the Lender to the
Borrower.
"Operating Agreement" means the Operating Agreement of the Borrower,
dated as of March 25, 1996, as amended and in effect on the date hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
10
"Permitted Investments" means (a) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six months from the date of acquisition thereof; (b)
commercial paper, maturing not more than 270 days after the date of issue rated
P-1 by ▇▇▇▇▇'▇ Investors Service, Inc. or A-1 by Standard & Poor's Ratings
Group, (c) certificates of deposit maturing not more than 270 days after the
date of issue, issued by commercial banking institutions and money market or
demand deposit accounts maintained at commercial banking institutions, each of
which is a member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $500,000,000, and (d) repurchase
agreements having maturities of not more than 90 days from the date of
acquisition which are entered into with major money center banks included in the
commercial banking institutions described in clause (c) above and which are
secured by readily marketable direct obligations of the Government of the United
States of America or any agency thereof.
"Permitted Liens" has the meaning specified therefor in Section
6.02(a) hereof.
"Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or Governmental Authority.
"PIK Interest" has the meaning specified therefor in Section 2.04(c)
hereof.
"PIK Interest Rate" means a rate of interest equal to 13% per annum.
"Post-Default Rate" means a rate of interest per annum equal to the
rate of interest otherwise in effect from time to time pursuant to the terms of
this Agreement plus 5%.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date of this Agreement, among the Lender and the
holders of the membership interests in the Borrower, as the same may be amended,
supplemented or otherwise modified from time to time, attached as Exhibit D
hereto, in form and substance satisfactory to the Lender.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including ambient
air, soil, surface or ground water.
"Relevant Pavment" has the meaning specified therefor in Section
3.02(a) hereof.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (ii) 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
11
welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies
and investigations and post-remedial operation and maintenance activities; or
(iv) any other actions authorized by 42 U.S.C. 9601.
"Reportable Event" means an event described in Section 4043 of ERISA
(other than an event not subject to the provision for 30-day notice to the PBGC
under the regulations promulgated under such Section).
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or Governing Documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" means the chief executive officer, the chief
operating officer and the president of the Borrower or, with respect to
financial matters, the chief financial officer of the Borrower.
"Senior Credit Agreement" means that certain Credit Agreement, dated
as of October 16, 1997 among the Borrower, the lenders party thereto and the
Senior Lender, as agent.
"Senior Debt" means all amounts owed by the Loan Parties to the Senior
Lender pursuant to the Senior Loan Documents.
"Senior Debt-to-EBITDA Ratio" means, on any date, the ratio of (a) the
sum of (i) Consolidated Senior Indebtedness on such date plus (ii) the aggregate
Available RC Commitments on such Date to (b) Consolidated EBITDA for the twelve
month period ending on the last day of the calendar month immediately prior to
the month in which such determination is made.
"Senior Intercreditor Agreement" means the Intercreditor Agreement,
dated as of the date of this Agreement, among the Lender, the Loan Parties and
the Senior Lender, attached as Exhibit E hereto, in form and substance
satisfactory to the Lender.
"Senior Lender" means CIBC, as lender and agent for the lenders party
to the Senior Credit Agreement.
"Senior Loan Availability" means, on any date, the difference of (a)
the Borrowing Base under, and as defined in, the Senior Credit Agreement on such
date less (b) the total Aggregate Outstanding RC Extensions of Credit under, and
as defined in, the Senior Credit Agreement on such date.
"Senior Loan Documents" means the Senior Credit Agreement and all
other Loan Documents (as defined therein) relating to the Senior Debt.
12
"Solvent" means, with respect to any Person on a particular date, that
on such date (a) the fair value of the property of such Person is not less than
the total amount of its liabilities of such Person, (b) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its existing
debts as they become absolute and matured, (c) such Person is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (d) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (e) as of the Closing Date, such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital.
"Subsidiary" means, as to any Person, any corporation, limited or
general partnership, limited liability company, trust, association or other
business entity of which more than 50% of the outstanding Capital Stock having
(in the absence of contingencies) ordinary voting power to elect directors (or
Persons performing similar functions) of such entity is, at the time of
determination, owned directly, or indirectly through one or more intermediaries,
by such Person.
"Termination Event" means (i) a Reportable Event with respect to any
Employee Plan, (ii) any event that causes the Borrower or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(1), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
Code, (iii) the filing of a notice of intent to terminate an Employee Plan or
the treatment of an Employee Plan amendment as a termination under Section 4041
of ERISA, (iv) the institution of proceedings by the PBGC to terminate an
Employee Plan, or (v) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Employee Plan.
"Warrants" means the two Warrants to be entered into between the
Lender and the Borrower, representing warrants to purchase 9% and 1.5%,
respectively, of the ownership interests in the Borrower on a fully-diluted
basis, as the same may be amended, supplemented or otherwise modified from time
to time, each in the form attached as Exhibit B hereto, in form and substance
satisfactory to the Lender.
"Working Capital" means an amount, which may be negative or positive,
equal to Consolidated Current Assets minus Consolidated Current Liabilities.
"▇▇▇▇" means ▇▇▇▇▇▇ ▇▇▇▇, an individual residing at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 1.02. Construction. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by the Lender include good faith estimates by the Lender (in the
case of quantitative determinations) and good faith beliefs by the Lender (in
the case of qualitative determinations). The words "hereof", "herein",
"hereunder" and similar terms in this
13
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. The section and other headings contained in this Agreement
and the Table of Contents preceding this Agreement are for reference purposes
only and shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified.
SECTION 1.03. Accounting and Other Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP applied on a basis consistent with those used in preparing the
Financial Statements delivered pursuant to Section 6.01 (a)(i). All terms used
in this Agreement which are defined in Article 9 of the Uniform Commercial Code
in effect in the State of New York on the date hereof and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein.
SECTION 1.04. Time References. Unless otherwise indicated herein, all
references to time of day refer to Eastern standard time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding", provided, however, that with respect to a computation
of fees or interest payable to the Lender, such period shall in any event
consist of at least one full day.
ARTICLE II
THE LOAN
SECTION 2.01. The Loan. Subject to the terms and conditions, and
relying upon the representations and warranties set forth herein, the Lender
agrees to make a Loan to the Borrower on the Closing Date in the principal
amount of $6,000,000. The Lender shall have no obligation to make a Loan
hereunder after the Closing Date. Any principal amount of the Loan which is
repaid or prepaid by the Borrower may not be reborrowed.
SECTION 2.02. Making the Loan. The Lender will make the proceeds of
the Loan available to the Borrower on the Closing Date by causing $6,000,000, in
immediately available funds, to be deposited in an account or accounts
designated in writing by the Borrower to the Lender at a commercial bank chosen
by the Borrower and reasonably satisfactory to the Lender.
SECTION 2.03. Notes; Repayment of Loan. (a) The obligations of the
Borrower to repay the Loan and interest thereon shall be evidenced by the Note,
duly executed by the Borrower, dated the Closing Date and delivered and payable
to the order of the Lender in the original principal amount of $6,000,000.
(b) The Borrower agrees to record the Loan on the Register referred to
in Section 9.07(b) hereof. The Loan recorded on the Register ("Registered
Loan") may not be evidenced by a promissory note other than a Registered Note
(as defined below) and, upon the
14
registration of the Loan, any promissory note (other than a Registered Note)
evidencing the same shall be null and void and shall be returned to the
Borrower. The Borrower agrees to execute and deliver to the Lender one
promissory note in registered form to evidence such Registered Loan and
registered as provided in Section 9.07(b) hereof (herein, a "Registered Note"),
dated the date hereof, payable to the Lender and otherwise duly completed. The
Loan, once recorded on the Register, may not be removed from the Register so
long as it remains outstanding and a Registered Note may not be exchanged for a
promissory note that is not a Registered Note.
(c) Payable on Maturity Date. To the extent not due and payable
earlier pursuant to the terms of this Term Loan Agreement, all Obligations shall
be due and payable on the Maturity Date.
SECTION 2.04. Interest.
(a) Interest Rate. The Loan shall bear interest on the principal
amount thereof from time to time outstanding from the date of the Loan until
such principal amount becomes due (i) at the Cash Payable Interest Rate or (ii)
at the option of the Borrower (to be elected, in writing, not later than thirty
(30) days prior to the date on which the first interest payment subject to such
election is due), accrue at the PIK Interest Rate in each of the first, second
and third years after the Closing Date, and at the Cash Payable Interest Rate
thereafter. After making the election referred to in clause (ii) of the
immediately preceding sentence, the Borrower may elect to pay interest in cash
at the Cash Payable Interest Rate by providing the Lender with written notice of
such election not later than thirty (30) days prior to the date on which the
first interest payment subject to such election is due.
(b) Default Interest. To the extent permitted by law, after there
shall have occurred and so long as there is continuing an Event of Default
(unless the Borrower repays all Obligations in full within seven Business Days
of its first receipt of written notice of the occurrence of an Event of
Default), all principal, interest, fees, indemnities or any other Obligations of
the Borrower under this Agreement, the Note and other Loan Documents (including
interest accrued under this Section 2.04(b)) shall bear interest from the day
when due until such amount is paid in full at a rate per annum equal at all
times to the Post-Default Rate.
(c) Interest Payment and Deferral. Interest on the Loan at the Cash
Payable Interest Rate shall be payable quarterly in arrears on the first day of
each fiscal quarter, commencing on the first day of the first fiscal quarter
after the Closing Date, and at maturity (whether upon demand, by acceleration or
otherwise). Interest on the Loan at the PIK Interest Rate ("PIK Interest") shall
accrue quarterly in arrears on the first day of each fiscal quarter, commencing
on the first day of the first fiscal quarter after the Closing Date; all such
accrued interest shall be added by the Lender to the principal amount of the
Loan. The Borrower hereby authorizes the Lender to, and the Lender may, from
time to time, charge the Loan Account pursuant to Section 3.01 hereof with the
amount of any interest payment due or accrued hereunder.
15
(d) General. All interest shall be computed on the basis of a year of
360 days for the actual number of days, including the first day but excluding
the last day, elapsed.
SECTION 2.05. Prepayment of Loan.
(a) Mandatory Prepayment; Disposition of Assets, etc. Except as
provided in the Senior Intercreditor Agreement, without limiting any other
provision of this Agreement or any other Loan Document permitting or requiring
prepayment of the Loan in whole or part, the Borrower shall be required to
prepay the Loan (i) if a Change of Control shall have occurred and (ii) upon the
sale, lease, transfer or other disposition of any of the Borrower's assets
outside the ordinary course of business either (A) in any transaction or series
of related transactions the Net Sales Proceeds from which are greater than 40%
of the gross revenue of the Borrower (calculated in accordance with GAAP) for
the twelve month period ending on the last day of the calendar month immediately
preceding the date of such transaction, (B) to the extent that the aggregate Net
Sales Proceeds from all such transactions in any twelve month period is greater
than 40% of the gross revenues of the Borrower (calculated in accordance with
GAAP) for the twelve month period ending on the last day of the calendar month
immediately preceding the date of the last of such transactions, or (C) in any
transaction or series of transactions pursuant to which the Borrower sells any
business which business generated 40% or more of the gross revenues of the
Borrower (calculated in accordance with GAAP) for the twelve month period ending
on the last day of the calendar month immediately preceding the date of the last
of such transactions. Any prepayment required under subclause (i) of this clause
(a) shall be in an amount equal to 102.5% of the amount of the Loan then
outstanding, together with all other Obligations than owed by the Loan Parties
to the Lender; such prepayment shall be made on the same Business Day as that on
which the Change of Control occurs. Any prepayment required under subclause (ii)
of this clause (a) shall be made, in the case of Net Sales Proceeds constituting
cash, on the first Business Day after the consummation of such transfer, sale,
disposition, settlement, issuance or other event triggering a prepayment and, in
the case of Net Sales Proceeds not constituting cash, on the first Business Day
after the receipt of any cash on account of such non-cash consideration.
(b) Optional Prepayment. The Borrower may prepay the Loan, in whole or
in part, at any time prior to the Maturity Date at a price equal to 102.5% of
the principal amount being repaid; each partial prepayment must be in an
integral multiple of $10,000.
(c) Interest with Prepayment. Any prepayment made pursuant to this
Section 2.05 shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment.
SECTION 2.06. Fees.
(a) Closing Fee. On the Closing Date, the Borrower shall pay in cash
to the Lender a non-refundable fee (the "Closing Fee") of $210,000 in
immediately available funds.
16
(b) Anniversary Fee. From and after the Closing Date, the Borrower
shall pay to the Lender an anniversary fee equal to (i) 3.0% of the principal
amount of the Loan outstanding on the fourth anniversary of the Closing Date,
payable in cash on such anniversary, (ii) 3.5% of the principal amount of the
Loan outstanding on the fifth anniversary of the Closing Date, payable in cash
on such anniversary, (iii) 4.0% of the average principal amount of the Loan
outstanding during the year preceding the sixth anniversary of the Closing Date,
payable in cash on such anniversary and (iv) 4.5% of the average principal
amount of the Loan outstanding during the year preceding all subsequent
anniversaries of the Closing Date, payable in cash on such anniversary.
(c) Exit Fee. The Borrower shall pay to the Lender a non-refundable
fee (the "Exit Fee") of $1,166,000, payable in full in cash on the earlier of,
and only if the following shall occur on or prior to the seventh anniversary of
the Closing Date: (i) the date on which a Change of Control shall have occurred,
and (ii) the date on which the Borrower consummates an initial public offering
of any of its debt or equity securities; provided, however, that (1) if the
Borrower repays in full in cash all of the Obligations hereunder (other than the
Exit Fee) prior to the third anniversary of the Closing Date, the Exit Fee shall
be reduced to $1,000,000 and (2) if the Exit Fee is paid pursuant to clause (i)
of this Section 2.06(c) and the holders of Capital Stock of the Borrower sell
any of such Capital Stock in connection with such Change in Control, the Exit
Fee shall be the lesser of (A) the Exit Fee otherwise payable and (B) 10.5% of
the amount obtained by dividing (I) the Net Sales Proceeds received by the
holders of Capital Stock of the Borrower in connection with such Change of
Control by (II) the percentage, expressed as a decimal fraction, equal to the
percentage of the Capital Stock of the Borrowers sold by such holders. The
obligation of the Borrower to pay the Exit Fee shall survive, and the Exit Fee
shall be payable notwithstanding, the payment of all other Obligations
hereunder.
ARTICLE III
PAYMENTS AND OTHER COMPENSATION
SECTION 3.01. Payments; Computations and Statements. (a) The Borrower
will make each payment hereunder or under the Note not later than 4:00 p.m. (New
York City time) on the day when due, in lawful money of the United States of
America and in immediately available funds, to the Lender at the Lender Account.
All payments received by the Lender after 4:00 p.m. (New York City time) on any
Business Day will be credited to the Loan Account on the next succeeding
Business Day. All payments shall be made by the Borrower without defense, set-
off or counterclaim to the Lender. The Borrower hereby authorize the Lender to,
and the Lender may, from time to time charge the Loan Account with all
Obligations and any other amount due and payable under any Loan Document to
which the Borrower is a party whether or not any Event of Default or Default
shall have occurred or be continuing or whether any of the conditions precedent
in Article IV have been satisfied. The Borrower confirms that any charges which
the Lender may so make to the Loan Account as herein provided will be made as an
accommodation to the Borrower and solely at the Lender's discretion. The Lender
shall maintain a Loan Account on its books in the name of the Borrower
17
for the account of the Borrower. It is expressly understood and agreed by the
Borrower that the Lender shall have no responsibility to inquire into the
correctness of the apportionment, allocation or disposition of the Loan made to
the Borrower or any fees, costs or expenses for which the Borrower is obligated
under this Agreement. Whenever any payment to be made under any such Loan
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be. All computations of fees shall be made by the Lender on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such fee is
payable. Each determination by the Lender of an interest rate or fees hereunder
shall be conclusive and binding for all purposes in the absence of manifest
error.
(b) The Lender shall provide the Borrower, promptly after the end of
each calendar quarter, a summary statement (in the form from time to time used
by the Lender) of (i) the opening and closing daily balances in the Loan Account
during such quarter, (ii) the amounts and dates of all payments on account of
the Loan during such quarter, (iii) the amount of interest accrued on the Loan
during such quarter, and (iv) the amount and nature of any charges to the Loan
Account made during such quarter on account of fees, commissions, expenses and
other Obligations. All entries on any such statement shall, 30 days after the
same is sent, be presumed to be correct and shall constitute presumptive
evidence of the information contained in such statement and shall be final and
conclusive absent manifest error, provided, however, that no error shall affect
the rights of the Lender or the obligations of the Borrower with respect to any
amounts due to the Lender hereunder.
SECTION 3.02. Contribution. (a) On any date a payment in respect of
the Obligations is made, the right of contribution, if any, of the Borrower or
each Guarantor (each an "Obligor") against each Contributor shall be determined
as provided in the immediately succeeding sentence, with the right of
contribution of each Obligor to be revised and restated as of each such date. At
any time that a payment (a "Relevant Payment") is made by an Obligor in respect
of the Obligations and results in the aggregate payments made by such Obligor in
respect of the Obligations to and including the date of such Relevant Payment
exceeding such Obligor's Contribution Percentage of the aggregate payments made
by all Obligors in respect of the Obligations to and including such date (such
excess, the "Aggregate Excess Amount"), each such Obligor shall have a right of
contribution against each Contributor who has made payments in respect of the
Obligations to and including such date in an aggregate amount less than such
Contributor's Contribution Percentage of the aggregate payments made to and
including such date by all Obligors in respect of the Obligations (the aggregate
amount of such deficit, the "Aggregate Deficit Amount") in an amount equal to
(x) a fraction the numerator of which is the Aggregate Excess Amount of such
Obligor and the denominator of which is the sum of the Aggregate Excess Amounts
of all Obligors multiplied by (y) the Aggregate Deficit Amount of such
Contributor. An Obligor's right of contribution, if any, pursuant to this
paragraph shall arise at the time of each computation, subject to adjustment at
the time of subsequent computations, provided that such Obligor may not take any
action to enforce such right until the Obligations have been paid in full, it
being expressly recognized and agreed by all Obligors that any Obligor's right
of contribution arising pursuant hereto against any Contributor shall be
expressly
18
junior and subordinate to such Contributor's obligations and liabilities in
respect of the Obligations. As used in this Section 3.02, (i) "Contributor"
shall mean each Obligor required to make any payment to any other Obligor
pursuant to this Section 3.02, (ii) the "Contribution Percentage" of each
Obligor shall mean the percentage obtained by dividing (x) the Benefit Amount of
such Obligor by (y) the aggregate Benefit Amount of all Obligors and (iii) the
"Benefit Amount" of each Obligor shall mean the net value of the benefits to
such Obligor from the credit extensions made under the Loan Documents.
(b) Each of the Obligors recognizes and agrees that, except for any
right of contribution arising pursuant to Section 3.02(a) hereof, each Obligor
which makes any payment in respect of the Obligations shall have no right of
contribution, reimbursement or subrogation against any other Obligor in respect
of such payment, any such right of contribution, reimbursement or subrogation
arising under law or otherwise being expressly waived by all Obligors.
(c) Each of the Obligors recognizes and acknowledges that the rights
to contribution arising hereunder shall constitute an asset in favor of the
party entitled to such contribution. In this connection each Obligor has the
right to waive its contribution right against any Contributor to the extent that
after giving effect to such waiver such Obligor would remain Solvent in the
determination of the Lender.
ARTICLE IV
CONDITIONS OF CLOSING
SECTION 4.01. Conditions Precedent to Closing. The obligation of the
Lender to make the Loan hereunder is subject to the satisfaction of each of the
following conditions precedent (the first Business Day on which each of the
following conditions precedent has been satisfied, or waived by the Lender being
the "Closing Date"):
(a) Payment of Fees, Etc. The Borrower shall have paid on or before
the date of this Agreement, all fees, costs, expenses and taxes then payable by
the Borrower pursuant to Sections 2.06 and 9.04 hereof which payment may be
funded from the proceeds of the Loan.
(b) Representations and Warranties; No Event of Default. The
representations and warranties contained in Section 5.01 of this Agreement and
in each other Loan Document and certificate or other writing delivered to the
Lender pursuant hereto on or prior to the Closing Date shall be correct on and
as of the Closing Date as though made on and as of such date (except for
representations and warranties which relate to a specific date); and no Default
or Event of Default shall have occurred and be continuing on the Closing Date or
would result from this Agreement becoming effective in accordance with its
terms.
(c) Legality. The making of the initial Loans shall not contravene any
law, rule or regulation applicable to the Lender or the Borrower or any of the
Guarantors.
19
(d) Delivery of Documents. The Lender shall have received on or
before the Closing Date the following, each in form and substance satisfactory
to the Lender and, unless indicated otherwise, dated the Closing Date:
(i) the Note payable to the order of the Lender, duly executed
by the Borrower;
(ii) a copy of the resolutions of the Borrower and each
Guarantor, certified as of the Closing Date by an authorized officer thereof,
authorizing (A) the borrowings hereunder and the transactions contemplated by
the Loan Documents to which such Person is or will be a party, and (B) the
execution, delivery and performance by each such Person of each Loan Document
and the execution and delivery of the other documents to be delivered by each
such Person in connection herewith;
(iii) a certificate of an authorized officer of the Borrower and
each Guarantor, certifying the names and true signatures of the representatives
of such Person authorized to sign each Loan Document to which such Person is or
will be a party and the other documents to be executed and delivered by such
Person in connection herewith, together with evidence of the incumbency of such
authorized officers;
(iv) a certificate of the appropriate official(s) of the state
of organization and each state of foreign qualification of the Borrower and each
Guarantor certifying as to the subsistence in good standing of, and the payment
of taxes by, such Person in such states, together with confirmation by telephone
facsimile or telegram on the Closing Date as to such matters from such
official(s) or from a recognized service company specializing in the
verification of organizational good standing;
(v) a true and complete copy of the Governing Documents of the
Borrower and each Guarantor certified as of a date not more than 30 days prior
to the Closing Date by an appropriate official of the state of organization of
each such Person;
(vi) an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd., counsel to the
Borrower and the Guarantors, substantially in the form of Exhibit F hereto;
(vii) a certificate of an Authorized Officer of the Borrower and
each Guarantor, certifying as to the matters set forth in subsection (b) of this
Section 4.01;
(viii) the Senior Intercreditor Agreement;
(ix) the Members' Agreement, in form and substance satisfactory
to the Lender, duly executed by all holders of membership interests, and
warrants to acquire membership interests, in the Borrower;
(x) the Registration Rights Agreement, in form and substance
satisfactory to the Lender, duly executed by the holders of the common stock of
the Borrower;
20
(xi) the Warrants, in the form attached as Exhibit B, duly
executed by the Borrower, together with evidence, satisfactory to the Lender in
its sole discretion, of the waiver of all preemptive rights held by each holder
of ownership interests (other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇), or warrants to acquire
ownership interests, in the Borrower arising on account of the issuance of
Warrants (whether on the Closing Date or thereafter) to the Lender;
(xii) such other agreements, instruments, approvals, opinions
and other documents as the Lender may reasonably request.
(e) Senior Debt Closing. The closing under the Senior Loan Documents
shall have occurred.
(f) Material Adverse Effect. The Lender shall have determined, in its
sole judgment, that no Material Adverse Effect shall have occurred after June
30, 1997.
(g) Closing Deadline. The conditions precedent to the Closing Date
shall have been satisfied, or waived by the Lender in its sole discretion, on or
before October 24, 1997.
(h) Due Diligence. The Lender shall be satisfied, in its sole and
absolute discretion, with its legal and business due diligence review of the
Loan Parties, including, without limitation, the Borrower's capital structure,
all tax, accounting, ERISA, labor, environmental, litigation and other matters
related to the Loan Parties and their respective assets, liabilities and
businesses.
(i) Consents. The Loan Parties shall have received all consents,
licenses, approvals or evidence of other action required by any Governmental
Authority in connection with the execution by any Loan Party of this Agreement
and any of the other Loan Documents and with the consummation of the
transactions contemplated hereby and thereby.
(j) Minimum Availability. The Borrower shall have provided evidence
reasonably satisfactory to the Lender that the Senior Loan Availability is at
least $4,000,000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties. Each Loan Party
represents and warrants as follows:
(a) Organization, Good Standing, Etc. Each Loan Party (i) is a
corporation or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of the state of its
organization, (ii) has all requisite power and authority to conduct its business
as now conducted and as presently contemplated and to make the borrowings
hereunder, in the case of the Borrower, and to consummate the transactions
21
contemplated hereby, and (iii) is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary or where the failure to qualify would have a Material
Adverse Effect.
(b) Authorization, Etc. The execution, delivery and performance by
any Loan Party of each Loan Document to which it is a party, (i) have been duly
authorized by all necessary corporate or company action, (ii) do not and will
not contravene such Loan Party's Governing Documents, or any applicable law or
any contractual restriction binding on or otherwise affecting it or any of its
properties, (iii) do not and will not result in or require the creation of any
Lien upon or with respect to any of its properties (except in favor of the
Lender or its assignees), and (iv) do not and will not result in any suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to its operations or any of its properties.
(c) Governmental Approvals. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or other
regulatory body is required in connection with the due execution, delivery and
performance by each Loan Party of any Loan Document to which it is or will be a
party.
(d) Enforceability of Loan Documents. This Agreement is, and each
other Loan Document to which each Loan Party is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of such Loan
Party, enforceable against principles in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws and general equity principles affecting the enforcement of
creditors' rights generally.
(e) Locations; Places of Business; Chief Executive Office. Schedule
5.01(e) hereto sets forth a complete and accurate list as of the date hereof of
(A) each place of business of the Borrower and each Guarantor and (B) the chief
executive office of the Borrower and each Guarantor.
(f) Subsidiaries. Schedule 5.01(f) hereto is a complete and correct
description of the name, jurisdiction of incorporation and ownership of the
outstanding Capital Stock of each Subsidiary of each Loan Party in existence on
the date hereof. All such Capital Stock owned by the Borrower or one or more of
its Subsidiaries, as indicated in such Schedule, is owned free and clear of all
Liens.
(g) Litigation. Except as set forth in Schedule 5.01(g) hereto, there
is no pending or, to the knowledge of the Borrower or the Guarantors, threatened
action, suit or proceeding affecting any Loan Party before any court or other
Governmental Authority or any arbitrator which, individually or in the aggregate
could have a Material Adverse Effect.
22
(h) Financial Condition.
(i) The Financial Statements, copies of which have been
delivered to the Lender, fairly present the financial condition of the Loan
Parties as at the date thereof and the results of operations of the Loan Parties
for the fiscal period ended on such date, all in accordance with GAAP, and since
June 30, 1997 there has been no Material Adverse Effect.
(ii) The Loan Parties have heretofore furnished to the Lender a
projected income statement and statement of cash flow of the Loan Parties for
the period from January 1, 1997 through December 31, 2002, attached as Schedule
5.01(h) hereto. Such projections were believed at the time furnished to be
reasonable, have been prepared on a reasonable basis and in good faith by the
Loan Parties, and have been based on assumptions believed by the Loan Parties to
be reasonable at the time made and upon the best information then reasonably
available to the Loan Parties.
(iii) The Loan Parties each make and keep books, records and
accounts which, in reasonable detail, accurately and fairly reflect their
respective transactions and dispositions of their respective assets and each
Loan Party maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with GAAP except as previously disclosed to the Lender and (B) to
maintain accountability for assets, and (iii) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(iv) To the best of the Borrower's knowledge, the consolidated
balance sheet of ▇▇▇▇▇'▇ and its Consolidated Subsidiaries as at December 31,
1996 and the related consolidated statements of income and of cash flows for the
fiscal year ended on such date, reported on by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Ruchowitz
▇▇▇▇▇▇▇, copies of which have heretofore been furnished to the Lender, are
complete and correct in all material respects and present fairly the
consolidated financial condition of ▇▇▇▇▇'▇ and its Consolidated Subsidiaries as
at such date, and the consolidated results of their operations and their
consolidated cash flows for the fiscal year then ended. To the best of the
Borrower's knowledge, the unaudited consolidated balance sheet of ▇▇▇▇▇'▇ and
its Consolidated Subsidiaries as at June 30, 1997 and the related unaudited
consolidated statements of income and of cash flows for the six-month period
ended on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to the Lender, are complete and correct in all
material respects and present fairly the consolidated financial condition of
▇▇▇▇▇'▇ and its Consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the six-month
period then ended (subject to normal year-end audit adjustments). To the best of
the Borrower's knowledge, all such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). To the best of the Borrower's knowledge, neither ▇▇▇▇▇'▇ nor any of
its
23
Consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction or other financial derivative, which is not
reflected in the foregoing statements or in the notes thereto. To the best of
the Borrower's knowledge, during the period from June 30, 1997 to and including
the date hereof, except for transactions in the ordinary course of business,
there has been no sale, transfer or other disposition by ▇▇▇▇▇'▇ or any of its
Consolidated Subsidiaries of any material part of its business or property and
no purchase or other acquisition of any business or property (including any
Capital Stock of any other Person) material in relation to the consolidated
financial condition of ▇▇▇▇▇'▇ and its Consolidated Subsidiaries at June 30,
1997.
(i) Compliance with Law, Etc. No Loan Party, both before and
after giving effect to this Agreement, is in violation of its charter or by-laws
or any law or any material term of any agreement or instrument binding on or
otherwise affecting it or any of its properties where such violation would have
a Material Adverse Effect.
(j) ERISA. Except as set forth on Schedule 5.01(j) hereto, (i)
each Employee Plan is in substantial compliance with ERISA and the Code, (ii) no
Termination Event has occurred nor is reasonably expected to occur with respect
to any Employee Plan, (iii) the most recent annual report (Form 5500 Series)
with respect to each Employee Plan, including any required Schedule B (Actuarial
Information) thereto, copies of which have been filed with the Internal Revenue
Service and, if requested, delivered to the Lender, is complete and correct and
fairly presents the funding status of such Employee Plan, and since the date of
such report there has been no material adverse change in such funding status,
(iv) no Employee Plan had an accumulated or waived funding deficiency or
permitted decreases which would create a deficiency in its funding standard
account or has applied for an extension of any amortization period within the
meaning of Section 412 of the Code at any time during the previous 60 months,
and (v) no Lien imposed under the Code or ERISA exists or is likely to arise on
account of any Employee Plan within the meaning of Section 412 of the Code at
any time during the previous 60 months. Except as set forth on Schedule 5.01(j)
hereto, neither any Loan Party nor any ERISA Affiliate has incurred any
withdrawal liability under ERISA with respect to any Multiemployer Plan, and is
not aware of any facts indicating that any Loan Party or any ERISA Affiliate may
in the future incur any such withdrawal liability. Except as required by Section
4980B of the Code, neither any Loan Party nor any ERISA Affiliate maintains an
employee welfare benefit plan (as defined in Section 3(1) of ERISA) which
provides health or welfare benefits (through the purchase of insurance or
otherwise) for any retired or former employee of any Loan Party or any ERISA
Affiliate or coverage after a participant's termination of employment. Neither
any Loan Party nor any ERISA Affiliate has incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act ("WARN") or similar
state law, which remains unpaid or unsatisfied.
(k) Taxes, Etc. All federal, state, provincial and local tax
returns and other reports required by applicable law to be filed by each Loan
Party have been filed, or extensions have been obtained, and all taxes,
assessments and other governmental charges
24
imposed upon each Loan Party or any property of each Loan Party and which have
become due and payable on or prior to the date hereof have been paid (or
installment arrangements made with respect thereto), except to the extent
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof.
(l) Regulation U. Each Loan Party is not nor will be engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board), and no proceeds
of any Loan will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock.
(m) Adverse Agreements, Etc. No Loan Party is a party to any
agreement or instrument, or subject to any partnership agreement, charter or
other corporate or partnership restriction or any judgment, order, regulation,
ruling or other requirement of a court or other Governmental Authority or
regulatory body, which has a Material Adverse Effect, or, to the best knowledge
of any Loan Party, in the future is reasonably likely to have a Material Adverse
Effect.
(n) Permits, Etc. Each Loan Party has all material permits, licenses,
authorizations and approvals required for it lawfully to own and operate its
business.
(o) Title to Properties. Except as set forth on Schedule 5.01(o)
hereto, each Loan Party has good and marketable title in fee simple to all of
its properties and assets, free and clear of all Liens and other types of
encumbrances and preferential arrangements except such as are permitted by
Section 6.02(a) hereof.
(p) Full Disclosure. No Loan Document or schedule or exhibit thereto
and no certificate, report, statement or other document or information prepared
by Borrower and furnished to the Lender in connection herewith or therewith or
with the consummation of the transactions contemplated hereby or thereby,
contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the statements contained herein or therein not
misleading. There is no fact materially adversely affecting the condition or
operations, financial or otherwise, or the business or prospects of any Loan
Party (except that, as to financial information provided with respect to any
Subsidiary with respect to periods prior to the Borrower's acquisition thereof,
this representation shall be to the best of Borrower's knowledge) which has not
been set forth in a footnote included in the Financial Statements or a schedule
hereto.
(q) Environmental Matters. Except as set forth in Schedule 5.01(q)
hereto, to the best of Borrower's knowledge, (i) the operations of each Loan
Party are in compliance with Environmental Laws; (ii) there has been no Release
at any of the properties owned or operated by a Loan Party or a predecessor in
interest, or at any disposal or treatment facility which received Hazardous
Materials generated by a Loan Party or any predecessor in interest which Release
was a violation of Environmental Law and is reasonably likely to have a Material
Adverse Effect; (iii) no Environmental Actions have been asserted against a Loan
Party
25
or any predecessor in interest nor does any Loan Party have knowledge or notice
of any threatened or pending Environmental Action against any Loan Party or any
predecessor in interest which is reasonably likely to have a Material Adverse
Effect; and (iv) no Loan Party has received notice that any Environmental
Actions have been asserted against any facilities that may have received
Hazardous Materials generated by any Loan Party or any predecessor in interest
which is reasonably likely to result in a Material Adverse Effect.
(r) Schedules. All of the information which is required to be
scheduled to this Agreement (subject to the qualifications set forth in the
representation to which such Schedule relates) is set forth on the Schedules
attached hereto, is correct and accurate and does not omit to state any
information material thereto.
(s) Insurance. Each Loan Party keeps its properties adequately (based
upon industry standards for comparable companies) insured and maintains (i)
insurance to such extent and against such risks, including fire, as is customary
with companies in the same or similar businesses, (ii) workmen's compensation
insurance in the amount required by applicable law, (iii) public liability
insurance, which shall include product liability insurance, in the amount
customary with companies in the same or similar business against claims for
personal injury or death on properties owned, occupied or controlled by it, and
(iv) such other insurance as may be required by law or as may be reasonably
required in writing by the Lender. Schedule 5.01(s) hereto sets forth a list of
all insurance maintained by each Loan Party on the Closing Date.
(t) Use of Proceeds. $5,000,000 of the proceeds of the Loan will be
used either (i) to fund $5,000,000 of the purchase price to be paid by the
Borrower for all or substantially all of the common stock or assets of ▇▇▇▇▇'▇,
or (ii) to repay the Senior Debt. The remaining proceeds of the Loan (less all
fees and expenses paid from the proceeds of the Loan on the Closing Date) will
be used to repay the Senior Debt.
(u) Tradenames. Schedule 5.01(u) hereto sets forth a complete and
accurate list as of the Closing Date of all tradenames used by the Borrower and
each Guarantor.
(v) Solvency. After giving effect to the transactions contemplated by
this Agreement and the Senior Credit Agreement and before and after giving
effect to the Loan and each Senior Loan, each of the Borrower and the Guarantors
is, individually and together with its Consolidated Subsidiaries, Solvent.
(w) Power to Carry on Businesses. Each of the Loan Parties has all of
the requisite power and authority to own and operate its properties and carry on
its business as now conducted and as presently planned to be conducted.
(x) Location of Bank Accounts. Schedule 5.01(x) hereto sets forth a
complete and accurate list as of the Closing Date of all deposit and other
accounts maintained by the Borrower and each Guarantor together with a
description thereof (i.e., the bank at which such deposit or other account is
maintained and the account number and the purpose thereof).
26
(y) No Event of Default. No event has occurred and is continuing and
no condition exists which constitutes a Default or an Event of Default.
(z) Intellectual Property. The Borrower and each Guarantor owns or
licenses or otherwise has the right to use all material licenses, permits,
patents, patent applications, trademarks, trademark applications, service marks,
tradenames, copyrights, copyright applications, franchises, authorizations and
other intellectual property rights that are necessary for the operations of its
business, which to the best of Borrower's knowledge are without infringement
upon or conflict with the rights of any other Person with respect thereto,
except for such infringements and conflicts which, individually or in the
aggregate, could not have a Material Adverse Effect. Set forth in Schedule
5.01(z) is a complete and accurate list as of the Closing Date of all such
material licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights of the
Borrower and each Guarantor. To the knowledge of the Loan Parties, no slogan or
other advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by the Borrower or
any Guarantor infringes upon or conflicts with any rights owned by any other
Person, and, except as set forth in Schedule 5.01(z), no claim or litigation
regarding any of the foregoing is pending or threatened, except for such
infringements and conflicts which could not have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of the Borrower and each
Guarantor, no patent, invention, device, application, principle or any statute,
law, rule, regulation, standard or code is pending or proposed, which,
individually or in the aggregate, could have a Material Adverse Effect.
(aa) Material Contracts. Set forth in Schedule 5.01(aa) is a complete
and accurate list as of the Closing Date of all Material Contracts of the
Borrower and each Guarantor, showing the parties and subject matter thereof and
amendments and modifications thereto. Each such Material Contract, to the best
of Borrower's knowledge, (i) is in full force and effect and is binding upon and
enforceable against the Borrower and each Guarantor party thereto and all other
parties thereto in accordance with its terms, (ii) has not been otherwise
amended or modified, and (iii) there exists no default under any Material
Contract by the Borrower or Guarantors party thereto or any other party thereto.
(bb) Senior Loan Documents. Set forth in Schedule 5.01(bb) are
complete copies in all material respects of each of the ▇▇▇▇▇'▇ Acquisition
Documents (as defined in the Senior Credit Agreement) (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto) and all amendments thereto, waivers relating thereto and other side
letters or agreements affecting the terms thereof. None of such documents and
agreements has been amended or supplemented, nor have any of the provisions
thereof been waived, in any material respect, except pursuant to a written
agreement or instrument which has heretofore been consented to by the Lender.
Each ▇▇▇▇▇'▇ Acquisition Document has been duly executed and delivered by each
Loan Party which is a party thereto and is in full force and effect; and the
▇▇▇▇▇'▇ Acquisition (as defined in the Senior Credit Agreement) has been duly
consummated in accordance with the terms of the ▇▇▇▇▇'▇ Purchase Agreement (as
defined in the Senior Credit Agreement), unless otherwise provided in the
▇▇▇▇▇'▇ Acquisition Documents.
27
The representations and warranties of each Loan Party contained in each ▇▇▇▇▇'▇
Acquisition Document to which it is a party is true and correct in all material
respects, and will be true and correct in all material respects on the Closing
Date as if made on and as of the Closing Date, and the Lender shall be entitled
to rely on such representations and warranties with the same force and effect as
if they were incorporated in this Agreement and made to the Lender directly. To
the best knowledge of each Loan Party after due investigation, the
representations and warranties of each party to each ▇▇▇▇▇'▇ Acquisition
Document other than a Loan Party contained therein are true and correct in all
material respects and will be true and correct in all material respects on the
Closing Date as if made on and as of the Closing Date.
ARTICLE VI
COVENANTS OF THE BORROWER AND GUARANTORS
SECTION 6.01 Affirmative Covenants. So long as any principal of or
interest on the Loan or any other Obligations (whether or not due) shall remain
unpaid, the Borrower and the Guarantors will, unless the Lender shall otherwise
consent in writing:
(a) Reporting Requirements. Furnish to the Lender:
(i) As soon as practicable and in any event within 90 days after
the end of each fiscal year of the Borrower, consolidated and consolidating
balance sheets, consolidated and consolidating statements of income and retained
earnings and consolidated and consolidating statements of operations and cash
flow of the Loan Parties as at the end of such fiscal year, and notes to each,
setting forth in comparative form the corresponding figures for the immediately
preceding fiscal year all in reasonable detail and prepared in accordance with
GAAP, and accompanied by a report and an unqualified opinion, prepared in
accordance with generally accepted auditing standards, of BDO ▇▇▇▇▇▇▇ or other
independent certified public accountants of recognized national standing
selected by the Loan Parties and satisfactory to the Lender, together with a
written statement of such accountants to the effect that (A) such accountants
examined such statements and balance sheet in accordance with generally accepted
auditing standards and accordingly made such tests of accounting records and
such other auditing procedures as such accountants considered necessary in the
circumstances and (B) in the opinion of such accountants such statements and
balance sheets present fairly, in all material respects, the consolidated
financial position of the Loan Parties and their Consolidated Subsidiaries as of
the end of such fiscal year and the results of its operations and the changes in
its financial position for such fiscal year, in conformity with GAAP applied on
a basis consistent with that of the preceding fiscal year (except for changes in
application in which such accountants concur). A copy of such certificate or
report shall be delivered to the Lender and signed by such independent public
accountants and, as soon as available, a copy of any management letter received
by each Loan Party from its independent public accountants, shall be delivered
to the Lender. Each set of statements and balance sheets delivered pursuant to
this Section 6.01(a)(i) shall be accompanied by a certificate or report dated
the date of such statements and balance sheets by the accountants
28
who certified or reported on such statements and balance sheets stating in
substance that they have reviewed this Agreement and that in making the
examination necessary for their certification of such statements and balance
sheets they did not become aware of any Event of Default or Default based upon
any financial covenant, or if they did become so aware, such certificate or
report shall state the nature and period of existence thereof, if determinable.
(ii) As soon as available and in any event (A) within 45 days after
the end of each of the first three fiscal quarters of the Borrower, unaudited
consolidated and consolidating balance sheets, consolidated and consolidating
statements of income and retained earnings and consolidated and consolidating
statements of cash flow of the Loan Parties as at the end of such quarter, and
for the period commencing at the end of the immediately preceding fiscal year
and ending with the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding date or period of the
immediately preceding fiscal year, all in reasonable detail and certified by a
duly authorized officer of the Borrower as fairly presenting, in all material
respects, the financial position of the Loan Parties as of the end of such
quarter and the results of operations and changes in financial position of the
Loan Parties for such quarter, in accordance with GAAP applied in a manner
consistent with that of the most recent audited financial statements of such
Person furnished to the Lender, subject to year end adjustments. Each set of
statements and balance sheets delivered pursuant to this Section 6.01(a)(ii)
shall be accompanied by a certificate dated the date of such statements and
balance sheet by a duly authorized of officer of each Loan Party stating in
substance that he has reviewed this Agreement and that to the best of his
knowledge he did not become aware of any Event of Default or Default, or if he
did become so aware, such certificate shall state the nature and period of
existence thereof, if determinable.
(iii) As soon as available, and in any event within 30 days of the
end of each month, unaudited consolidated and consolidating balance sheets,
consolidated and consolidating statements of income and retained earnings and
consolidated and consolidating statements of cash flow of the Loan Parties for
such month and for the period from the beginning of such fiscal year to the end
of such month all in reasonable detail and certified by a duly authorized
officer of the Borrower as fairly presenting, in all material respects, the
financial position of the Loan Parties as of the end of such month and the
results of operations and changes in financial position of the Loan Parties for
such month, in accordance with GAAP applied in a manner consistent with that of
the most recent audited financial statements furnished to the Lender, subject to
year end adjustments. Each set of statements and balance sheets delivered
pursuant to this Section 6.01(a)(iii) shall be accompanied by a certificate
dated the date of such statements and balance sheet by a duly authorized
officer of each Loan Party stating in substance that he has reviewed this
Agreement and that to the best of his knowledge he did not become aware of any
Event of Default or Default, or if he did become so aware, such certificate
shall state the nature and period of existence thereof, if determinable.
(iv) At the same time provided to the Senior Lender, each Borrowing
Base Certificate (as defined in the Senior Loan Documents), together with all
back-up therefor provided to the Senior Lender.
29
(v) On or before January 31 of each year, financial projections, in
form and substance satisfactory to the Lender, for the succeeding fiscal year
for the Borrower, and all such financial projections to be reasonable, to be
prepared on a reasonable basis and in good faith, and to be based on assumptions
believed by the Borrower to be reasonable at the time made and from the best
information then available to the Borrower.
(vi) Promptly upon their becoming available, a copy of (A) all
consultants' reports addressing financial or strategic affairs, investment
bankers' reports, accountants' management letters, and final business plans, (B)
all reports, financial statements or other information delivered by the Borrower
to its members, (C) all reports, proxy statements, financial statements and
other information generally distributed by any Loan Party to its creditors or
the financial community in general; and (D) any audit or other reports submitted
to any Loan Party by independent accountants in connection with any annual,
interim or special audit.
(vii) Promptly after submission to any Government Authority all
documents and information furnished to such Government Authority in connection
with any investigation of any Loan Party other than routine inquiries by such
Governmental Authority, provided that furnishing such documents and information
will not waive any privilege or confidentiality obligation of any Loan Party.
(viii) As soon as possible, and in any event within five days after
the occurrence of an Event of Default or Default or a Material Adverse Effect,
the written statement of a duly authorized officer setting forth the details of
such Event of Default, Default or Material Adverse Effect and the action which
the Loan Parties propose to take with respect thereto.
(ix) (A) As soon as possible and in any event (1) within 30 days
after any Borrower or Guarantor knows that any Termination Event described in
clause (i) of the definition of Termination Event with respect to any Employee
Plan has occurred, (2) within 10 Business Days after the Borrower or any
Guarantor knows that any other Termination Event with respect to any Employee
Plan has occurred, or (3) within 10 Business Days after the Borrower or any
Guarantor knows that an accumulated funding deficiency has been incurred or an
application has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including installment payments) or
an extension of any amortization period under Section 412 of the Code with
respect to an Employee Plan, a statement of a duly authorized officer setting
forth the details of such occurrence and the action, if any, which the Borrower
and the Guarantors propose to take with respect thereto, (B) promptly and in any
event within two Business Days after receipt thereof by the Borrower or any
Guarantor from the Pension Benefit Guaranty Corporation, copies of each notice
received by the Borrower or any Guarantor of the Pension Benefit Guaranty
Corporation's intention to terminate any Plan or to have a trustee appointed to
administer any Plan, (C) promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, if requested by the Lender
copies of each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Employee Plan and Multiemployer Plan, (D)
promptly and in any event within 10 Business Days after the Borrower or any
Guarantor knows or has reason to know that a required
30
installment within the meaning of Section 412 of the Code has not been made when
due with respect to an Employee Plan, a statement of a duly authorized
officer setting forth the details of such occurrence and the action, if any,
which the Borrower and the Guarantors propose to take with respect thereto, (E)
promptly and in any event within 10 Business Days after receipt thereof by the
Borrower or any Guarantor from a sponsor of a Multiemployer Plan or from the
Pension Benefit Guaranty Corporation, a copy of each notice received by the
Borrower or any Guarantor concerning the imposition or amount of withdrawal
liability under Section 4202 of ERISA or indicating that such Multiemployer Plan
may enter reorganization status under Section 4241 of ERISA, and (F) promptly
and in any event within 10 days after the Borrower or any Guarantor or any of
its ERISA Affiliates sends notice of a plant closing or mass layoff (as defined
in WARN) to employees, copies of each such notice sent by the Borrower or such
Guarantor or any of its ERISA Affiliates.
(x) Promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of any Loan Party as the Lender
may, from time to time may reasonably request.
(b) Compliance with Laws, Etc. Comply, and cause each of their
respective Subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations and orders (including, without limitation, all
Environmental Laws), such compliance to include, without limitation, (i) paying
before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any of
its properties, (ii) paying all lawful claims which if unpaid might become a
Lien or charge upon any of its properties, except to the extent (A) contested in
good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the nonpayment thereof and with respect to which adequate
reserves have been set aside for the payment thereof and (B) any notices thereof
or relating thereto have been vacated and discharged from title to any of the
Collateral affected thereby, and (iii) immediately discharging or vacating from
title to any and all of the Collateral affected thereby Liens other than
Permitted Liens.
(c) Preservation of Existence, Etc. Maintain and preserve, and cause
each of their Subsidiaries to maintain and preserve, its existence, rights and
privileges, and become or remain duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by them or
in which the transaction of their business makes such qualification necessary.
(d) Keeping of Records and Books of Account. Keep, and cause each of
their Subsidiaries to keep, adequate records and books of account, with complete
entries made in accordance with GAAP.
(e) Inspection Rights. Permit, and cause each of their Subsidiaries
to permit, the Lender, or any agents or representatives thereof at any time and
from time to time during normal business hours and, upon at least two Business
Days' notice, to examine and make copies of and abstracts from their records and
books of account, to visit and inspect their properties, to verify materials,
leases, notes, accounts receivable, deposit accounts and other
31
assets of the Borrower and each Guarantor to conduct audits, physical counts,
valuations or examinations and to discuss their affairs, finances and accounts
with any of the directors, officers, managerial employees, independent
accountants or other representatives thereof.
(f) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of their properties which
are necessary or useful in the proper conduct of their business in good working
order and condition, ordinary wear and tear excepted, and comply, and cause each
of its Subsidiaries to comply, at all times with the provisions of all leases to
which each of them is a party as lessee or under which each of them occupies
property, so as to prevent any loss or forfeiture thereof or thereunder.
(g) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, with responsible and reputable insurance companies or
associations insurance (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to
their properties (including all real properties leased or owned by them) and
business, in such amounts and covering such risks, as is required by any
Governmental Authority having jurisdiction with respect thereto or as is carried
generally in accordance with sound business practice by companies in similar
businesses similarly situated and in any event in amount, adequacy and scope
reasonably satisfactory to the Lender. All certificates of insurance are to be
delivered with the loss payable and additional insured endorsement in the
Lender's favor, and shall provide for not less than 30 days' prior written
notice to the Lender of the exercise of any right of cancellation. If the
Borrower or any Guarantor fails to maintain such insurance, the Lender may
arrange for such insurance, but at the Borrower's expense and without any
responsibility on the Lender's part for obtaining the insurance, the solvency of
the insurance companies, the adequacy of the coverage, or the collection of
claims. Upon the occurrence and during the continuance of an Event of Default,
the Lender (or, to the extent that it is the primary loss payee, the Senior
Lender, subject to the terms of the Senior Intercreditor Agreement) shall have
the sole right, in the name of the Lender and the Borrower and Guarantors, to
file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(h) Environmental. (i) Keep any property either owned or operated by
it or any of its Subsidiaries free of any Environmental Liens or post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Lien; (ii) comply, and cause its Subsidiaries to
comply, in all material respects with Environmental Laws and shall provide to
the Lender documentation of such compliance which the Lender reasonably
requests; (iii) promptly notify the Lender of any Release of a Hazardous
Material in excess of any reportable quantity from or onto property owned or
operated by any Loan Party or any of its Subsidiaries and take any Remedial
Actions required to ▇▇▇▇▇ said Release or otherwise to come into compliance with
applicable Environmental Law; and (iv) promptly provide the Lender with written
notice within ten (10) days of the receipt of any of the following: (a) notice
that an Environmental Lien has been filed against any of the real or personal
property of any
32
Loan Party; (b) commencement of any Environmental Action or notice that an
Environmental Action will be filed against any Loan Party; and (c) notice of a
violation, citation or other administrative order which would reasonably be
expected to have a Material Adverse Effect.
(i) Further Assurances. Take such action and execute, acknowledge
and deliver, and cause each of its Subsidiaries to take such action and execute,
acknowledge and deliver, at its sole cost and expense such agreements,
instruments or other documents as the Lender may reasonably require from time to
time in order (i) to carry out more effectively the purposes of this Agreement
and the other Loan Documents, (ii) to maintain the validity and effectiveness of
any of the Loan Documents, and (iii) to better assure, convey, grant, assign,
transfer and confirm unto the Lender the rights now or hereafter intended to be
granted to the Lender under this Agreement or any other Loan Document.
(j) Executive Committee. If the Borrower shall at any time become a
corporation, its Governing Documents shall provide (i) for the existence of an
executive committee or similar body and (ii) the right for the Lender to appoint
a member to such body upon the occurrence of an Event of Default.
(k) ▇▇▇▇▇'▇ Intercreditor Agreement. On or before the date that is
six months after the Closing Date, the Borrower shall deliver to the Lender the
▇▇▇▇▇'▇ Intercreditor Agreement, in form and substance satisfactory to the
Lender, duly executed by ▇▇▇▇▇'▇, the Borrower and the Guarantors.
SECTION 6.02. Negative Covenants. So long as any principal of or
interest on any Loan or any other Obligations (whether or not due) shall remain
unpaid, the Borrower and each Guarantor will not, unless the Lender shall
otherwise consent in writing:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, rights or other assets, whether now owned or hereafter
acquired, or assign or otherwise transfer, or permit any of its Subsidiaries to
assign or otherwise transfer, any right to receive income, other than the
following ("Permitted Liens"):
(i) Liens or security interests created pursuant to the Senior
Loan Documents, and any extension of maturity, refinancing or modification of
the terms thereof; provided, however, that such extension, refinancing or
modification (A) is pursuant to terms that are not materially less favorable to
the Loan Parties than the terms of the Indebtedness created under the Senior
Loan Documents and (B) after giving effect to the extension, refinancing or
modification, the Borrower remains in compliance with the covenants set forth in
Section 6.02(n) hereof; and any Liens permitted under the Senior Loan Documents;
(ii) Liens existing on the date hereof, as set forth in Schedule
6.02(a) hereto, but not the extension of coverage thereof to other property or
the extension of maturity, refinancing or other modification of the terms
thereof or of the Indebtedness secured thereby;
33
(iii) Liens created by operation of law (other than Environmental
Liens, except to the extent permitted by Section 6.01(h) hereof), such as
materialmen's liens, mechanics' liens and other similar Liens, arising in the
ordinary course of business and securing claims the payment of which shall not
be required by Section 6.01(b) hereof;
(iv) deposits, pledges or Liens (other than Liens arising under ERISA
or the Code) securing (A) obligations incurred in respect of workers'
compensation, unemployment insurance or other forms of governmental insurance or
benefits, (B) the performance of bids, tenders, leases, contracts (other than
for the payment of money) and statutory obligations, or (C) obligations on
surety or appeal bonds, but only to the extent such deposits, pledges or Liens
are incurred or otherwise arise in the ordinary course of business and secure
obligations which are not past due;
(v) restrictions or covenants on the use of real property and minor
irregularities in the title thereto which do not (A) secure obligations for the
payment of money or (B) materially adversely impair the value or marketability
of such property or its use by the Borrower or any Guarantor in the normal
conduct of such Person's business, provided that in all such cases the Borrower
or relevant Guarantor complies in all material respects with all of its
obligations under such title restrictions or covenants;
(vi) Liens securing Capitalized Leases permitted by Section 6.02(g);
(vii) Purchase money Liens on or purchase money security interests in
equipment securing Indebtedness permitted by Section 6.02(b)(v) and 6.02(h); and
(viii) Non-consensual Liens, but only if the Borrower has posted a
bond or other financial assurance sufficient to satisfy the Indebtedness
secured by such Lien.
(b) Indebtedness. Create, incur or suffer to exist, or permit any of its
Subsidiaries to create, incur or suffer to exist, any Indebtedness, other than:
(i) Indebtedness created hereunder, under the Note, the ▇▇▇▇▇'▇
Purchase Money Note or the Senior Loan Documents;
(ii) Indebtedness existing on the date hereof, as set forth in
Schedule 6.02(b) hereto, and any extension of maturity, refinancing or
modification of the terms thereof; provided, however, that such extension,
refinancing or modification (A) is pursuant to terms that are not materially
less favorable to the Loan Parties than the terms of the Indebtedness being
extended, refinanced or modified and (B) after giving effect to the extension,
refinancing or modification, such Indebtedness is not greater than the amount of
Indebtedness outstanding immediately prior to such extension, refinancing or
modification;
(iii) Indebtedness under Capitalized Leases permitted by Section
6.02(g);
34
(iv) Indebtedness secured by Liens permitted by Section
6.02(a)(vii); and
(v) Other Indebtedness only if, after giving effect to such
Indebtedness, the Loan Parties would maintain compliance with the covenants set
forth in Section 6.02(n) herein.
(c) Guaranties, Etc. Assume, guarantee, endorse or otherwise become
directly or contingently liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss), in connection with any Indebtedness of any other Person
(other than, in the case of the Borrower, guaranties of Indebtedness of the
Guarantors), other than
(i) guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business; and
(ii) guaranties existing on the date hereof, as set forth in
Schedule 6.02(c) hereto, but not any renewal or other modification thereof.
(d) Merger, Consolidation, Sale of Assets, Etc. (i) Merge or
consolidate with any Person, or permit any of its Subsidiaries to merge or
consolidate with any Person (a) if such merger results in a Change of Control or
(b) if, upon giving effect to such merger, the Borrower, on a pro forma basis,
would not be in compliance with any covenant set forth in this Article VI;
provided, however, that any direct or indirect Subsidiary of the Borrower may be
merged into the Borrower or another such Subsidiary of the Borrower, or may
consolidate with another such Subsidiary of the Borrower or may split into
separate corporations (as long as such split does not affect the Borrower's
direct or indirect ownership of such Subsidiaries), so long as (x) no other
provision of this Agreement would be violated thereby, (y) the Borrower gives
the Lender at least 30 days' prior written notice of such merger or
consolidation or split, and (z) no Default or Event of Default shall have
occurred and be continuing either before or after giving effect to such
transaction.
(ii) Sell, assign, lease or otherwise transfer or dispose of, or
permit any of its Subsidiaries to sell, assign, lease or otherwise transfer or
dispose of, whether in one transaction or in a series of related transactions,
any of its properties, rights or other assets whether now owned or hereafter
acquired to any Person, provided that (A) the Borrower and each Guarantor may
sell Inventory in the ordinary course of business, (B) the Borrower and each of
the Guarantors may dispose of obsolete or worn-out property in the ordinary
course of business, and (C) the Borrower and each of the Guarantors may sell or
otherwise dispose of assets, other than Inventory, for fair market value, but
only to the extent permitted by the Senior Lender.
(e) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof outside of the general scope and market of the
Loan Parties' present business, provided
35
that nothing herein shall prohibit the Loan Parties from ceasing operations in a
particular market or seeking to enter new markets or introduce new products,
provide such activities are within the general scope of their business as
currently conducted.
(f) Loans, Advances, Investments, Etc. Make, or permit any of its
Subsidiaries to make, any loan or advance to any Person or purchase or otherwise
acquire, or permit any of its Subsidiaries to purchase or otherwise acquire, any
capital stock, properties, assets or obligations of, or any interest in, any
Person, other than (i) raw materials purchased in the ordinary course of
business, (ii) trade credit extended in the ordinary course of business and
(iii) Permitted Investments.
(g) Lease Obligations. Create, incur or suffer to exist, or permit
any of its Subsidiaries to create, incur or suffer to exist, any obligations as
lessee (i) for the payment of rent for any real or personal property in
connection with any sale and leaseback transaction, or (ii) for the payment of
rent for any real or personal property under leases or agreements to lease other
than (A) obligations under Capitalized Leases which would not cause the
aggregate amount of all obligations under Capitalized Leases entered into after
the Closing Date owing by the Borrower and the Guarantors in any Fiscal Year to
exceed the amounts set forth in subsection (h) of this Section 6.02, and (B)
Consolidated Lease Expense which would not cause the aggregate amount of all
Consolidated Lease Expense owing by the Borrower and the Guarantors in any
Fiscal Year to exceed $1,350,000 or such greater amount as shall be approved by
the Lender.
(h) Capital Expenditures. Make or be committed to make, or permit
any of its Subsidiaries to make or be committed to make, any Capital Expenditure
(by purchase or capitalized lease) other than Capital Expenditures (including
obligations under Capitalized Leases) which would not cause the aggregate amount
of all such Capital Expenditures to exceed (a) $250,000 during the period from
the closing date under the Senior Credit Agreement through December 31, 1997,
(b) $1,000,000 during the Fiscal Year of the Borrower ending on the Friday
closest to December 31, 1998, and (c) $600,000 in any, Fiscal Year of the
Borrower thereafter.
(i) Dividends, Prepayments, Etc. Declare or pay any dividends,
purchase or otherwise acquire for value any of its membership interests or other
Capital Stock now or hereafter outstanding, return any capital to its members as
such, or make any other payment or distribution of assets to its stockholders as
such, or permit any of its Subsidiaries to do any of the foregoing or to
purchase or otherwise acquire for value any stock of the Borrower or its
Subsidiaries, or make any payment or prepayment of principal of, premium, if
any, or interest on, or redeem, defease or otherwise retire, any Indebtedness
before its scheduled due date; provided, however, that the Borrower may make
distributions to each of its members on the dates and in the amounts specified
in Section 4.4 of the Borrower's Operating Agreement (as in effect on the date
hereof), so long as (i) the Borrower is and was during the entire period of such
quarter a partnership for federal income tax purposes that is not taxed as an
association taxable as a corporation pursuant to Section 7701 of the Code or as
a corporation pursuant to Section 7704 of the Code, (ii) solely with respect to
such distributions to ▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇, no Default or Event of Default has
occurred and is continuing under Sections 8.01(a), (e) (solely with respect to
payment default under the Senior Loan Documents), (g) and (h) at the time of
such
36
distribution, and (iii) at least five Business Days prior to the making of any
such distribution, the Borrower shall (A) notify the Lender of the amount and
date of the proposed distribution and the aggregate amount of all distributions
previously made pursuant to this proviso in respect of such calendar quarter,
and (B) provide a statement from the chief financial officer of the Borrower
setting forth in reasonable detail a calculation of the amount of such
distributions for such members for such calendar quarter. Notwithstanding
anything herein to the contrary contained herein, until one calendar quarter
following the occurrence of an Event of Default of which the Lender provides
written notice the Borrower may fund the amount as provided in this Section
6.02(i), but not thereafter.
(j) Federal Reserve Regulations. Permit the Loan or the proceeds of
the Loan under this Agreement to be used for any purpose which violates or is
inconsistent with the provisions of Regulations G, T, U or X of the Board.
(k) Transactions with Affiliates. Enter into or be a party to, or
permit any Subsidiary to enter into or be a party to any transaction with any
Affiliate of the Borrower except in the ordinary course of business in a manner
and to an extent consistent with past practice and necessary or desirable for
the prudent operation of its business for fair consideration and on terms no
less favorable to the Borrower or any Guarantor as are available from
unaffiliated third parties. The Affiliate transactions set forth in Schedule
6.02(k) are expressly permitted.
(1) Environmental. The Borrower and the Guarantors shall not allow
the use, handling, generation, storage, treatment, release or disposal of
Hazardous Materials at any property owned or leased by each Loan Party except in
compliance with Environmental Laws and so long as such use, handling,
generation, storage, treatment, release or disposal of Hazardous Materials does
not result in a violation of Environmental Law which would have a Material
Adverse Effect.
(m) ERISA. (A) Engage or permit any ERISA Affiliate to engage, in any
transaction described in Section 4069 of ERISA; (B) engage, or permit any ERISA
Affiliate to engage, in any prohibited transaction described in Section 406 of
ERISA or 4975 of the Code for which a statutory or class exemption is not
available or a private exemption has not previously been obtained from the
Department of Labor; (C) adopt or permit any ERISA Affiliate to adopt any
employee welfare benefit plan within the meaning of Section 3(1) of ERISA which
provides benefits to employees after termination of employment other than as
required by Section 601 of ERISA or applicable law; (D) fail to make any
contribution or payment to any Multiemployer Plan which any of the Loan Parties
or any ERISA Affiliate may be required to make under any agreement relating to
such Multiemployer Plan, or any law pertaining thereto; (E) fail, or permit any
ERISA Affiliate to fail, to pay any required installment or any other payment
required under Section 412 of the Code on or before the due date for such
installment or other payment.
(n) Financial Covenants.
37
(i) The Borrower shall not permit its Consolidated EBITDA for
any twelve month period ending on the last day of each month during the periods
set forth below to be less than the amount specified below opposite such period:
Period Consolidated EBITDA
------ -------------------
Closing Date through December 31, 1997 $ 5,750,000
January 1, 1998 through September 30, 1998 $ 5,750,000
September 30, 1998 through November 30, 1998 $ 7,500,000
December 1, 1998 through December 31, 1998 $ 8,500,000
January 1, 1999 through September 30, 1999 $ 8,500,000
October 1, 1999 through November 30, 1999 $ 9,500,000
December 1, 1999 through December 31, 1999 $10,500,000
January 1, 2000 through September 30, 2000 $10,500,000
October 1, 2000 through November 30, 2000 $11,250,000
December 1, 2000 through December 31, 2000 $12,000,000
January 1, 2001 through September 30, 2001 $12,000,000
October 1, 2001 through November 30, 2001 $12,750,000
December 1, 2001 through December 31, 2001 $13,250,000
(ii) The Borrower shall not permit its Interest Coverage Ratio,
measured at the end of each fiscal quarter ending on the Friday closest to the
dates listed below to be less than the figure specified below:
Year Interest Coverage Ratio
---- -----------------------
December 31, 1997 2.75
March 31, 1998 2.75
June 30, 1998 2.75
September 30, 1998 3.00
December 31, 1998 3.00
March 31, 1999 3.00
June 30, 1999 3.00
September 30, 1999 3.00
December 31, 1999 and thereafter 3.75
(iii) The Borrower shall not permit its Debt-to-EBITDA Ratio
measured at the end of each fiscal quarter ending on the Friday closest to the
dates listed below to be greater than the figure specified below:
38
Year Debt-to-EBITDA Ratio
---- --------------------
December 31, 1997 6.40
March 31, 1998 6.40
June 30, 1998 6.40
September 30, 1998 5.20
December 31, 1998 4.25
March 31, 1999 4.25
June 30, 1999 4.25
September 30, 1999 3.75
December 31, 1999 3.75
March 31, 2000 and thereafter 3.50
(iv) At any time following any repayment or refinancing of the
amounts outstanding under the Senior Loan Documents with any lender other than
CIBC, the Borrower shall not permit its Senior Debt-to-EBITDA Ratio measured at
the end of each fiscal quarter ending on the Friday closest to the dates listed
below to be greater than the figure specified below:
Year Senior Debt-to-EBITDA Ratio
---- ---------------------------
December 31, 1997 6.15
March 31, 1998 6.15
June 30, 1998 6.15
September 30, 1998 5.05
December 31, 1998 4.10
March 31, 1999 4.10
June 30, 1999 4.10
September 30, 1999 3.60
December 31, 1999 3.60
March 31, 2000 and thereafter 3.25
(v) The Borrower shall maintain its fiscal year to mean the
twelve-month period ending on the Friday nearest to December 31 of each year.
ARTICLE VII
GUARANTY
SECTION 7.01. Guaranty. Each of the Borrower and each Guarantor,
jointly and severally, hereby (i) irrevocably, absolutely and unconditionally
guarantees the prompt payment, as and when due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of (A) all of
the Guaranteed Obligations of such Guarantor, including, without limitation, all
amounts now or hereafter owing in respect of the Loan Documents, whether for
principal, interest, fees, expenses or otherwise, and (B) all indebtedness,
39
obligations and other liabilities, direct or indirect, absolute or contingent,
now existing or hereafter arising of the Borrower to the Lender and (ii) agrees
to pay any and all expenses (including reasonable counsel fees and expenses)
incurred by the Lender in enforcing its rights under this Article VII.
SECTION 7.02. Obligations Unconditional.
(a) Each of the Borrower and each of the Guarantors hereby jointly
and severally guarantees that the Guaranteed Obligations will be paid strictly
in accordance with the terms of the Loan Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Lender with respect thereto. Each Guarantor
agrees that its guarantee constitutes a guaranty of payment when due and not of
collection, and waives any right to require that any resort be had by the Lender
to any security held for payment of the Guaranteed Obligations or to any balance
of any deposit account or credit on the books of the Lender in favor of the
Borrower or for any other reason. The liability of the Borrower and each of the
Guarantors hereunder shall be absolute and unconditional, joint and several,
irrespective of: (i) any lack of validity or enforceability of any Loan Document
or any agreement or instrument relating thereto; (ii) any extension or change in
the time, manner or place of payment of, or in any other term in respect of, all
or any of the Guaranteed Obligations (including, without limitation, any
extension for longer than the original period), or any other amendment or waiver
of or consent to any departure from any provision of any Loan Document; (iii)
any release or amendment or waiver of or consent to any departure from any other
guaranty, for all or any of the Guaranteed Obligations; or (iv) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Borrower or any other guarantor in respect of the Guaranteed
Obligations of the Guarantors in respect hereof.
(b) This Guaranty (i) is a continuing guaranty and shall remain in
full force and effect until such date on which all of the Guaranteed Obligations
and all other expenses to be paid by the Borrower or any Guarantors pursuant
hereto shall have been satisfied in full, (ii) shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment of any of
the Guaranteed Obligations is rescinded or must otherwise be returned by the
Lender upon the insolvency, bankruptcy or reorganization of the Borrower or any
Guarantor or otherwise, all as though such payment had not been made, and (iii)
shall be binding upon the Borrower, each Guarantor, their successors and
assigns.
SECTION 7.03. Waivers. The Borrower and each of the Guarantors hereby
waive, to the extent permitted by applicable law, (i) promptness and diligence,
(ii) notice of acceptance and notice of the incurrence of any Guaranteed
Obligation, (iii) notice of any action taken by the Lender or the Borrower or
any other agreement or instrument relating thereto, (iv) all other notices,
demands and protests, and all other formalities of every kind in connection with
the enforcement of the Guaranteed Obligations or of the obligations of the
Borrower and the Guarantors hereunder, the omission of or delay in which, but
for the provisions of this Section 7.03, might constitute grounds for relieving
the Borrower or the Guarantors of their obligations hereunder, (v) any
requirement that the Lender protect, secure, perfect or insure any security
40
interest or lien or any property subject thereto or exhaust any right or take
any action against any Person or any Collateral, and (vi) any other defenses
available to the Borrower or any such Guarantor. All such waivers by any
Guarantor shall be effective only to the extent permitted by applicable law.
SECTION 7.04. Subrogation. Except as provided in Section 3.02 hereof,
the Borrower and each of the Guarantors hereby irrevocably waives and agrees
that it will not exercise any and all rights which it has or may have at any
time or from time to time (whether arising directly or indirectly by operation
of law or contract) to assert any claim against the Borrower or any Guarantor on
account of any payments made under this Agreement, including, without
limitation, and all existing and future rights of subrogation, reimbursement,
exoneration, contribution and/or indemnity. If any amount shall be paid to the
Borrower or any Guarantor on account of such rights at any time when all of such
Guaranteed Obligations and all other Guaranteed Obligations shall not have been
paid in full, such amount shall be held in trust for the benefit of the Lender,
shall be segregated from the other funds of the Borrower or such Guarantor and
shall forthwith be paid over to the Lender to be applied in whole or in part by
the Lender against the Guaranteed Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement.
SECTION 7.05. No Waiver; Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedy provided by law.
SECTION 7.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower in respect of the Guaranteed
Obligations is stayed upon the insolvency, bankruptcy or reorganization of the
Borrower, all such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable by the Borrower and the Guarantors
hereunder forthwith on demand by the Lender.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following ("Events of
Default") shall occur and be continuing:
(a) Any Loan Party fails to pay any principal of the Loan when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise); or any Loan Party fails to pay any interest on the Loan, or fails to
pay any other amount payable under this Agreement or any other Loan Document
when due;
41
(b) Any representation or warranty made by any Loan Party or any
officer of such Loan Party under or in connection with any Loan Document shall
have been incorrect in any material respect when made;
(c) Any Loan Party fails to perform or observe any covenant contained
in Section 6.02 hereof;
(d) Any Loan Party fails to perform or observe any other term,
covenant or agreement contained in any Loan Document and to be performed or
observed by such Loan Party and such failure, if capable of being remedied,
shall remain unremedied for 15 days after written notice thereof shall have been
given by the Lender to such Loan Party;
(e) Any Event of Default under, and as defined in, the Senior Loan
Documents or the ▇▇▇▇▇'▇ Purchase Money Note occurs and is continuing;
(f) Any Loan Party fails to pay any principal or interest on any of
its Indebtedness (excluding Indebtedness evidenced by the Note) in excess of
$1,000,000 outstanding in the aggregate at any time, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness, or any other default under any agreement or
instrument relating to any such Indebtedness, or any other event, shall occur
and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness in excess of such amount shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof;
(g) Any Loan Party (i) shall institute any proceeding or voluntary
case seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for such Loan Party or for any substantial part of its
property, (ii) shall be generally not paying its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, (iii) shall
make a general assignment for the benefit of creditors, or (iv) shall take any
action to authorize or effect any of the actions set forth above in this
subsection (g);
(h) Any proceeding shall be instituted against any Loan Party seeking
to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for such Loan Party or
for any substantial part of its property, and either such proceeding shall
remain undismissed or unstayed for a period of 45 days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against it or the
42
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property) shall occur;
(i) Any material 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 any party thereto, or a proceeding shall be
commenced by any Loan Party or any Governmental Authority or other regulatory
body having jurisdiction over such Loan Party, seeking to establish the
invalidity or unenforceability thereof, or any Loan Party shall deny in writing
that such Loan Party has any liability or obligation purported to be created
under any Loan Document;
(j) One or more judgments or orders (other than a judgment or award
described in subsections (g) or (h) of this Section 8.01) for the payment of
money exceeding any applicable insurance or bond coverage by more than
$1,000,000 in the aggregate shall be rendered against any Loan Party and either
(i) enforcement proceedings shall have been commenced by any creditor upon any
such judgment or order, or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of any such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
(k) The Borrower or any Guarantor or any ERISA Affiliate shall have
made a complete or partial withdrawal from a Multiemployer Plan, and, as a
result of such complete or partial withdrawal, the Borrower or such Guarantor or
such ERISA Affiliate incurs a withdrawal liability in an annual amount exceeding
$1,000,000; or a Multiemployer Plan enters reorganization status under Section
4241 of ERISA, and, as a result thereof, the Borrower's, such Guarantor's or
such ERISA Affiliate's annual contribution requirement with respect to such
Multiemployer Plan increases in an annual amount exceeding $1,000,000;
(l) Any Termination Event with respect to any Employee Plan shall
have occurred, and, 30 days after notice thereof shall have been given to the
Borrower by the Lender, (i) such Termination Event (if correctable) shall not
have been corrected, and (ii) the then current value of such Employee Plan's
vested benefits exceeds the then current value of assets allocable to such
benefits in such Employee Plan by more than $1,000,000 (or, in the case of a
Termination Event involving liability under Section 409, 502(i), 502(1), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of
the Code, the liability is in excess of such amount);
(m) Any of the Loan Parties shall have entered into any consent or
settlement decree or agreement or similar arrangement with a Governmental
Authority (other than those disclosed on Schedule 5.01(q) hereto) or any
judgment, order, decree or similar action shall have been entered against any of
the Loan Parties based on or arising from the violation of or pursuant to any
Environmental Law, or the generation, storage, transportation, treatment,
disposal or Release of any Hazardous Material and, in connection with all of the
foregoing, the Loan Parties incur Environmental Liabilities and Costs which are
unstayed, due and owing in an amount in excess of $1,000,000 in the aggregate;
43
(n) Any non-monetary judgment or order shall be entered against any
Loan Party which does or could reasonably be expected to have a Material Adverse
Effect, and there shall be a period of ten consecutive days during which a stay
or enforcement of such judgment or order shall not be in effect; or
(o) Any property (if the aggregate of the higher of the original
purchase price and the replacement cost for such property is in excess of
$200,000) of any Loan Party shall be seized or otherwise attached by any Person
or Governmental Authority pursuant to any legal process or other means
including, without limitation, distress, execution or similar action and such
seizure or attachment is not released, bonded, satisfied, discharged, stayed or
vacated within 15 days;
then, and in any such event, the Lender may, by notice to the Borrower, (i)
declare the Loan, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Loan, all such interest
and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by each Loan Party, provided, however, that upon the
occurrence of any Event of Default described in subsection (g) or (h) of this
Section 8.01, the Loan, all such interest and all such amounts shall become and
be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by each Loan Party, (ii)
appoint a designee as a member of the Borrower's executive committee or similar
body (if the Borrower is a corporation) and (iii) exercise any and all of its
other rights under applicable law, hereunder and under the other Loan Documents.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied, telexed,
telegraphed or delivered, if to the Borrower, at the following address:
Diversified Food Group LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Lender, to it at the following address:
▇▇▇▇▇▇▇▇▇ LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Neporent, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 9.01. All such notices and other communications shall be
effective, (i) if mailed, when received or five days after deposited in the
mails, whichever occurs first (ii) if telecopied, when transmitted, (iii) if
telexed, when sent and the appropriate answerback is received, (iv) if
telegraphed, when delivered to the telegraph company, or (v) if delivered, upon
delivery.
SECTION 9.02. Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the other Loan Documents, and no consent to any departure by
any Loan Party therefrom, shall in any event be effective unless the same shall
be in writing and signed by such Loan Party and the Lender, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 9.03. No Waiver; Remedies, Etc. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under any
other Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of the Lender provided herein and in the other Loan Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Lender under any Loan Document against any
party thereto are not conditional
45
or contingent on any attempt by the Lender to exercise any of their rights under
any other Loan Document against such party or against any other Person.
SECTION 9.04. Expenses; Taxes; Attorneys' Fees. The Borrower agrees to
pay or cause to be paid, on demand, and to save the Lender harmless against
liability for the payment of, all reasonable out-of-pocket expenses, regardless
of whether the transactions contemplated hereby are consummated, including but
not limited to reasonable fees and expenses of counsel for the Lender,
accounting, due diligence, periodic field audits (not to exceed one audit per
year), investigation, monitoring of assets, syndication, miscellaneous
disbursements, examination, travel, lodging and meals, incurred by the Lender
from time to time arising from or relating to: (i) the negotiation, preparation,
execution, delivery, performance and administration of this Agreement and the
other Loan Documents, (ii) any requested amendments, waivers or consents to this
Agreement or the other Loan Documents whether or not such documents become
effective or are given, (iii) the preservation and protection of any of the
Lender's rights under this Agreement or the other Loan Documents, (iv) the
defense of any claim or action asserted or brought against the Lender by any
Person that arises from or relates to this Agreement, any other Loan Document,
the Lender's claims against the Loan Party, or any and all matters in connection
therewith, (v) the commencement or defense of, or intervention in, any court
proceeding arising from or related to this Agreement or any other Loan Document,
(vi) the filing of any petition, complaint, answer, motion or other pleading by
the Lender in connection with this Agreement or any other Loan Document, (vii)
any attempt to collect from any Loan Party, (viii) the receipt of any advice
with respect to any of the foregoing, (ix) all liabilities and costs arising
from or in connection with the past, present or future operations of the Loan
Parties involving any damage to real or personal property or natural resources
or harm or injury alleged to have resulted from any Release of Hazardous
Materials on, upon or into such property, (x) any Environmental Liabilities and
Costs incurred in connection with the investigation, removal, cleanup and/or
remediation of any Hazardous Materials present or arising out of the operations
of any facility of any Loan Party, or (xi) any Environmental Liabilities and
Costs incurred in connection with any Environmental Lien. Without limitation of
the foregoing or any other provision of any Loan Document: (A) the Borrower
agrees to pay all stamp, document, transfer, recording or filing taxes or fees
and similar impositions now or hereafter determined by the Lender to be payable
in connection with this Agreement or any other Loan Document, and the Borrower
agrees to save the Lender harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any
omission to pay or delay in paying any such taxes, fees or impositions, and (B)
if the Borrower fails to perform any covenant or agreement contained herein or
in any other Loan Document, the Lender may itself perform or cause performance
of such covenant or agreement, and the expenses of the Lender incurred in
connection therewith shall be reimbursed on demand by the Borrower.
SECTION 9.05. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Lender may, and is hereby authorized
to, at any time and from time to time, without notice to any Loan Party (any
such notice being expressly waived by the Loan Party) and to the fullest extent
permitted by law, set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Lender to or for the credit or the account of any Loan
46
Party against any and all obligations of the Borrower now or hereafter existing
under any Loan Document, irrespective of whether or not the Lender shall have
made any demand hereunder or thereunder and although such obligations may be
contingent or unmatured. The Lender agrees to notify the Borrower promptly after
any such set-off and application made by the Lender provided that the failure to
give such notice shall not affect the validity of such set-off and application.
SECTION 9.06. Severability. Any provision of this Agreement, or of any
other Loan Document to which any Loan Party is a party, which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 9.07. Assignments and Participations.
(a) This Agreement and the Note shall be binding upon and inure to
the benefit of the Loan Parties and the Lender and their respective successors
and assigns, except that the Loan Parties may not assign or transfer any of
their rights hereunder, or under the Note, without the prior written consent of
the Lender. Except as provided in this Section 9.07, this Agreement shall not
inure to the benefit of any party other than the Loan Party and the Lender.
(b) (i) The Borrower shall maintain, or cause to be maintained, a
register (the "Register") on which it enters the name of the Lender as the
registered owner of each Loan held by the Lender. A Registered Loan (and the
Registered Note, if any, evidencing the same) may be assigned or sold in whole
or in part only by registration of such assignment or sale on the Register (and
each Registered Note shall expressly so provide). Any assignment or sale of all
or part of such Registered Loan (and the Registered Note, if any, evidencing the
same) may be effected only by registration of such assignment or sale on the
Register, together with the surrender of the Registered Note, if any, evidencing
the same duly endorsed by (or accompanied by a written instrument of assignment
or sale duly executed by) the holder of such Registered Note, whereupon, at the
request of the designated assignee(s) or transferee(s), one or more new
Registered Notes in the same aggregate principal amount shall be issued to the
designated assignee(s) or transferee(s). Prior to the registration of assignment
or sale of any Registered Loan (and the Registered Note, if any evidencing the
same), the Borrower shall treat the Person in whose name such Loan (and the
Registered Note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(ii) In the event that the Lender sells participations in any
Registered Loan, the Lender shall, as the Borrower's agent, maintain a register
on which it enters the name of all participants in such Registered Loan (the
"Participant Register"). A Registered Loan (and the Registered Note, if any,
evidencing the same) may be participated in whole or in part only by
registration of such participation on the Participant Register (and each
Registered Note shall expressly so provide). Any participation of such
Registered Loan (and the Registered Note, if any, evidencing the same) may be
effected only by the registration of such participation on the Participant
Register.
47
(iii) Any foreign Person who purchases or is assigned or
participates in any portion of any Loan shall provide the Borrower (in the case
of a purchase or assignment) or the Lender (in the case of a participation) with
a completed Internal Revenue Service Form W-8 (Certificate of Foreign Status) or
a substantially similar form for such purchaser, participant or any other
affiliate who is a holder of beneficial interests in any Loan.
(c) The Lender may at any time sell, assign or participate all or any
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of the Loan made by it, or the Note held by it)
without the consent of the Loan Parties. The Loan Parties shall execute and
deliver such Notes and any amendment or other modification or restatement of
this Agreement or any Loan Document as may be requested by the Lender to reflect
any such sale or assignment.
SECTION 9.08. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
SECTION 9.09. GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 9.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ IN THE COUNTY OF
NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. EACH LOAN PARTY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH LOAN PARTY AT ITS ADDRESS FOR
NOTICES AS SET FORTH IN SECTION 9.01, SUCH SERVICE TO BECOME EFFECTIVE TEN (10)
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH LOAN PARTY IN ANY OTHER
JURISDICTION. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY
48
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT EACH LOAN PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN PARTY HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 9.11. WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY AND THE LENDER
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, THE NOTE OR OTHER LOAN
DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR
OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN PARTY CERTIFIES
THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF
ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS.
EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE LENDER ENTERING INTO THIS AGREEMENT.
SECTION 9.12. Consent by the Lender. Except as otherwise expressly set
forth herein to the contrary, if the consent, approval, satisfaction,
determination, judgment, acceptance or similar action (an "Action") of the
Lender shall be permitted or required pursuant to any provision hereof or any
provision of any other agreement to which each Loan Party is a party and to
which the Lender has succeeded thereto, such Action shall be required to be in
writing and may be withheld or denied by the Lender with or without any reason,
and without being subject to question or challenge on the grounds that such
Action was not taken in good faith.
SECTION 9.13. No Party Deemed Drafter. The Loan Parties and the Lender
agree that no party hereto shall be deemed to be the drafter of this Agreement.
SECTION 9.14. Reinstatement; Certain Payments. If claim is ever made upon
the Lender for repayment or recovery of any amount or amounts received by the
Lender in payment or on account of any of the Obligations, the Lender shall give
prompt notice of such claim to the Borrower, and if the Lender repays all or
part of such amount by reason of (i) any judgment, decree or order of any court
or administrative body having jurisdiction over the Lender or any of its
property, or (ii) any good faith settlement or compromise of any such claim
effected by the Lender with any such claimant, then and in such event the
Borrower agrees that (A) any such judgment, decree, order, settlement or
compromise shall be binding upon it
49
notwithstanding the cancellation of the Note or other instrument evidencing the
Obligations or the other Loan Documents or the termination of this Agreement or
the other Loan Documents, and (B) it shall be and remain liable to the Lender
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by the Lender.
SECTION 9.15. Indemnification. In addition to all of the other
Obligations of the Loan Parties under this Agreement each Loan Party agrees to
defend, protect, indemnify and hold harmless the Lender and all of the
respective officers, directors, employees, attorneys, consultants and agents
of the Lender (collectively called the "Indemnitees") from and against any and
all losses, damages, liabilities, obligations, penalties, fees, reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees, costs
and expenses) incurred by such Indemnitees, whether prior to or from and after
the Closing Date, whether direct, indirect or consequential, as a result of or
arising from or relating to or in connection with any of the following: (i) the
negotiation, preparation, execution or performance or enforcement of this
Agreement, any other Loan Document or of any other document executed in
connection with the transactions contemplated by this Agreement, (ii) the
Lender's furnishing of funds to such Loan Party for the account of such Loan
Party under this Agreement, (iii) any matter relating to the financing
transactions contemplated by this Agreement or by any document executed in
connection with the transactions contemplated by this Agreement, or (iv) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto (collectively, the "Indemnified
Matters"); provided, however, that the Loan Parties shall not have any
obligation to any Indemnitee under this Section 9.15 for any Indemnified Matter
caused by the gross negligence or willful misconduct of such Indemnitee, as
determined by a final judgment of a court of competent jurisdiction or by
settlement agreement among the Lender and the other parties in question. Such
indemnification for all of the foregoing losses, damages, fees, costs and
expenses of the Indemnitees are chargeable against the Loan Account. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section 9.15 may be unenforceable because it is violative of any law or
public policy, the Loan Parties shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. This
Indemnity shall survive the repayment of the Obligations and the discharge of
the Liens granted under the Loan Documents.
SECTION 9.16. Records. The unpaid principal of and interest on the Note,
the interest rate or rates applicable to such unpaid principal and interest, the
duration of such applicability, and the accrued and unpaid Servicing Fee shall
at all times be ascertained from the records of the Lender, which shall be
conclusive and binding absent manifest error.
SECTION 9.17. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Loan Parties and the Lender and when the
conditions precedent set forth in Section 4.01 hereof have been satisfied or
waived by the Lender, and thereafter shall be binding upon and inure to the
benefit of the Loan Parties and the Lender, and their respective successors and
assigns, except that the Loan Parties shall not have the right to assign their
rights hereunder or any interest herein without the prior written consent of the
Lender, and the assignment by the Lender shall be governed by Section 9.07
hereof.
50
SECTION 9.18. Preemptive Rights. As long as any Obligations remain
outstanding, if any Loan Party intends to obtain any financing other than any
traditional LIBOR- or prime rate-based financing provided by an institutional
lender, the Borrower shall provide the Lender with written notice of the
intention to obtain such financing. The Lender shall have the right to negotiate
with such Loan Party or Parties to provide such financing (provided that the
Lender must give the Borrower written notice of its intent to exercise its right
to negotiate within five (5) days of its receipt of the notice referred to in
the immediately preceding sentence). The Loan Parties agree to negotiate with
the Lender in good faith, and shall not negotiate with any other entity with
respect to such financing for fifteen (15) days following the Borrower's receipt
of notice from the Lender of its intent to exercise its right to negotiate. If
the Lender and such Loan Party or Parties do not enter into a written
commitment to provide such financing within such fifteen day period, the such
Loan Party or Parties may negotiate and enter into such financing with any other
entity.
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
--------
By: /S/
------------------------------
Title: President
--------------------
GUARANTORS:
----------
CLASSIC CONFECTIONERY, L.L.C.
By: /S/
-----------------------------
Title: President
--------------------
RESTAURANIC, INC.
By: /S/
-----------------------------
Title: President
--------------------
GREAT AMERICAN ICE CREAM
COMPANY, LLC
By: /S/
-----------------------------
Title: President
--------------------
▇▇▇▇▇'▇ KOSHER FOOD, L.L.C.
By: /S/
-----------------------------
Title: President
--------------------
LENDER:
▇▇▇▇▇▇▇▇▇ LLC
By: /S/
-----------------------------
Title:
--------------------
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
---------
DIVERSIFIED FOOD GROUP, L.L.C.
By:
------------------------------
Title:
---------------------
GUARANTORS:
----------
CLASSIC CONFECTIONERY, L.L.C.
By:
------------------------------
Title:
---------------------
RESTAURANIC, INC.
By:
------------------------------
Title:
---------------------
GREAT AMERICAN ICE CREAM
COMPANY, LLC
By:
------------------------------
Title:
---------------------
▇▇▇▇▇'▇ KOSHER FOOD, L.L.C.
By:
------------------------------
Title:
---------------------
LENDER:
------
▇▇▇▇▇▇▇▇▇ LLC
By: ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Title:
---------------------
52
