CREDIT AGREEMENT between SWISHER INTERNATIONAL, INC. and WACHOVIA BANK, NATIONAL ASSOCIATION $5,000,000 Revolving Line of Credit November 14, 2005

Exhibit 10.1
 
between
XXXXXXX INTERNATIONAL, INC.
and
WACHOVIA BANK, NATIONAL ASSOCIATION
$5,000,000 Revolving Line of Credit
November 14, 2005
 

 

 

INDEX
         
Item   Tab
    1  
Exhibits to Credit Agreement
     2  
Schedules to Credit Agreement
     3  
Revolving Note
     4  
Subsidiary Guaranty
     5  
Security Agreement
     6  
A. UCC-1 Financing Statements
        
B. USPTO Security Interest Filings
        
Funds Flow Memo
     7  
Closing Certificate
     8  
Secretary’s Certificate of Xxxxxxx International, Inc.
     9  
Secretary’s Certificate of Xxxxxxx Hygiene Franchise Corp.
     10  
Secretary’s Certificate of SHFC Buffalo, LLC
     11  
Secretary’s Certificate of SHFC Minneapolis, LLC
     12  
Secretary’s Certificate of SHFC Oklahoma, LLC
     13  
Secretary’s Certificate of SHFC Operations, LLC
     14  
Secretary’s Certificate of Xxxxxxx Pest Control Corp.
     15  
Secretary’s Certificate of Xxxxxxx Maids, Inc.
     16  
Good Standing Certificates
     17  
Opinion of Counsel to Xxxxxxx International, Inc.
     18  
Bank of America Payoff Letter
     19  
A. UCC Termination Statements
        

 

 

 
between
XXXXXXX INTERNATIONAL, INC.
and
WACHOVIA BANK, NATIONAL ASSOCIATION
$5,000,000 Revolving Line of Credit
November 14, 2005
 

 

 

TABLE OF CONTENTS
         
    Page
ARTICLE I
        
 
        
DEFINITIONS
        
 
        
1.1 Defined Terms
     1  
1.2 Accounting Terms
     12  
1.3 Singular/Plural
     12  
1.4 Other Terms
     12  
 
        
ARTICLE II
        
 
        
AMOUNTS AND TERMS OF THE LOANS
        
 
        
2.1 Commitments
     12  
2.2 Note
     12  
2.3 Principal Payments; Maturity of Loans
     13  
2.4 Interest
     13  
2.5 Fees
     15  
2.6 Termination or Reduction of Commitments
     15  
2.7 General Provisions as to Payments
     15  
2.8 Disbursement of Loan Proceeds
     15  
2.9 Use of Proceeds
     15  
2.10 Taxes
     15  
2.11 Illegality
     16  
 
        
ARTICLE III
        
 
        
CLOSING; CONDITIONS OF CLOSING AND BORROWING
        
 
        
3.1 Conditions of Initial Loans and Advances
     16  
3.2 Conditions to all Loans
     19  
3.3 Waiver of Conditions Precedent
     19  
 
        
ARTICLE IV
        
 
        
REPRESENTATIONS AND WARRANTIES
        
 
        
4.1 Corporate Organization and Power
     19  
4.2 Corporate Authority: No Conflict With Other Instruments or Law
     20  
4.3 Due Execution and Delivery
     20  
4.4 Enforceability
     20  
4.5 Governmental Approval
     20  
4.6 Margin Stock
     20  
4.7 Investment Company
     20  

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    Page
4.8 Taxes
     21  
4.9 Litigation
     21  
4.10 Financial Statements; Solvency
     21  
4.11 No Material Adverse Change
     21  
4.12 Compliance with Laws
     22  
4.13 Environmental Compliance
    22  
4.14 Ownership of Properties
     23  
4.15 Intellectual Property
     23  
4.16 Insurance
     23  
4.17 ERISA
     24  
4.18 Full Disclosure
     24  
4.19 No Default
     24  
4.20 Subsidiaries
     24  
4.21 First Priority Liens
     24  
4.22 Labor Relations
     24  
4.23 OFAC; Anti-Terrorism Laws
     25  
 
        
ARTICLE V
        
 
        
AFFIRMATIVE COVENANTS
        
 
        
5.1 Financial and Business Information
     25  
5.2 Notice of Certain Events
     26  
5.3 Existence; Franchises; Maintenance of Properties
     27  
5.4 Compliance with Law
     28  
5.5 Payment of Obligations
     28  
5.6 Maintenance of Books and Records; Inspection
     28  
5.7 Maintenance of Insurance
     28  
5.8 Compliance with ERISA
     28  
5.9 Name Change
     29  
5.10 Creation of Subsidiaries
     29  
5.11 OFAC, PATRIOT Act Compliance
     30  
5.12 Banking Relationship
     30  
5.13 Further Assurances
     30  
 
        
ARTICLE VI
        
 
        
FINANCIAL COVENANTS
        
 
        
6.1 Fixed Charge Coverage Ratio
     30  
6.2 Minimum Tangible Net Worth
     30  
6.3 Funded Debt to EBITDA Ratio
     30  
 
        
ARTICLE VII
        
 
        
NEGATIVE COVENANTS
        
 
        
7.1 Mergers; Consolidations
     31  

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    Page
7.2 Indebtedness
     31  
7.3 Liens and Encumbrances
     31  
7.4 Disposition of Assets
     32  
7.5 Restricted Investments
     33  
7.6 Restricted Payments
     34  
7.7 Transactions With Related Persons
     34  
7.8 Sale-Leaseback Transactions
     34  
7.9 Certain Amendments
     35  
7.10 Limitation on Certain Restrictions
     35  
7.11 No Other Negative Pledges
     35  
7.12 Subsidiaries or Partnerships
     35  
7.13 Lines of Business
     36  
7.14 Fiscal Year
     36  
7.15 Accounting Changes
     36  
 
        
ARTICLE VIII
        
 
        
EVENTS OF DEFAULT; REMEDIES
        
 
        
8.1 Events of Default
     36  
8.2 Remedies
     38  
 
        
ARTICLE IX
        
 
        
MISCELLANEOUS
        
 
        
9.1 Costs, Expenses and Taxes
     39  
9.2 Indemnification
     39  
9.3 Arbitration; Preservation and Limitation of Remedies
     40  
9.4 Waiver of Automatic or Supplemental Stay
     41  
9.5 Notices
     42  
9.6 Continuing Obligations
     42  
9.7 Controlling Law
     42  
9.8 Successors and Assigns
     42  
9.9 Assignment and Sale
     43  
9.10 Entire Agreement
     43  
9.11 Amendment
     43  
9.12 Severability
     43  
9.13 Confidentiality
     43  
9.14 Counterparts
     44  
9.15 Captions
     44  
 
        
Exhibit A   Form of Revolving Note
        
Exhibit B   Form of Guaranty
        
Exhibit C   Form of Compliance Certificate
        
Exhibit D   Form of Notice of Borrowing
        

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Schedule 4.10(b) Solvency
        
Schedule 4.10(c) Note Receivables
        
Schedule 4.13 Environmental Compliance
        
Schedule 4.14 Realty; Registry
        
Schedule 4.15 Intellectual Property
        
Schedule 4.16 Insurance
        
Schedule 4.20 Subsidiaries
        
Schedule 7.3(viii) Liens for Terminating Indebtedness
        
Schedule 7.7 Affiliate Transactions
        

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     THIS CREDIT AGREEMENT, dated as of November 14, 2005, is made and entered into by and between XXXXXXX INTERNATIONAL, INC., a Nevada corporation, (the “Borrower”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the “Bank”).
BACKGROUND STATEMENT
     A. The Borrower has requested that the Bank extend a $5,000,000 revolving line of credit to the Borrower, to be advanced by the Bank pursuant to the terms and conditions hereof.
     B. The Bank is willing to extend the revolving line of credit described above upon the terms and subject to the conditions set forth in this Credit Agreement.
AGREEMENT
     NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Bank to make the loans described herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
     1.1 Defined Terms. In addition to the words and terms defined elsewhere in this Agreement, the following terms when used herein shall have the following respective meanings:
     “AAA” shall mean the American Arbitration Association.
     “Adjusted LIBOR Rate” shall mean, for any day, a rate equal to the sum of (i) the LIBOR Market Index Rate for such day, and (ii) the Applicable Margin in effect at such time with respect to such Loan.
     “Affiliate” shall mean, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, ten percent (10%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.
     “Affiliate Note Receivables” shall mean those accounts receivable payable to the Borrower or a Subsidiary pursuant to notes or other debt instruments evidencing debt owed by an employee, officer, director or Affiliate of the Borrower or a Subsidiary other than Former Franchisee Receivables.

 

 

     “Agreement” or “this Agreement” or “Credit Agreement” shall mean this Credit Agreement and all schedules and exhibits hereto, together with any amendments, modifications, replacements and supplements hereto, any substitutes herefor, and any replacements, renewals or extensions hereof, in whole or in part, and shall refer to this Agreement as the same may be in effect at the time such reference becomes operative.
     “Applicable Margin” shall have the meaning set forth in Section 2.4(b).
     “Arbitration Rules” shall mean the Commercial Financial Disputes Arbitration Rules of the AAA.
     “Bank” shall mean Wachovia Bank, National Association, a national banking association and its successors and assigns.
     “Bankruptcy Code” shall mean Title 11 of the United States Code, as amended, and any successor statute or statutes having substantially the same function.
     “Borrower” shall mean Xxxxxxx International, Inc., a Nevada corporation, and all of its permitted successors and assigns.
     “Borrowing” means any borrowing hereunder consisting of Revolving Loans made to the Borrower pursuant to Article II.
     “Business Day” shall mean any day of the year on which banks are open for business in Charlotte, North Carolina and, in respect of any determination relevant to the determination or payment of interest determined based on LIBOR, any such day that is also a day on which dealings in Dollar deposits are carried out in the London interbank market.
     “Capitalized Lease” shall mean any lease or similar arrangement which is of a nature that payment obligations of the lessee or obligor thereunder at the time are or should be capitalized and shown as liabilities (other than current liabilities) upon a balance sheet of such lessee or obligor prepared in accordance with GAAP.
     “Capitalized Lease Obligations” shall mean, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder that would, in accordance with GAAP, appear on a balance sheet of such lessee with respect to such Capital Lease.
     “Capital Expenditures” shall mean, during any period, the sum of all amounts paid during such period that would, in accordance with GAAP, be included on the consolidated statement of cash flows of the Borrower and its Subsidiaries as an acquisition of fixed assets or improvements, replacements, substitutions or additions thereto.
     “Capital Stock” shall mean (i) with respect to any Person that is a corporation, any and all shares, interests or equivalents in capital stock (whether voting or nonvoting, and whether common or preferred) of such corporation, and (ii) with respect to any Person that is not a corporation, any and all partnership, membership, limited liability company or other equity interests of such Person; and in each case, any and all warrants, rights or options to purchase any of the foregoing.

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     “Cash Equivalents” shall mean (i) securities issued or unconditionally guaranteed or insured by the United States of America or any agency or instrumentality thereof, backed by the full faith and credit of the United States of America and maturing within one year from the date of acquisition, (ii) commercial paper issued by any Person organized under the laws of the United States of America, maturing within 180 days from the date of acquisition and, at the time of acquisition, having a rating of at least A-1 or the equivalent thereof by Standard & Poor’s Ratings Services or at least P-1 or the equivalent thereof by Xxxxx’x Investors Service, Inc., (iii) time deposits and certificates of deposit maturing within 180 days from the date of issuance and issued by a bank or trust company organized under the laws of the United States of America or any state thereof (y) that has combined capital and surplus of at least $500,000,000 or (z) that has (or is a subsidiary of a bank holding company that has) a long-term unsecured debt rating of at least A or the equivalent thereof by Standard & Poor’s Ratings Services or at least A2 or the equivalent thereof by Xxxxx’x Investors Service, Inc., (iv) repurchase obligations with a term not exceeding thirty (30) days with respect to underlying securities of the types described in clause (i) above entered into with any bank or trust company meeting the qualifications specified in clause (iii) above, and (v) money market funds at least ninety-five percent (95%) of the assets of which are continuously invested in securities of the foregoing types.
     “Casualty Event” shall mean, with respect to any Collateral of the Borrower or any of its Subsidiaries, any loss of, damage to, or Condemnation or other taking of, such property for which the Borrower or such Subsidiary receives insurance proceeds, proceeds of a Condemnation award or other compensation.
     “Change of Law” shall mean the adoption of any applicable law, rule or regulation, or any change therein or any existing or future law, rule or regulation, or any change in the interpretation or administration thereof, by any Governmental Authority, or compliance by the Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Governmental Authority.
     “Closing Date” shall mean the date upon which the initial extensions of credit are made pursuant to this Agreement, which shall be the date upon which each of the conditions set forth in Sections 3.1 and 3.2 shall have been satisfied or waived in accordance with the terms of this Agreement.
     “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor federal tax code. Any reference to any provision of the Code shall also include the income tax regulations promulgated thereunder, whether final, temporary or proposed.
     “Compliance Certificate” shall mean a fully completed and duly executed certificate in the form of Exhibit C, together with a Covenant Compliance Worksheet.
     “Condemnation” shall mean any taking of title, of use, or of any other property interest under the exercise of the power of eminent domain, whether temporarily or permanently, by any governmental authority or by any Person acting under governmental authority.

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     “Consolidated EBITDA” shall mean, for any Person for any period, the aggregate of (i) Consolidated Net Income of such Person for such period plus (ii) the sum of depreciation, amortization of intangible assets, interest expense, and income tax expense for such period.
     “Consolidated Fixed Charges” shall mean, for any Person for any period of four consecutive Fiscal Quarters, the aggregate (without duplication) of (i) Consolidated Interest Expense during such period, (ii) the aggregate (without duplication) of all scheduled payments of principal on Funded Debt required to have been made by such Person and its Subsidiaries during such period (whether or not such payments are actually made), (iii) aggregate expense for federal state, local and other income taxes for such period, and (iv) all payments required to be made by the Borrower pursuant to leases of real and personal property during such period (whether or not such payments are actually made).
     “Consolidated Interest Expense” shall mean, for any Person for any period, the aggregate (without duplication) of (i) total interest expense of such Person and its Subsidiaries for such period in respect of Funded Debt of such Person and its Subsidiaries (including all such interest expense accrued or capitalized during such period, whether or not actually paid during such period), and (ii) all net amounts payable under or in respect of Hedge Agreements, to the extent paid or accrued by such Person and its Subsidiaries during such period.
     “Consolidated Net Income” shall mean, for any Person for any period, the net income (or loss) of such Person and its Subsidiaries, as determined on consolidated basis in accordance with GAAP, but excluding extraordinary gains and losses and any other non-operating gains and losses.
     “Consolidated Tangible Net Worth” shall mean, as of any date of determination, the (i) total assets of the Borrower and its Subsidiaries as of such date, other than assets which would be treated as intangible assets for balance sheet presentation purposes under GAAP (including without limitation intellectual property and goodwill) and Affiliate Note Receivables, minus (ii) total liabilities of the Borrower and its Subsidiaries as of such date, in each case as determined on a consolidated basis in accordance with GAAP.
     “Controlled Group” shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code.
     “Costs” shall have the meaning set forth in Section 9.2.
     “Covenant Compliance Worksheet” shall mean a fully completed worksheet in the form of Attachment A to Exhibit C.
     “Credit Documents” shall mean and collectively refer to this Agreement, the Note, the Security Documents and any and all other agreements, instruments and documents, including, without limitation, notes, guaranties, mortgages, deeds to secure debt, deeds of trust, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, trust account agreements and all other written matters whether heretofore, now or hereafter executed by or on behalf of the Borrower or delivered to the Bank with respect to this Agreement or with respect to the transactions contemplated by this Agreement, and in each case,

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together with any amendments, modifications and supplements thereto, any replacements, renewals, extensions and restatements thereof, and any substitutes therefor, in whole or in part.
     “Default” shall mean any event which with the giving of notice, lapse of time, or both, would become an Event of Default.
     “Default Rate” shall mean an interest rate equal to the Adjusted LIBOR Rate plus two percent (2.0%) per annum.
     “Disputes” shall have the meaning set forth in Section 9.3(a).
     “Dollar” or “$” shall mean dollars in lawful currency of the United States of America.
     “Environmental Law” shall mean any federal, state or local law, statute, ordinance, rule, regulation, permit, license, approval, interpretation, order, guidance or other legal requirement (including without limitation any subsequent enactment, amendment or modification) relating to the protection of human health or the environment, including, but not limited to, any requirement pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of materials that are or may constitute a threat to human health or the environment.
     “Environmental Liability” shall mean any liability, whether accrued, contingent or otherwise, arising from or in any way associated with any Environmental Law.
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations from time to time promulgated thereunder.
     “ERISA Affiliate” shall mean any Person (including any trade or business, whether or not incorporated) that would be deemed to be under “common control” with, or a member of the same Controlled Group as, the Borrower or any of its Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o) of the Internal Revenue Code or Section 4001 of ERISA.
     “ERISA Event” shall mean any of the following with respect to a Plan or Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan or a Multiemployer Plan, (ii) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan that results in liability under Section 4201 or 4204 of ERISA, or the receipt by the Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA, (iii) the distribution by the Borrower or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a notice of intent to terminate any Plan or the taking of any action to terminate any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from any Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of any Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the imposition upon the Borrower or any ERISA Affiliate of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent

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under Section 4007 of ERISA, or the imposition or threatened imposition of any Lien upon any assets of the Borrower or any ERISA Affiliate as a result of any alleged failure to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii) the engaging in or otherwise becoming liable for a nonexempt Prohibited Transaction by the Borrower or any ERISA Affiliate, (viii) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Internal Revenue Code by any fiduciary of any Plan for which the Borrower or any of its ERISA Affiliates may be directly or indirectly liable or (ix) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if the Borrower or an ERISA Affiliate fails to timely provide security to such Plan in accordance with the provisions of such sections.
     “Event of Default” shall have the meaning specified in Article VIII hereof.
     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.
     “Fiscal Quarter” or “FQ” shall mean a fiscal quarter of the Borrower and its Subsidiaries.
     “Fiscal Year” or “FY” shall mean a fiscal year of the Borrower and its Subsidiaries.
     “Fixed Charge Coverage Ratio” shall mean, as of the last day of any period of four consecutive Fiscal Quarters, the ratio of: (i)(A) Consolidated EBITDA of the Borrower for such period minus (B) all dividends and distributions paid in cash by the Borrower to its shareholders during such period plus (C) all payments required to be made by the Borrower pursuant to leases of real and personal property during such period (whether or not such payments are actually made), to (ii) Consolidated Fixed Charges for such period.
     “Former Franchisee Receivable” shall mean a receivable payable to the Borrower or a Subsidiary pursuant to notes or other debt instruments evidencing debt owed by an Affiliate of the Borrower or a Subsidiary, which debt was incurred by a unaffiliated Franchisee prior to its acquisition by such Affiliate
     “Franchisee” shall mean any Person with whom the Borrower or any of its Affiliates has entered a franchise agreement.
     “Funded Debt” shall mean all Indebtedness of the Borrower and its Subsidiaries (other than Indebtedness of the types referred to in clause (xi) of the definition of “Indebtedness”).
     “Funded Debt to EBITDA Ratio” shall mean, as of the last day of any Fiscal Quarter, the ratio of Funded Debt as of such day to Consolidated EBITDA for the period of the four consecutive Fiscal Quarters ending on such day.
     “GAAP” shall mean generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries on a consolidated basis throughout the

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period indicated and consistent with the financial practice of the Borrower and its Subsidiaries after the date hereof.
     “Governmental Authority” shall mean any nation or government, any state, department, agency or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government, and any corporation or other entity owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing.
     “Guaranty” shall mean a guaranty agreement, dated as of the date hereof, made by the Subsidiary Guarantors in favor of the Bank in the form of Exhibit D attached hereto, as amended, modified, restated or supplemented from time to time.
     “Hazardous Material” shall mean any substance or material meeting any one or more of the following criteria: (i) it is or contains a substance designated as a hazardous waste, hazardous substance, pollutant, contaminant or toxic substance under any Environmental Law; (ii) it is toxic, explosive, corrosive, ignitable, infectious, radioactive, mutagenic or otherwise hazardous, (iii) its presence requires investigation or remediation under an Environmental Law or common law; (iv) it constitutes a danger, nuisance, trespass or health or safety hazard to persons or property; and/or (v) it is or contains, without limiting the foregoing, petroleum hydrocarbons.
     “Hedge Agreement” shall mean any interest or foreign currency rate swap, cap, collar, option, hedge, forward rate or other similar agreement or arrangement designed to protect against fluctuations in interest rates or currency exchange rates.
     “Indebtedness” shall mean, for any Person, without duplication (i) obligations of such Person for borrowed money; (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business on terms customary in the trade); (iv) obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person; (v) Capitalized Lease Obligations of such Person; (vi) obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit (whether or not drawn upon and in the stated amount thereof); (vii) guaranties by such Person of the type of indebtedness described in clauses (i) through (vi) above; (viii) all indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such indebtedness has been assumed by such Person; (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person; (x) off-balance sheet liability retained in connection with asset securitization programs, synthetic leases, sale and leaseback transactions or other similar obligations arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries; and (xi) obligations under any Hedge Agreement.
     “Intellectual Property” shall mean (i) all inventions (whether or not patentable and whether or not reduced to practice), all improvements thereto, and all patents, patent

7

 

applications, and patent disclosures, together with all reissues, continuations, continuations-in-part, divisions, revisions, extensions, and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (iii) all copyrightable works and all copyrights (registered and unregistered), (iv) all trade secrets and confidential information (including, without limitation, financial, business and marketing plans and customer and supplier lists and related information), (v) all computer software and software systems (including, without limitation, data, databases and related documentation), (vi) all Internet web sites and domain names, (vii) all technology, know-how, processes and other proprietary rights, and (viii) all licenses or other agreements to or from third parties regarding any of the foregoing.
     “Investments” shall have the meaning set forth in Section 7.5.
     “Lending Office” shall mean, as to the Bank, any of its offices located in Charlotte, North Carolina, or such other office as the Bank may hereafter designate as its Lending Office by notice to the Borrower.
     “LIBOR Market Index Rate” shall mean, for any day, the rate for one month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m. London time, on such day, or if such day is not a London business day, then the immediately preceding London business day (or if not so reported, then as determined by the Bank from another recognized source or interbank quotation).
     “Lien” shall mean any interest in property securing an obligation owed to, or claim by, a Person other than the owner of such property, whether such interest arises by virtue of contract, statute or common law, including but not limited to the lien or security interest arising from a mortgage, security agreement, pledge, lease, conditional sale, consignment or bailment for security purposes or from attachment, judgment or execution. The term “Lien” shall include any easements, covenants, restrictions, conditions, encroachments, reservations, rights-of-way, leases and other title exceptions and encumbrances affecting real property. For the purpose of this Agreement, the Borrower shall be deemed to own, subject to a Lien, any proceeds of a sale with recourse of accounts receivable, any asset leased under any “sale and lease back” or similar arrangement and any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, financing lease or other title retention agreement relating to such asset.
     “Loans” shall mean the Revolving Loans.
     “Material Adverse Effect” or “Material Adverse Change” shall mean a material adverse effect upon, or a material adverse change in, any of (i) the financial condition, operations, business, properties or prospects of the Borrower and its Subsidiaries, taken as a whole; (ii) the ability of the Borrower or any Subsidiary to perform under this Agreement or any other Credit Document in any material respect or any other material contract in any material respect to which any one or more of them is a party; (iii) the legality, validity or enforceability of this Agreement or any other Credit Document; or (iv) the perfection or priority of the Liens of the Bank granted under this Agreement or any other Credit Document or the rights and remedies of the Bank under

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this Agreement or any other Credit Document (other than a change resulting from any act or omission by the Bank).
     “Multiemployer Plan” shall mean any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.
     “Net Tangible Assets” shall mean, as of any date of determination, (i) total assets of the Borrower and its Subsidiaries as of such date other than assets, which would be treated as intangible assets for balance sheet presentation purposes under GAAP (including, without limitation, intellectual property and goodwill), as determined on a consolidated basis in accordance with GAAP, minus (ii) Restricted Cash and Affiliate Note Receivables.
     “Note” shall mean the Revolving Note.
     “Notice of Borrowing” shall have the meaning set forth in Section 3.2(a).
     “Obligations” shall mean and include (i) the Loans and all other loans, advances, indebtedness, liabilities, obligations, covenants and duties owing, arising, due or payable from the Borrower to the Bank of any kind or nature, present or future, arising under this Agreement, the Note or the other Credit Documents or any Hedge Agreement, whether direct or indirect (including those acquired by assignment), absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising and however acquired; and (ii) all interest (including to the extent permitted by law, all post-petition interest), charges, expenses, fees, attorneys’ fees and any other sums payable by the Borrower to the Bank under this Agreement or any of the other Credit Documents.
     “OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto.
     “PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act of 2001), as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.
     “PBGC” shall mean the Pension Benefit Guaranty Corporation and any successor thereto.
     “Performance Pricing Determination Date” shall have the meaning set forth in Section 2.4(b).
     “Permitted Liens” shall have the meaning set forth in Section 7.3.
     “Person” shall mean an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
     “Plan” shall mean, at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member

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of the Controlled Group, or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.
     “Realty” shall mean the real property owned by the Borrower and set forth on Schedule 4.14.
     “Registry” shall mean the office of the Register of Deeds (or comparable Governmental Authority) for each of piece of Realty as set forth on Schedule 4.14.
     “Requirement of Law” shall mean, with respect to any Person, the charter, articles or certificate of organization or incorporation and bylaws or other organizational or governing documents of such Person, and any statute, law, treaty, rule, regulation, order, decree, writ, injunction or determination of any arbitrator or 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 or otherwise pertaining to any or all of the transactions contemplated by this Agreement and the other Credit Documents.
     “Responsible Officer” shall mean, with respect to the Borrower, the chairman of the board of directors, the president, the chief executive officer, the chief financial officer, any executive officer, controller or treasurer of the Borrower, and any other officer or similar official thereof responsible for the administration of the obligations of the Borrower in respect of this Agreement.
     “Restricted Cash” shall mean cash or Cash Equivalents held by the Borrower or its Subsidiaries that is subject to a Lien other than a Permitted Lien.
     “Revolving Credit Commitment” shall have the meaning set forth in Section 2.1(a).
     “Revolving Credit Termination Date” shall mean the date of the earliest to occur of the following: (i) November 14, 2008; (ii) the date on which the Bank makes demand for payment of the Revolving Loans; (iii) such date of termination as is mutually agreed upon by the Bank and the Borrower; and (iv) the date after all Obligations have been paid in full and the Bank is no longer obligated to make Revolving Loans hereunder.
     “Revolving Loans” shall have the meaning set forth in Section 2.1(a)
     “Revolving Note” shall mean the promissory note of the Borrower dated the date hereof in the form of Exhibit A attached hereto, executed and delivered to the Bank pursuant to Article II hereof, evidencing the obligation of the Borrower to repay the Revolving Loans, together with any amendments, modifications and supplements thereto, any replacements, restatements, renewals and extensions thereof, and any substitutes therefor, in whole or in part.
     “Sanctioned Country” shall mean a country subject to a sanctions program identified on the list maintained by OFAC and available at xxxx://xxx.xxxxx.xxx/xxxxxxx/xxxxxx/xxxx/xxxxxxxxx/xxxxx/xxxx, or as otherwise published from time to time.

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     “Sanctioned Person” shall mean (i) a Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at xxxx://xxx.xxxxx.xxx/xxxxxxx/xxxxxx/xxxx/xxx/xxxxx/xxxx, or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a Person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.
     “Security Agreement” shall mean the Security Agreement, dated as of the date hereof, between the Borrower, each of the Borrower’s Subsidiaries and the Bank, as the same may be amended, modified, supplemented or restated from time to time.
     “Security Documents” shall mean the Security Agreement, the Guaranty and all other pledge or security agreements, mortgages, deeds of trust, assignments or other similar agreements or instruments executed and delivered by the Borrower or any of its Subsidiaries pursuant to the terms of this Agreement or otherwise in connection with the transactions contemplated hereby, in each case as amended, modified or supplemented from time to time.
     “Solvent” shall mean as to any Person on any particular date, that such Person (i) does not have unreasonably small capital to carry on its business as now conducted and as presently proposed to be conducted, (ii) is able to pay its debts as they become due in the ordinary course of business, and (iii) has assets with a present fair saleable value greater than its total stated liabilities and identified contingent liabilities, including any amounts necessary to satisfy preferential rights of shareholders.
     “Subsidiary” shall mean any corporation, partnership, limited liability company, association or other business entity of which the Borrower owns, directly or indirectly, more than fifty percent (50%) of the voting securities thereof.
     “Subsidiary Guarantor” shall mean any Subsidiary of the Borrower that is a guarantor of the Obligations under the Guaranty (or under another guaranty agreement in form and substance satisfactory to the Bank) and has granted to the Bank a Lien upon and security interest in its personal property assets pursuant to the Security Agreement.
     “Terminating Indebtedness” shall have the meaning set forth in Section 3.1(j).
     “Threshold Amount” shall mean, as of any day, an amount equal to the Revolving Credit Commitment, provided that the conditions set forth below are satisfied as of the most recent Fiscal Quarter for which the Bank has received the financial statements required by Sections 5.1(a) or 5.1(b) (starting with the Fiscal Quarter ending December 31, 2005); otherwise the Threshold Amount shall be equal to $3,500,000:
     (i) the Funded Debt to EBITDA Ratio shall be no greater that 2.0 to 1.0;
     (ii) the Net Tangible Assets shall be greater than or equal to $7,500,000; and
     (iii) the Borrower’s Unrestricted Cash shall be greater than or equal to $500,000.

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     “Unrestricted Cash” shall mean cash or Cash Equivalents held by the Borrower or its Subsidiaries, free and clear of any Liens other than Permitted Liens.
     “Wholly Owned” shall mean, with respect to any Subsidiary of any Person, that 100% of the outstanding Capital Stock of such Subsidiary is owned, directly or indirectly, by such Person.
     1.2 Accounting Terms. Except as specifically provided otherwise in this Agreement, all accounting terms used herein that are not specifically defined shall have the meanings customarily given them in accordance with GAAP. Notwithstanding anything to the contrary in this Agreement, for purposes of calculation of the financial covenants set forth in Article VI, all accounting determinations and computations hereunder shall be made in accordance with GAAP as in effect as of the date of this Agreement applied on a basis consistent with the application used in preparing the most recent financial statements of the Borrower referred to in Section 4.10. In the event that any changes in GAAP after such date are required to be applied to the Borrower and would affect the computation of the financial covenants contained in Article VI, such changes shall be followed only from and after the date this Agreement shall have been amended to take into account any such changes.
     1.3 Singular/Plural. Unless the context otherwise requires, words in the singular include the plural and words in the plural include the singular.
     1.4 Other Terms. All other terms contained in this Agreement shall, when the context so indicates, have the meanings provided for by the Uniform Commercial Code of the State of North Carolina to the extent the same are used or defined therein.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
     2.1 Commitments.
     (a) The Bank agrees, on the terms and conditions set forth herein, to make loans (each, a “Revolving Loan,” and collectively, the “Revolving Loans”) to the Borrower, from time to time before the Revolving Credit Termination Date; provided that, immediately after each Revolving Loan is made, the aggregate outstanding principal amount of the Revolving Loans by the Bank shall not exceed the lesser of (x) $5,000,000 (as such figure may be reduced from time to time as provided in this Agreement, the “Revolving Credit Commitment”) and (y) the Threshold Amount. So long as no Default or Event of Default has occurred and is continuing, and subject to the limits set forth in this Section 2.1(a), the Borrower may borrow under this Section 2.1(a), repay or prepay Revolving Loans and reborrow under this Section 2.1(a) at any time before the Revolving Credit Termination Date.
     (b) Subject to the Bank’s right to cease making Revolving Loans upon the occurrence of a Default or an Event of Default, the Revolving Credit Commitment and the Bank’s obligation to make Revolving Loans thereunder shall continue until the Revolving Credit Termination Date.
     2.2 Note. The Revolving Loans made by the Bank shall be evidenced by a single Revolving Note payable to the order of the Bank for the account of its Lending Office in an

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amount equal to the original principal amount of the Revolving Credit Commitment. The Borrower and the Bank hereby agree that the terms of this Agreement shall be incorporated by reference into the Note as if set forth therein and, in the event of any conflict between the terms of this Agreement and the Note, the terms of this Agreement shall control.
     2.3 Principal Payments; Maturity of Loans.
     (a) The Borrower shall repay the Revolving Note:
     (i) In full, on the Revolving Credit Termination Date;
     (ii) In full, upon the occurrence of any Event of Default and acceleration of the Obligations by the Bank pursuant to Article VIII hereof; and
     (iii) In part, immediately in the event that the total principal amount outstanding at any time under the Revolving Note exceeds the lesser of (x) the Revolving Credit Commitment or (y) the Threshold Amount, in the amount of such excess.
     2.4 Interest.
     (a) Subject to the terms and conditions of this Agreement, each Loan shall bear, and the Borrower shall pay, interest from the Closing Date on the unpaid principal balance thereof at the Adjusted LIBOR Rate.
     (b) For purposes of calculating the Adjusted LIBOR Rate, “Applicable Margin” shall mean, in respect of each Loan, (i) for the period commencing on the Closing Date to and including the first Performance Pricing Determination Date, 1.75%, and (ii) from and after the first Performance Pricing Determination Date, the percentage determined on each Performance Pricing Determination Date by reference to the table set forth below as to the Funded Debt to EBITDA Ratio for the quarterly or annual period ending immediately prior to such Performance Pricing Determination Date.
         
Funded Debt to EBITDA Ratio   Applicable Margin
Greater than 2.25 to 1.0, but less than or equal to 3.0 to 1.0
     2.75 %
 
Greater than or equal to 1.75 to 1.0, but less than or equal to 2.25 to 1.0
     2.25 %
 
Less than 1.75 to 1.0
     1.75 %
In determining interest for purposes of this Section 2.4, the Borrower and the Bank shall refer to the Borrower’s most recent consolidated quarterly and annual (as the case may be) financial statements delivered pursuant to Section 5.1(a) or 5.1(b), as the case may be. If such financial statements require a change in interest pursuant to this Section 2.4, the Borrower shall deliver to

13

 

the Bank, along with such financial statements, a notice to that effect, which notice shall set forth in reasonable detail the calculations supporting the required change. The “Performance Pricing Determination Date” is each of the dates which is 45 days after the end of each of the first three Fiscal Quarters in any Fiscal Year and 120 days after the end of each Fiscal Year. Any such required change in interest and fees shall become effective on such Performance Pricing Determination Date, and shall be in effect until the next Performance Pricing Determination Date, provided that no interest shall be decreased pursuant to this Section 2.4 if a Default is in existence on the Performance Pricing Determination Date.
Notwithstanding the foregoing or anything else herein to the contrary, (i) if at any time the Borrowers shall have failed to deliver the financial statements as required by Section 5.1(a) or 5.1(b), as the case may be, and the certificate required by Section 5.1(c), or if at any time a Default or Event of Default shall have occurred and be continuing, then at the election of the Bank, at all times from and including the date on which such financial statements and certificate are required to have been delivered (or the date of occurrence of such Default or Event of Default, as the case may be) to the date on which the same shall have been delivered (or such Default or Event of Default cured or waived, as the case may be), the Applicable Margin shall be determined as if the Funded Debt to EBITDA Ratio for the Borrower was greater than 2.25 to 1.0, but less than or equal to 3.0 to 1.0 (notwithstanding the actual Funded Debt to EBITDA Ratio for the Borrower), and (ii) from the Closing Date until the Performance Pricing Determination Date for the Fiscal Quarter ending March 31, 2006, the Applicable Margin shall be determined as if the Funded Debt to EBITDA Ratio for the Borrower was less than 1.75 to 1.0 (notwithstanding the actual Funded Debt to EBITDA Ratio).
     (c) Accrued (and theretofore unpaid) interest on the outstanding principal balance of each Loan shall be due and payable (i) in arrears on the last Business Day of each calendar month, beginning with the first such day to occur after the Closing Date and (ii) on each date when all or any amount of the unpaid principal balance of each such Loan shall be due (whether at maturity, by acceleration or otherwise), but only to the extent accrued.
     (d) Interest on the Loans and fees shall be computed on the basis of a 360-day year and the actual number of days elapsed.
     (e) Nothing contained in this Agreement or the Note shall be deemed to establish or require the payment of interest to the Bank at a rate in excess of the maximum rate permitted by governing law. In the event that the rate of interest required to be paid under this Agreement or the Note exceeds the maximum rate permitted by governing law, the rate of interest required to be paid hereunder and under the Note shall be automatically reduced to the maximum rate permitted by governing law and any amounts collected in excess of the permissible amount shall be deemed a prepayment of principal on the Note.
     (f) Notwithstanding any other provision of this Agreement to the contrary, upon and during the continuance of any Event of Default under this Agreement, at the option of the Bank without any required notice to the Borrower, the outstanding principal amount of each of the Loans, and to the full extent permitted by law, all interest accrued on each of the Loans, shall bear interest at the Default Rate, and such default interest shall be payable on demand.

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     2.5 Fees.
     (a) The Borrower agrees to pay to the Bank a Revolving Credit Commitment fee, in an aggregate amount equal to $5,000.00, due and payable in full on the Closing Date.
     (b) The Borrower agrees to pay to the Bank an availability fee on the last Business Day of each calendar year and on the Revolving Credit Termination Date at a per annum rate of 0.125% of the excess of $3,500,000 over the average daily outstanding principal balance of Revolving Loans for such calendar year or portion thereof. Such facility fees shall accrue from and including the Closing Date to (but excluding) the Revolving Credit Termination Date.
     2.6 Termination or Reduction of Commitments. The Borrower may, upon at least three (3) Business Days’ written notice to the Bank, terminate at any time, or proportionately reduce the unused portion of the Revolving Credit Commitment from time to time by an aggregate amount of at least $500,000 or any larger integral multiple of $100,000. If the Revolving Credit Commitment is terminated in its entirety, all accrued fees (as provided under Section 2.5) shall be due and payable on the effective date of such termination.
     2.7 General Provisions as to Payments. All payments (including prepayments) by the Borrower on account of principal, interest and fees on the Loan shall be made in immediately available funds to the Bank at its offices at 000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx, prior to 2:00 p.m., Eastern Standard Time, on the date payment is due, or at such other place as is designated in writing by the Bank.
     2.8 Disbursement of Loan Proceeds. The Borrower hereby authorizes and directs the Bank to disburse, for and on behalf of the Borrower and for the Borrower’s account, the proceeds of the Loans made by the Bank pursuant to this Agreement (i) to such Person or Persons as the Borrower shall direct in a writing signed by two individuals named as authorized individuals by the Borrower and delivered to the Bank via facsimile; (ii) to pay the Bank any interest, fees, costs and expenses payable pursuant to Section 9.1 hereof, and (iii) to the Borrower’s depository accounts with the Bank in an amount equal to the sum necessary to cover checks or other items of payment drawn by the Borrower upon such accounts and presented for payment.
     2.9 Use of Proceeds. The proceeds of the Revolving Loans shall be used by the Borrower solely (i) to refinance the Terminating Indebtedness; (ii) to provide working capital for the Borrower; (iii) to finance future acquisitions; and (iv) to pay fees and expenses in connection with the transactions contemplated by this Agreement.
     2.10 Taxes. All payments of principal, interest and fees and all other amounts to be made by the Borrower pursuant to this Agreement with respect to the Loans or fees relating thereto shall be paid without deduction for, and free from, any tax, imposts, levies, duties, deductions, or withholdings of any nature now or at any time hereafter imposed on or measured by any governmental authority or by any taxing authority thereof, or therein, excluding (i) taxes imposed on or measured by the Bank’s net income, (ii) franchise taxes imposed on the Bank by the jurisdiction under the laws of which the Bank is organized or any political subdivision thereof, and (iii) taxes imposed on the Bank’s income, and franchise taxes imposed on it, by the jurisdiction of the Bank’s Lending Office or any political subdivision thereof. In the event that

15

 

the Borrower is required by applicable law to make any such withholding or deduction of taxes with respect to the Loans or fee or other amount, the Borrower shall pay such deduction or withholding to the applicable taxing authority, shall promptly furnish to the Bank all receipts and other additional amounts as may be necessary in order that the amount received by the Bank after the required withholding or other payment shall equal the amount the Bank would have received had no such withholding or other payment been made.
     2.11 Illegality. If, after the date hereof, any Change of Law, or any change in interpretation or administration thereof by any Governmental Authority, or compliance by the Bank (or its Lending Office) with any request or directive (whether or not having the force of law) by any Governmental Authority, shall make it unlawful or impossible for the Bank (or its Lending Office) to make, maintain or fund Loans, then the Bank shall so notify the Borrower, whereupon until the Bank notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of the Bank to fund Loans shall be suspended. Before giving any notice to the Borrower pursuant to this Section, the Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of the Bank, be otherwise disadvantageous to the Bank. If the Bank shall determine that it may not lawfully continue to maintain and fund Loans to maturity and shall so specify in such notice, the Borrower shall prepay in full the then outstanding principal amount of the Loans, together with accrued interest thereon, no later than thirty (30) days after the Bank shall have given such notice.
ARTICLE III
CLOSING; CONDITIONS OF CLOSING AND BORROWING
     3.1 Conditions of Initial Loans and Advances. The obligation of the Bank to make Loans in connection with the initial Borrowing hereunder is subject to the satisfaction of the following conditions precedent:
     (a) Credit Documents. The Bank shall have received the following, each dated as of the Closing Date (unless otherwise specified) and in such number of copies as the Bank shall have requested:
     (i) from each of the parties hereto, a duly executed counterpart of this Agreement signed by such party;
     (ii) a duly executed Revolving Note for the account of the Bank;
     (iii) the Guaranty, duly completed and executed by each Subsidiary of the Borrower (other than foreign Subsidiaries), in form and substance satisfactory to the Bank;
     (iv) the Security Agreement, duly completed and executed by the Borrower and each of its Subsidiaries (other than foreign Subsidiaries), in form and substance satisfactory to the Bank; and

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     (v) an opinion of counsel to the Borrower dated as of the Closing Date and addressed to the Bank, in form and substance satisfactory to the Bank.
     (b) Closing Certificate. The Bank shall have received a certificate, signed by the president, the chief executive officer or the chief financial officer of the Borrower, dated as of the Closing Date and in form and substance reasonably satisfactory to the Bank, certifying that (i) all representations and warranties of the Borrower and its Subsidiaries contained in this Agreement and the other Credit Documents are true, correct and complete as of the Closing Date, both immediately before and after giving effect to the making of the initial Loans and the application of the proceeds thereof (except to the extent any such representation or warranty is expressly stated to have been made as of a specific date, in which case such representation or warranty shall be true and correct as of such date), (ii) no Default or Event of Default has occurred and is continuing, both immediately before and after giving effect to the making of the initial Loans and the application of the proceeds thereof, (iii) both immediately before and after giving effect to the making of the initial Loans and the application of the proceeds thereof, no Material Adverse Effect has occurred since December 31, 2004, and there exists no event, condition or state of facts that could reasonably be expected to result in a Material Adverse Effect, and (iv) all conditions to the initial extensions of credit hereunder set forth in this Section 3.1 and in Section 3.2 have been satisfied or waived as required hereunder.
     (c) Secretary’s Certificate. The Bank shall have received a certificate of the secretary or an assistant secretary of the Borrower and each of its Subsidiaries as of the Closing Date, dated as of the Closing Date and in form and substance reasonably satisfactory to the Bank, certifying (i) that attached thereto is a true and complete copy of the articles or certificate of incorporation, certificate of formation or other organizational document and all amendments thereto of such party, certified as of a recent date by the Secretary of State (or comparable Governmental Authority) of its jurisdiction of organization, and that the same has not been amended since the date of such certification, (ii) that attached thereto is a true and complete copy of the bylaws, operating agreement or similar governing document of such party, as then in effect and as in effect at all times from the date on which the resolutions referred to in clause (iii) below were adopted to and including the date of such certificate, (iii) that attached thereto is a true and complete copy of resolutions adopted by the board of directors (or similar governing body) of such party, authorizing the execution, delivery and performance of this Agreement and the other Credit Documents to which it is a party, and (iv) as to the incumbency and genuineness of the signature of each officer of such party executing this Agreement or any of such other Credit Documents, and attaching all such copies of the documents described above.
     (d) Good Standings. The Bank shall have received a certificate as of a recent date of the good standing or existence of the Borrower and each of its Subsidiaries under the laws of its jurisdiction of organization, from the Secretary of State (or comparable Governmental Authority) of such jurisdiction.
     (e) Consents; Approvals. All approvals, permits and consents of any Governmental Authorities or other Persons required in connection with the execution and delivery of this Agreement or the other Credit Documents shall have been obtained, without the imposition of conditions that are not acceptable to the Bank, and all related filings, if any, shall have been

17

 

made, and all such approvals, permits, consents and filings shall be in full force and effect and the Bank shall have received such copies thereof as it shall have reasonably requested.
     (f) Lien Searches. The Bank shall have received certified reports from an independent search service satisfactory to it listing any judgment or tax lien filing or Uniform Commercial Code financing statement that names the Borrower, or any of the Borrower’s Subsidiaries as debtor, and the results thereof shall be reasonably satisfactory to the Bank.
     (g) Recording and Filing. The Bank shall have received evidence that UCC-1 Financing Statements naming the Borrower as debtor and the Bank as secured party and describing the collateral encumbered by the Security Documents have been duly filed in each jurisdiction necessary to perfect the Liens created by the Security Documents and that all other filings and action needed to provide the Bank with a perfected, first priority security interest in the collateral described in the Security Documents have occurred.
     (h) Insurance. The Bank shall have received certificates of insurance evidencing the insurance coverages described on Schedule 4.16 and all other or additional coverages required under the Security Documents and naming the Bank as loss payee or additional insured, as its interests may appear.
     (i) No Litigation. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court or other governmental authority to enjoin, restrain or prohibit, or to obtain substantial damages in respect of, or that is related to or arises from, the making of the Loans.
     (j) Payoff Letters. Concurrently with the making of the initial Loans hereunder, (i) all other Indebtedness of the Borrower or any of its Subsidiaries other than Indebtedness permitted under Section 7.2 (collectively, the “Terminating Indebtedness”), shall be repaid and satisfied in full and all guaranties related thereto extinguished, (ii) all commitments to extend credit under any Terminating Indebtedness shall be terminated, (iii) any Liens securing any Terminating Indebtedness shall be released and any related filings (including UCC filings, mortgages, and intellectual property filings) terminated of record (or arrangements satisfactory to the Bank made therefor), and (iv) any letters of credit outstanding under any Terminating Indebtedness for which the Borrower or any of its Subsidiaries is obligated shall have been terminated, canceled or replaced; and the Bank shall have received evidence of the foregoing satisfactory to it, including a payoff letter executed by the lenders or the agent under the Terminating Indebtedness.
     (k) Fees; Expenses. The Borrower shall have paid (i) to the Bank, the fees required to be paid to them on the Closing Date, and (ii) all other fees and reasonable expenses required hereunder or under any other Credit Document to be paid on or prior to the Closing Date (including reasonable fees and expenses of counsel) in connection with this Agreement and the other Credit Documents.
     (1) No Material Adverse Change. Since December 31, 2004, both immediately before and after giving effect to the consummation of this Agreement, there shall not have

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occurred (i) a Material Adverse Effect or (ii) any event, condition or state of facts that could reasonably be expected to have a Material Adverse Effect.
     (m) Other Documents. The Bank shall have received such other documents, certificates, opinions, instruments and other evidence as the Bank may reasonably request, all in form and substance satisfactory to the Bank and its counsel.
     3.2 Conditions to all Loans . The obligation of the Bank to make any Loan hereunder (including any Loans made on or after the Closing Date), is subject to the continued validity of all Credit Documents and the satisfaction of the following conditions:
     (a) The Bank shall have received a notice of borrowing (each a “Notice of Borrowing”), in the form of Exhibit D, specifying (i) the aggregate principal amount of the requested Loan to be made pursuant to such Borrowing, and (ii) the requested date of such Borrowing, which shall be a Business Day. Each such Notice of Borrowing shall be irrevocable.
     (b) Each of the representations and warranties made by the Borrower in Article IV shall be true and correct on and as of such date with the same effect as if made on and as of such date (except to the extent any such representation or warranty related to a specific date, in which case such representation or warranty shall be true and correct as of such date); and
     (c) No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the portion of the Loan to be made on such date.
     3.3 Waiver of Conditions Precedent. If the Bank funds any portion of the Loans hereunder prior to the fulfillment of any of the conditions precedent set forth in this Article III, the making of such Loan shall constitute only an extension of time for the fulfillment of such condition and not a waiver thereof, and the Borrower shall thereafter use its best efforts to fulfill each such condition within thirty (30) days after the date of such funding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
     Each of the Borrower and its Subsidiaries represents and warrants to the Bank as follows:
     4.1 Corporate Organization and Power. Each of the Borrower and its Subsidiaries (a) is a corporation or a limited liability company duly organized or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as the case may be; (b) is duly qualified or licensed to do business and is in good standing in every other jurisdiction where the nature of its business or its properties makes such qualification or licensing necessary (except where the failure to be so qualified or licensed would not have a Material Adverse Effect); (c) has full corporate or limited liability company power and authority to execute, deliver and perform the Credit Documents to which it is or will be a party, to own and hold its property and to engage in its business as presently conducted, and (d) has all governmental licenses, permits, franchises, certificates, inspections, authorizations, consents and approvals required to carry on its business as it is now being conducted (except where the failure to have such governmental authorization would not have a Material Adverse Effect).

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     4.2 Corporate Authority; No Conflict With Other Instruments or Law. The execution, delivery and performance of this Agreement and the other Credit Documents and the consummation of the transactions contemplated hereby and thereby (a) are within the corporate or limited liability company power and authority of the Borrower and each of its Subsidiaries, (b) have been duly authorized by all necessary corporate or limited liability company action on the part of the Borrower and each of its Subsidiaries, (c) do not and will not conflict with, contravene or violate any provision of, or result in a breach of or default under, or require the waiver (not already obtained) of any provision of or the consent (not already given) of any Person under the terms of the Borrower’s or any of its Subsidiaries’ articles or certificate of incorporation or formation, its bylaws or operating agreement, or other applicable formation or organizational documents, or any indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument to which the Borrower or any of its Subsidiaries is a party or by which it is bound or to which any of its properties are subject, (d) will not violate, conflict with, give rise to any liability under, or constitute a default under any Requirement of Law, and (e) will not result in the creation, imposition, or acceleration of any indebtedness or tax or any Lien that is not a Permitted Lien of any nature upon, or with respect to, the Borrower or any of its Subsidiaries or any of their properties.
     4.3 Due Execution and Delivery. This Agreement and the other Credit Documents to which the Borrower and each of its Subsidiaries is a party have been duly executed and delivered to the Bank by an officer of the Borrower who has been duly authorized to perform such acts.
     4.4 Enforceability. This Agreement and the other Credit Documents to which the Borrower and each of its Subsidiaries is a party constitute the legal, valid and binding obligations of the Borrower and each of its Subsidiaries enforceable against the Borrower and each of its Subsidiaries in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, statutes or rules of general application affecting the enforcement of creditor’s rights or general principles of equity.
     4.5 Governmental Approval. The execution, delivery and performance of this Agreement and the other Credit Documents to which the Borrower and each of its Subsidiaries is a party and the transactions contemplated hereby and thereby do not require any authorization, exemption, consent or approval of, notice to, or declaration or filing with, any Governmental Authority other than those obtained on or before the Closing Date.
     4.6 Margin Stock. None of the Borrower or its Subsidiaries is engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation T, U or X of the Board of Governors of the Federal Reserve System). The execution, delivery and performance of this Agreement and the use of the proceeds of the Loan or any extension of credit hereunder, do not and will not constitute a violation of such Regulations.
     4.7 Investment Company. None of the Borrower or its Subsidiaries is an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

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     4.8 Taxes. None of the Borrower or its Subsidiaries is delinquent in the payment of any taxes that have been levied or assessed by any Governmental Authority against it or its assets unless such tax is being contested in good faith by proper proceedings and adequate reserves satisfactory to the Bank have been established and maintained with respect thereto. The Borrower and each of its Subsidiaries has timely filed all tax returns that are required by law to be filed, and has paid all taxes shown on said returns to be payable by the Borrower and each of its Subsidiaries and all other assessments or fees levied upon it or upon its properties to the extent that such taxes, assessments or fees have become due, and if not due, such taxes have been adequately provided for and sufficient reserves therefor established on its books of account. No material controversy in respect of the Borrower’s or any of its Subsidiaries’ income taxes is pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened.
     4.9 Litigation. There is no judgment, injunction or similar order or decree which, and no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened against or affecting the Borrower or any of its Subsidiaries, before any court, commission, panel, board, bureau, arbitrator or any Governmental Authority which (in any one case or in the aggregate, if determined adversely to the interests of the Borrower or any of its Subsidiaries), (a) is reasonably likely to have a Material Adverse Effect, or (b) affects the validity or enforceability of this Agreement or any of the other Credit Documents.
     4.10 Financial Statements; Solvency.
     (a) The Borrower has delivered to the Bank (i) the audited consolidated balance sheets of the Borrower and its Subsidiaries as of October 31, 2002, 2003 and 2004, in each case with the related statements of income, cash flows and stockholders’ equity for the Fiscal Years then ended, together with the opinion of Xxxxx Pera & Co., PLLC thereon, (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of June 30, 2005, with the related statements of income, cash flows and stockholders’ equity for the six-month period then ended, respectively. Such financial statements contain no material misstatement or omission and fairly present the financial position, assets and liabilities of the Borrower and each of its Subsidiaries for the respective periods then ended.
     (b) Except as set forth on Schedule 4.10(b), each of the Borrower and its Subsidiaries is Solvent.
     (c) Set forth on Schedule 4.10(c) is a list of all note receivables of the Borrower and its Subsidiaries, including all notes from Franchisees and Former Franchisee Receivables (each indicated as such), outstanding as of the Closing Date, and including the outstanding balance of each such note receiveable.
     4.11 No Material Adverse Change. Since December 31, 2004, (a) there has been no Material Adverse Change, nor to the knowledge of the Borrower or any of its Subsidiaries, is any Material Adverse Change threatened or reasonably likely to occur, and (b) neither the Borrower nor any of its Subsidiaries has incurred any obligation or liability that would be reasonably likely to have a Material Adverse Effect or entered into any material contracts not specifically

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contemplated by this Agreement or the other Credit Documents or not in the ordinary course of business consistent with past practice.
     4.12 Compliance with Laws. To the best knowledge of the Borrower and its Subsidiaries, each of the Borrower and its Subsidiaries has timely filed all material reports, documents and other materials required to be filed by it under all applicable Requirements of Law with any Governmental Authority, has retained all material records and documents required to be retained by it under all applicable Requirements of Law, and is otherwise in compliance with all applicable Requirements of Law in respect of the conduct of its business and the ownership and operation of its properties, except in each case to the extent that the failure to comply therewith, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
     4.13 Environmental Compliance. Except as set forth on Schedule 4.13, to the best knowledge of the Borrower and its Subsidiaries,
     (a) (i) no Hazardous Material is or has been generated, used, released, treated, disposed of or stored, or otherwise located, in, on or under any property owned, leased or operated by the Borrower or any of its Subsidiaries or any portion thereof, and no part of the property owned, leased or operated by the Borrower or any of its Subsidiaries (now or in the past), including without limitation the soil and groundwater located thereon and thereunder, has been contaminated by any Hazardous Material; (ii) no improvements on the property owned, leased or operated by the Borrower or any of its Subsidiaries contain any asbestos or substances containing asbestos; (iii) none of the property owned, leased or operated by the Borrower or any of its Subsidiaries has been the subject of an environmental audit or assessment, or remedial action; and (iv) the foregoing statements are true and correct with respect to all of the real property adjoining any of the property owned, leased or operated by the Borrower or any of its Subsidiaries.
     (b) None of the property owned, leased or operated by the Borrower or any of its Subsidiaries (now or in the past) has, pursuant to any Environmental Law, been placed on the “National Priorities List” or “CERCLIS List” (or any similar federal, state or local list) of sites subject to possible environmental problems.
     (c) There are no underground storage tanks situated on the property owned, leased or operated by the Borrower or any of its Subsidiaries and no underground storage tanks have ever been situated on the property owned, leased or operated by the Borrower or any of its Subsidiaries.
     (d) All activities and operations of each of the Borrower and its Subsidiaries meet all requirements of all applicable Environmental Laws, none of the Borrower or its Subsidiaries has violated any Environmental Law in the past, and none of the property owned, leased or operated by the Borrower and its Subsidiaries has ever been the site of a violation of any Environmental Law.
     (e) None of the Borrower or its Subsidiaries has sent a Hazardous Material to a site which, pursuant to any Environmental Law, (i) has been placed on the “National Priorities List”

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or “CERCLIS List” (or any similar federal, state or local list) of sites subject to possible environmental problems, or (ii) is subject to, or the source of, a claim, an administrative order or other request to take “response,” “removal,” “corrective” or “remedial” action, as defined in any Environmental Law, or to pay for or contribute to the costs of cleaning up the site.
     (f) None of the Borrower or its Subsidiaries is involved in any suit or proceeding and has not received any notice from any Governmental Authority or other third party with respect to a release or threat of release of any Hazardous Material, or violation or alleged violation of any Environmental Law, and has not received notice of any claim from any person or entity relating to property damage or to personal injuries from exposure to any Hazardous Material.
     (g) Each of the Borrower and its Subsidiaries has timely filed all reports required to be filed, has acquired all necessary certificates, approvals and permits, and has generated and maintained all required data, documentation and records required under all Environmental Laws.
     4.14 Ownership of Properties. Each of the Borrower and its Subsidiaries (i) has good and marketable title to all real property owned respectively by it, (ii) holds interests as lessee under valid leases in full force and effect with respect to all material leased real and personal property used in connection with its business, and (iii) has good title to all of its other material properties and assets reflected in the financial statements referred to in Section 4.10 (except as sold or otherwise disposed of since the date thereof in the ordinary course of business), in each case free and clear of all Liens other than Permitted Liens. Schedule 4.14 lists, as of the Closing Date, all Realty of the Borrower and each of its Subsidiaries, indicating in each case the identity of the owner, the address of the property, the nature of the use of the premises and whether such interest is a leasehold or fee ownership interest.
     4.15 Intellectual Property. Each of the Borrower and its Subsidiaries owns, or has the legal right to use, all Intellectual Property necessary for it to conduct its business as currently conducted. Schedule 4.15 lists, as of the Closing Date, all registered Intellectual Property owned by the Borrower or any of its Subsidiaries. No claim has been asserted or is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any such claim, and to the knowledge of the Borrower, the use of such Intellectual Property by the Borrower does not infringe on the known rights of any Person.
     4.16 Insurance. Schedule 4.16 sets forth, as of the Closing Date, an accurate and complete list and a brief description (including the insurer, policy number, type of insurance, coverage limits, deductibles, expiration dates and any special cancellation conditions) of all policies of property and casualty, liability (including, but not limited to, product liability), business interruption, workers’ compensation, keyman life insurance, and other forms of insurance owned or held by the Borrower or any of its Subsidiaries or pursuant to which any of their respective assets are insured. The assets, properties and business of the Borrower and its Subsidiaries are insured against such hazards and liabilities, under such coverages and in such amounts, as are customarily maintained by prudent companies similarly situated and under policies issued by insurers of recognized responsibility.

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     4.17 ERISA.
     (a) The Borrower and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan. The Borrower and each member of the Controlled Group are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title IV of ERISA.
     (b) Neither the Borrower nor any member of the Controlled Group has incurred any withdrawal liability with respect to any Multiemployer Plan under Title IV of ERISA, and no such liability is expected to be incurred.
     (c) Neither the Borrower nor any member of the Controlled Group has participated in a prohibited transaction, as defined in Section 406 of ERISA or Section 4975(c) of the Code, which could subject either the Borrower or a member of the Controlled Group to any material civil penalty under ERISA or material tax under the Code.
     4.18 Full Disclosure. All information heretofore furnished to the Bank by each of the Borrower and its Subsidiaries for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished to the Bank by each of the Borrower and its Subsidiaries will be, true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. Each of the Borrower and its Subsidiaries has disclosed to the Bank in writing any and all facts which materially and adversely affect or may affect (to the extent the Borrower or any of its Subsidiaries can now reasonably foresee), the business, operations, prospects or condition, financial or otherwise, of each of the Borrower and its Subsidiaries, or the ability of the Borrower or any of its Subsidiaries to perform its obligations under this Agreement or any of the other Credit Documents.
     4.19 No Default. No Default or Event of Default under this Agreement has occurred and is continuing.
     4.20 Subsidiaries. Except as set forth on Schedule 4.20, the Borrower has no Subsidiaries. Except as indicated on Schedule 4.20, none of the Subsidiaries are foreign Subsidiaries.
     4.21 First Priority Liens. Except for Permitted Liens, this Agreement, together with the Security Documents and the actions described in clauses (i), (ii) and (iii) of Section 3.2 of the Security Agreement, will create valid, perfected, first-priority security interests in the collateral described in the Security Documents, in each case enforceable against the Borrower and each of its Subsidiaries and securing the payment of all obligations purported to be secured thereby.
     4.22 Labor Relations. None of the Borrower or its Subsidiaries is engaged in any unfair labor practice within the meaning of the National Labor Relations Act of 1947, as amended. As of the Closing Date, there is (i) no unfair labor practice complaint before the National Labor Relations Board, or grievance or arbitration proceeding arising out of or under any collective bargaining agreement, pending or, to the knowledge of the Borrower, threatened, against the Borrower or any of its Subsidiaries, (ii) no strike, lock-out, slowdown, stoppage,

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walkout or other labor dispute pending or, to the knowledge of the Borrower, threatened, against the Borrower or any of its Subsidiaries, and (iii) to the knowledge of the Borrower, no petition for certification or union election or union organizing activities taking place with respect to the Borrower or any of its Subsidiaries. As of the Closing Date, there are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower or any of its Subsidiaries.
     4.23 OFAC; Anti-Terrorism Laws.
     (a) None of the Borrower or its Subsidiaries is a Sanctioned Person or does business in a Sanctioned Country or with a Sanctioned Person in violation of the economic sanctions of the United States administered by OFAC.
     (b) The Borrower and its Subsidiaries are in compliance in all material respects with the PATRIOT Act. No part of the proceeds of the Loans hereunder will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
ARTICLE V
AFFIRMATIVE COVENANTS
     Until payment in full of all Obligations of the Borrower to the Bank, the Borrower will, and will cause its Subsidiaries to:
     5.1 Financial and Business Information. Deliver to the Bank:
     (a) Within forty-five (45) days after the close of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such Fiscal Quarter and consolidated statements of income and cash flows for the Borrower and its Subsidiaries for the Fiscal Quarter then ended and for that portion of the Fiscal Year then ended, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year, all prepared in accordance with GAAP applied on a basis consistent with that of the preceding period or containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the period, subject only to audit and year-end adjustments, and certified by the Borrower’s president or chief financial officer to be true and accurate;
     (b) Within one hundred twenty (120) days after the close of the Fiscal Year of the Borrower, an audited consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such Fiscal Year and audited consolidated statements of income and cash flows for the Borrower and its Subsidiaries for the Fiscal Year then ended, including the notes to each, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year, prepared by an independent certified public accountant reasonably acceptable to the Bank, in accordance with GAAP applied on a basis consistent with that of the preceding year or

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containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountant containing an opinion that is not qualified with respect to scope limitations imposed by the Borrower or its Subsidiaries or with respect to accounting principles followed by the Borrower or its Subsidiaries not in accordance with GAAP;
     (c) Concurrently with the delivery of the financial statements described in subsection (b) above, a certificate addressed to the Bank from the independent certified public accountant that in making its audit of the financial statements of the Borrower and its Subsidiaries, it obtained no knowledge of the occurrence or existence of any Default or Event of Default under this Agreement, or specifying the nature and period of existence of any such Default or Event of Default; provided, however, that such accountant shall not be liable to anyone by reason of its failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit conducted in accordance with generally accepted auditing standards;
     (d) Concurrently with the delivery of the financial statements described in subsections (a) and (b) above, a Compliance Certificate with respect to the period covered by the financial statements being delivered thereunder, executed by the president or chief financial officer of the Borrower, together with a Covenant Compliance Worksheet reflecting the computation of the financial covenants set forth in Article VI as of the last day of the period covered by such financial statements;
     (e) On or before the earlier of (i) thirty (30) days after of the Closing Date and (ii) November 30, 2005, a consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 2004 and consolidated statements of income and cash flows for the Borrower and its Subsidiaries for the two-month period then ended, all prepared in accordance with GAAP, and certified by the Borrower’s president or chief financial officer to be true and accurate;
     (f) Prompt notice of any Material Adverse Change; and
     (g) Within a reasonable time, upon the Bank’s request, such other information about the property, financial condition and operations of the Borrower and its Subsidiaries as the Bank may from time to time reasonably request.
     5.2 Notice of Certain Events. Give written notice to the Bank of the following:
     (a) promptly after a Responsible Officer’s learning thereof, (i) the commencement of any material litigation affecting the Borrower or any of its Subsidiaries or any of their respective assets, whether or not the claim is considered by the Borrower to be covered by insurance, and (ii) the institution of any material administrative proceeding, that in the case of either clause (i) or (ii), would be reasonably likely to have a Material Adverse Effect if decided adversely to the Borrower or its Subsidiaries;
     (b) immediately after a Responsible Officer’s learning thereof, the occurrence of any Casualty Event;

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     (c) at least 10 days prior thereto, the opening of any new office or place of business of the Borrower or any of its Subsidiaries;
     (d) as soon as reasonably practicable, but in any event at least five Business Days prior thereto, the closing of any existing office or place of business of the Borrower or any of its Subsidiaries;
     (e) promptly after a Responsible Officer’s learning thereof, any labor dispute to which the Borrower or any of its Subsidiaries may become a party, or any strike or walkout relating to any of their plants or other facilities, in either case that is reasonably likely to have a Material Adverse Effect, and the expiration of any labor contract to which the Borrower or any of its Subsidiaries is a party or by which any of them is bound;
     (f) promptly after the occurrence thereof, any default by any obligor under any note or other evidence of Indebtedness payable to the Borrower or any of its Subsidiaries exceeding $300,000;
     (g) promptly after the rendition thereof, any judgment in an amount exceeding $300,000 rendered against the Borrower or any of its Subsidiaries;
     (h) promptly after a Responsible Officer’s learning thereof, any material (i) Environmental Liability, (ii) pending, threatened or anticipated judicial or administrative proceeding arising from or in any way associated with any Environmental Law, (iii) notice from any Governmental Authority, or by any other Person, of possible or alleged noncompliance with or liability under any Environmental Law and any investigations concerning any violation of any Environmental Law, (iv) judgment, decree, order or written agreement with a Governmental Authority or other entity arising from or in any way associated with any Environmental Law, in each case at, on, in, under or in any way affecting the Realty or any adjacent property, and all facts, events, or conditions that could lead to any of the foregoing;
     (i) if and when any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any Reportable Event with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such Reportable Event; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, and provide the Bank with a copy of such notice; and
     (j) promptly, but in any event within five Business Days after the Borrower becomes aware of the occurrence of any Default or Event of Default.
     5.3 Existence; Franchises; Maintenance of Properties. (a) Maintain and preserve in full force and effect its legal existence, its good standing under the laws of the jurisdiction of its incorporation or formation, as the case may be, and its qualification to do business in every other jurisdiction where the nature of its business or its properties makes such qualification necessary (except where the failure to be so qualified or licensed would not have a Material Adverse Effect), (b) obtain, maintain and preserve in full force and effect its Intellectual Property and all other rights, franchises, licenses, permits, certifications, approvals and authorizations required by

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Governmental Authorities and necessary to the ownership, occupation or use of its properties or the conduct of its business, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect, and (c) keep all material properties in good working order and condition (normal wear and tear and damage by casualty excepted) and from time to time make all necessary repairs to and renewals and replacements of such properties, except to the extent that any of such properties are obsolete or are being replaced or, in the good faith judgment of the Borrower, are no longer useful or desirable in the conduct of the business.
     5.4 Compliance with Law. Comply in all respects with all Requirements of Law applicable in respect of the conduct of its business and the ownership and operation of its properties, except to the extent the failure to so comply could not reasonably be expected to have a Material Adverse Effect.
     5.5 Payment of Obligations. (a) Pay, discharge or otherwise satisfy at or before maturity all liabilities and obligations as and when due (subject to any applicable subordination, grace and notice provisions), except to the extent failure to do so could not reasonably be expected to have a Material Adverse Effect, and (b) pay and discharge all taxes, assessments and governmental charges or levies imposed upon it, upon its income or profits or upon any of its properties, prior to the date on which penalties would attach thereto, and all lawful claims that, if unpaid, would become a Lien (other than a Permitted Lien) upon any of the properties of the Borrower or any of its Subsidiaries; provided, however, that the Borrower and its Subsidiaries shall not be required to pay any such liability, obligation, tax, assessment, charge, levy or claim that is being contested in good faith and by proper proceedings and as to which such party is maintaining adequate reserves with respect thereto in accordance with GAAP.
     5.6 Maintenance of Books and Records; Inspection. Maintain adequate books, accounts and records, and prepare all financial statements required under this Agreement in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it. The Borrower shall permit any employee or representative of the Bank to visit and inspect any of its properties, to examine and audit its books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with its officers and, upon prior notice to the Borrower, its independent public accountants (and by this provision the Borrower authorizes said accountants to discuss its finances and affairs with the Bank and to provide the Bank with access to such accountants’ work papers), all upon reasonable notice during business hours and as often as may be reasonably requested.
     5.7 Maintenance of Insurance. Maintain and pay for insurance upon the Borrower and its property, wherever located, covering casualty, hazard, public liability, product liability, business interruption, boiler, fidelity and such other risks, casualties and contingencies as is customary in the business in which the Borrower is engaged, all in such amounts and with such insurance companies as shall be reasonably satisfactory to the Bank.
     5.8 Compliance with ERISA.
     (a) The Borrower will, and will cause each of its Subsidiaries and each member of the Controlled Group to, comply in all material respects with ERISA and the Code and the

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regulations and requirements of the PBGC, except where the necessity of such compliance is being contested in good faith through appropriate proceedings.
     (b) The Borrower and each member of the Controlled Group will make timely payment of contributions required to meet the minimum funding standards set forth in ERIS A and the Code with respect to any Plan, and will not take any action or fail to take action the result of which action or inaction could be a material liability for the Borrower or a member of the Controlled Group to the PBGC or a Multiemployer Plan. Neither the Borrower nor a member of the Controlled Group will participate in a prohibited transaction, as defined in Section 406 of ERIS A or Section 4975(c) of the Code, which could subject either the Borrower or a member of the Controlled Group to any material civil penalty under ERISA or material tax under the Code.
     5.9 Name Change. Notify the Bank at least thirty (30) days prior to the effective date of any change of its name, and prior to such effective date the Borrower shall have executed any required amended or new UCC financing statements and other documents necessary to maintain and continue the perfected security interests of the Bank in all of its collateral and shall have taken such other actions and executed such documents as the Bank shall reasonably require.
     5.10 Creation of Subsidiaries. Subject to the provisions of Section 7.12, the Borrower may from time to time create new Wholly Owned Subsidiaries and the Wholly Owned Subsidiaries of the Borrower may create new Wholly Owned Subsidiaries, provided that concurrently with (and in any event within ten (10) Business Days after) the creation thereof:
     (a) Each such new Subsidiary will execute and deliver to the Bank (i) a joinder to the Guaranty, pursuant to which such new Subsidiary shall become a Subsidiary Guarantor thereunder and shall guarantee the payment in full of the Obligations of the Borrower under this Agreement and the other Credit Documents, and (ii) a joinder to the Security Agreement, pursuant to which such new Subsidiary shall become a party thereto and shall grant to the Bank a first priority Lien upon and security interest in its accounts receivable, inventory, equipment, general intangibles and other personal property as collateral for its obligations under the Guaranty, subject only to Permitted Liens; and
     (b) The Borrower will deliver to the Bank a certificate of the secretary or an assistant secretary of such Subsidiary, in form and substance reasonably satisfactory to the Bank, certifying (i) that attached thereto is a true and complete copy of the articles or certificate of incorporation, certificate of formation or other organizational document and all amendments thereto of such Subsidiary, certified as of a recent date by the Secretary of State (or comparable Governmental Authority) of its jurisdiction of organization, and that the same has not been amended since the date of such certification, (ii) that attached thereto is a true and complete copy of the bylaws, operating agreement or similar governing document of such Subsidiary, as then in effect and as in effect at all times from the date on which the resolutions referred to in clause (iii) below were adopted to and including the date of such certificate, (iii) that attached thereto is a true and complete copy of resolutions adopted by the board of directors (or similar governing body) of such Subsidiary, authorizing the execution, delivery and performance of the Credit Documents to which it is a party, and (iv) as to the incumbency and genuineness of the signature of each officer of such Subsidiary executing such Credit Documents, and attaching all such copies of the documents described above;

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provided, however, that the provisions of this Section 5.10 shall not be required with respect to foreign Subsidiaries.
     5.11 OFAC, PATRIOT Act Compliance. (a) Refrain from doing business in a Sanctioned Country or with a Sanctioned Person in violation of the economic sanctions of the United States administered by OFAC, and (b) provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Bank in order to assist the Bank in maintaining compliance with the PATRIOT Act.
     5.12 Banking Relationship. The Borrower shall maintain a significant operating relationship with the Bank during the period for which any Loans or the Revolving Credit Commitment is outstanding, including without limitation, maintaining its primary depository account, cash management and lockbox services with the Bank.
     5.13 Further Assurances. Make, execute, endorse, acknowledge and deliver to the Bank any amendments, restatements, modifications or supplements hereto and any other agreements, instruments or documents, and take any and all such other actions, as may from time to time be reasonably requested by the Bank to effect, confirm or further assure or protect and preserve the interests, rights and remedies of the Bank under this Agreement and the other Credit Documents.
ARTICLE VI
FINANCIAL COVENANTS
     The Borrower covenant and agrees that, until payment in full of all Obligations of the Borrower to the Bank the Borrower will not:
     6.1 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as of the last day of any Fiscal Quarter to be less than 1.25:1.00.
     6.2 Minimum Tangible Net Worth. Permit the Consolidated Tangible Net Worth to be less than (i) $3,000,000 for the Fiscal Year ending on December 31, 2005 or (ii)(x) $3,000,000 plus (y) 75% of Consolidated Net Income for the Borrower for each Fiscal Year ending on or after December 31, 2006 (provided that Consolidated Net Income for any such Fiscal Year shall be taken into account for purposes of this calculation only if positive) plus(z) 50% of the aggregate amount of all increases in the stated capital and additional paid-in capital accounts of the Borrower, as determined on a consolidated basis in accordance with GAAP, resulting from the issuance of equity securities (including pursuant to the exercise of options, rights or warrants or pursuant to the conversion of convertible securities) or other Capital Stock after the Closing Date.
     6.3 Funded Debt to EBITDA Ratio. Permit the Funded Debt to EBITDA Ratio as of the last day of any Fiscal Quarter to be greater than 3.00:1:00.

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ARTICLE VII
NEGATIVE COVENANTS
     Until payment in full of all Obligations of the Borrower to the Bank, the Borrower will not, and will not permit its Subsidiaries to, without the express prior written approval of the Bank:
     7.1 Mergers; Consolidations. Merge or consolidate with or into any other Person, liquidate, wind up or dissolve; provided, however, that any Wholly Owned Subsidiary of the Borrower may merge or consolidate with, or be liquidated into, (i) the Borrower (so long as the Borrower is the surviving or continuing entity) or (ii) any other Wholly Owned Subsidiary (so long as the surviving or continuing entity is a Subsidiary Guarantor), and in each case so long as no Default or Event of Default has occurred and is continuing or would result therefrom.
     7.2 Indebtedness. Directly or indirectly issue, assume, create, incur or suffer to exist any Indebtedness except for:
     (i) Indebtedness of the Borrower and its Subsidiaries in favor of the Bank incurred under this Agreement and the other Credit Documents;
     (ii) Indebtedness secured by Permitted Liens;
     (iii) Indebtedness of the Borrower under Hedge Agreements entered into in connection with this Agreement or in the ordinary course of business to manage existing or anticipated interest rate or foreign currency risks and not for speculative purposes;
     (iv) purchase money Indebtedness of the Borrower and its Subsidiaries incurred solely to finance the acquisition, construction or improvement of any equipment, real property or other fixed assets in the ordinary course of business, including Indebtedness in respect of Capitalized Lease Obligations, provided that all such Indebtedness shall not exceed $750,000 in aggregate principal amount outstanding at any time;
     (v) notwithstanding subsection (iv) above, purchase money Indebtedness of the Borrower incurred pursuant to an agreement to be entered into with Microsoft Corp. for the purchase of software and accompanying licenses for a purchase price not to exceed $1,500,000; and
     (vi) other Indebtedness of the Borrower and its Subsidiaries not exceeding $300,000 in aggregate principal amount outstanding at any time.
     7.3 Liens and Encumbrances. Create, assume or suffer to exist any Lien in or on any of its property, real or personal, whether now owned or hereafter acquired, except for (collectively, the “Permitted Liens”):
     (i) Liens in favor of the Bank created by or otherwise existing under or in connection with this Agreement and the other Credit Documents;

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     (ii) Liens imposed by mandatory provisions of law of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due and payable;
     (iii) Liens incurred in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure the performance of letters of credit, bids, tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business, provided that all such liens in the aggregate have no reasonable likelihood of causing a Material Adverse Effect;
     (iv) Liens for current taxes, assessments or other governmental charges that are not delinquent or remain payable without any penalty or that are being contested in good faith and with due diligence by appropriate proceedings, provided that all such liens in the aggregate have no reasonable likelihood of causing a Material Adverse Effect and, if requested by the Bank, the Borrower or such Subsidiary has established reserves satisfactory to the Bank with respect thereto;
     (v) Liens of judgments, execution, attachment or similar process which will not result or have not yet resulted in the occurrence of an Event of Default as set forth in Sections 8.1(k) or (1) hereof;
     (vi) Liens with respect to any Realty occupied by the Borrower or any of its Subsidiaries, (a) all easements, rights of way, reservations, licenses, encroachments, variations and similar restrictions, charges and encumbrances on title that do not secure monetary obligations and do not materially impair the use of such property for its intended purposes or the value thereof, and (b) any other Lien or exception to coverage described in mortgagee policies of title insurance issued in favor of and accepted by the Bank;
     (vii) Liens securing the purchase money Indebtedness permitted under Section 7.2(iv), provided that (x) any such Lien shall attach to the property being acquired, constructed or improved with such Indebtedness concurrently with or within ninety (90) days after the acquisition (or completion of construction or improvement) by the Borrower or such Subsidiary, (y) the amount of the Indebtedness secured by such Lien shall not exceed the cost to the Borrower or such Subsidiary of acquiring, constructing or improving the property and any other assets then being financed solely by the same financing source, and (z) any such Lien shall not encumber any other property of the Borrower or any of its Subsidiaries except assets then being financed solely by the same financing source; and
     (viii) Liens securing the Terminating Indebtedness as set forth on Schedule 7.3(viii); provided that such Liens shall be released and any related filings terminated of record as required under Section 3.1(j).
     7.4 Disposition of Assets. Sell, lease, transfer, convey or otherwise dispose of any of its assets or property, other than:

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     (i) the sale or other disposition of inventory or Cash Equivalents in the ordinary course of business, the sale or write-off of past due or impaired accounts receivable for collection purposes (but not for factoring, securitization or other financing purposes), and the termination or unwinding of Hedge Agreements permitted hereunder;
     (ii) the sale, exchange or other disposition in the ordinary course of business of equipment or other assets that are obsolete or no longer necessary for the operations of the Borrower and its Subsidiaries with an aggregate value on the Borrower’s balance sheet of no more than $100,000 in the aggregate; and
     (iii) dividends permitted under Section 7.6.
     7.5 Restricted Investments. Purchase, own, invest in or otherwise acquire, directly or indirectly, any stock, evidence of indebtedness, or other obligation or security or any interest whatsoever in any other Person, or make or permit to exist any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any Person (collectively, “Investments”), except for:
     (i) Investments consisting of Cash Equivalents;
     (ii) Investments consisting of the extension of trade credit, the creation of prepaid expenses, and the purchase of inventory, supplies, equipment and other assets, in each case by the Borrower and its Subsidiaries in the ordinary course of business;
     (iii) Investments (including equity securities and debt obligations) of the Borrower and its Subsidiaries received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;
     (iv) without duplication, Investments with related Persons expressly permitted under Section 7.7;
     (v) Investments of the Borrower under Hedge Agreements entered into in connection with this Agreement or in the ordinary course of business to manage existing or anticipated interest rate or foreign currency risks and not for speculative purposes;
     (vi) Investments in connection with the creation (but not acquisition) of new Wholly Owned Subsidiaries organized under the laws of one of the United States, provided the Borrower complies with the terms of Section 5.10;
     (vii) Investments in connection with the creation (but not acquisition) of new Wholly Owned Subsidiaries organized under the laws of a jurisdiction outside of the United States, provided that in no event shall such investments exceed an aggregate amount of $100,000 per foreign Subsidiary;
     (viii) Investments consisting of the acquisition of capital stock or substantially all the assets of Franchisees, provided that immediately after giving pro forma effect to

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such acquisition (and the incurrence of any Indebtedness in connection therewith), the Borrower is in compliance with the financial covenants set forth in Article VI for the Fiscal Quarter most recently ended for which financial statements are required to have been delivered under Section 5.1(a) or 5.1(b); and
     (ix) other Investments of the Borrower and its Subsidiaries not otherwise permitted under this Section 7.5 (including joint ventures, but excluding Investments in Subsidiaries organized under the laws of a foreign jurisdiction) in an aggregate amount not exceeding $100,000 at any time outstanding for all such Investments.
     7.6 Restricted Payments. Directly or indirectly, declare or make any dividend payment, or make any other distribution of cash, property or assets, in respect of any of its Capital Stock, or purchase, redeem, retire or otherwise acquire for value any shares of its Capital Stock, or set aside funds for any of the foregoing, except that:
     (i) the Borrower and any of its Subsidiaries may declare and make dividend payments or other distributions payable solely in its Capital Stock, in each case to the extent not prohibited under applicable Requirements of Law;
     (ii) each Wholly Owned Subsidiary of the Borrower may declare and make dividend payments or other distributions to the Borrower or to another Subsidiary of the Borrower, in each case to the extent not prohibited under applicable Requirements of Law; and
     (iii) the Borrower may declare and make dividend payments and other distributions in cash if no Default or Event of Default shall have occurred and be continuing or would result therefrom.
     7.7 Transactions With Related Persons. Except as otherwise permitted by Sections 7.2 and 7.6, directly or indirectly make any loan or advance to, or purchase, assume or guarantee any indebtedness to or from, any of its officers, directors, stockholders, Franchisees or Affiliates, or to or from any member of the immediate family of any of its officers, directors, stockholders, Franchisees or Affiliates, or subcontract any operations to any Affiliate, except for travel or other reasonable expense advances to employees in the ordinary course of business; or enter into any transaction with any Affiliate, except (i) with respect to the transactions described on Schedule 7.7 hereto and (ii) pursuant to the reasonable requirements of the business of such Affiliate and on terms substantially no more favorable to such Affiliate than those that such Affiliate would obtain in a comparable arms-length transaction with a Person not an Affiliate of the Borrower.
     7.8 Sale-Leaseback Transactions. Directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real, personal or mixed, and whether now owned or hereafter acquired) (i) that the Borrower or any of its Subsidiaries has sold or transferred (or is to sell or transfer) to a Person that is not a party to this Agreement or any of the Credit Documents or (ii) that Borrower or any of its Subsidiaries intends to use for substantially the same purpose as any other property that, in connection with such lease, has been sold or transferred (or is to be

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sold or transferred) by the Borrower or any of its Subsidiaries to another Person that is not a party to this Agreement or any of the Credit Documents, in each case except for transactions otherwise expressly permitted under this Agreement.
     7.9 Certain Amendments. (a) Amend, modify or waive, or permit the amendment, modification or waiver of, any provision of material contract; or (b) amend, modify or change any provision of its articles or certificate of incorporation or formation, bylaws, operating agreement or other applicable formation or organizational documents, as applicable, the terms of any class or series of its Capital Stock, or any agreement among the holders of its Capital Stock or any of them; in each case other than in a manner that could not reasonably be expected to adversely affect the Bank in any material respect (provided that the Borrower shall give the Bank notice of any such amendment, modification or change covered by subsection (b) above, together with certified copies thereof).
     7.10 Limitation on Certain Restrictions. Directly or indirectly, create or otherwise cause or suffer to exist or become effective any restriction or encumbrance on (a) the ability of the Borrower or any of its Subsidiaries to perform and comply with their respective obligations under the Credit Documents or (b) the ability of any Subsidiary of the Borrower to make any dividend payment or other distribution in respect of its Capital Stock, to repay Indebtedness owed to the Borrower or any other Subsidiary, to make loans or advances to the Borrower or any other Subsidiary, or to transfer any of its assets or properties to the Borrower or any other Subsidiary, except (in the case of clause (b) above only) for such restrictions or encumbrances existing under or by reason of (i) this Agreement and the other Credit Documents, (ii) applicable Requirements of Law, (iii) customary non-assignment provisions in leases and licenses of real or personal property entered into by the Borrower or any Subsidiary as lessee or licensee in the ordinary course of business, restricting the assignment or transfer thereof or of property that is the subject thereof, and (iv) customary restrictions and conditions contained in any agreement relating to the sale of assets (including Capital Stock of a Subsidiary) pending such sale, provided that such restrictions and conditions apply only to the assets being sold and such sale is permitted under this Agreement.
     7.11 No Other Negative Pledges. Enter into or suffer to exist any agreement or restriction that, directly or indirectly, prohibits or conditions the creation, incurrence or assumption of any Lien upon or with respect to any part of its property or assets, whether now owned or hereafter acquired, or agree to do any of the foregoing, except for such agreements or restrictions existing under or by reason of (i) this Agreement and the other Credit Documents, (ii) applicable Requirements of Law, (iii) any agreement or instrument creating a Permitted Lien (but only to the extent such agreement or restriction applies to the assets subject to such Permitted Lien), (iv) customary provisions in leases and licenses of real or personal property entered into by the Borrower or any Subsidiary as lessee or licensee in the ordinary course of business, restricting the granting of Liens therein or in property that is the subject thereof, and (v) customary restrictions and conditions contained in any agreement relating to the sale of assets (including Capital Stock of a Subsidiary) pending such sale, provided that such restrictions and conditions apply only to the assets being sold and such sale is permitted under this Agreement.
     7.12 Subsidiaries or Partnerships. (a) Become a partner or joint venturer in any partnership or joint venture, unless the Borrower shall give the Bank at least thirty (30) days’

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prior written notice thereof, or (b) acquire or create any Subsidiary or divest itself of any material assets by transferring them to any Subsidiary, unless (i) in the case of a domestic Subsidiary, the Borrower shall give the Bank notice thereof at least thirty (30) days’ prior or as soon thereafter as reasonably practicable, (ii) in the case of a foreign Subsidiary, the Borrower shall give the Bank notice thereof at least thirty (30) days’ prior, and (iii) whether such Subsidiary is a domestic Subsidiary or a foreign Subsidiary, such Subsidiary shall comply with all of the conditions and requirements set forth in Section 5.10.
     7.13 Lines of Business. Engage in any business other than the business in which it is currently engaged or a business reasonably related thereto, or make any material change in its business objectives.
     7.14 Fiscal Year. Change its Fiscal Year or its method of determining Fiscal Quarters.
     7.15 Accounting Changes. Other than as permitted pursuant to Section 1.2, make or permit any material change in its accounting policies or reporting practices, except as may be required by GAAP.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
     8.1 Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default hereunder:
     (a) The Borrower shall fail to pay when due any principal amount or any interest, fees or other charges payable under this Agreement, the Note or under any other Credit Document;
     (b) The Borrower shall fail to observe or perform any covenant, restriction or agreement contained in Sections 5.1, 5.2 and 5.3 or Articles VI or VII of this Agreement;
     (c) The Borrower shall fail to observe or perform any covenant, restriction or agreement contained in this Agreement and not described in Sections 8.1(a) or (b) above for fifteen (15) days after the earlier of a Responsible Officer (i) obtaining knowledge of such failure, or (ii) receiving written notice of such failure from the Bank;
     (d) Any representation, warranty, certification or statement made or deemed made by the Borrower in Article IV of this Agreement, in any other Credit Document or in any certificate, financial statement or other document delivered pursuant to this Agreement or any other Credit Document shall prove to have been incorrect in any material respect when made or deemed made;
     (e) The occurrence and continuance of any default or event of default on the part of the Borrower (including specifically, but without limitation, defaults due to non-payment) under the terms of any agreement, document or instrument pursuant to which the Borrower has incurred any Indebtedness for money borrowed in excess of $100,000, which default would permit acceleration of such indebtedness;

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     (f) The occurrence and continuance of any default or event of default under any of the other Credit Documents or under any other agreement between the Borrower and the Bank;
     (g) Any Security Document to which the Borrower or any of its Subsidiaries is now or hereafter a party shall for any reason cease to be in full force and effect or cease to be effective to give the Bank a valid and perfected security interest in and Lien upon the collateral purported to be covered thereby, subject to no Liens other than Permitted Liens, in each case unless any such cessation occurs in accordance with the terms thereof or is due to any act or failure to act on the part of the Bank; or the Borrower or any such Subsidiary shall assert any of the foregoing; or any Subsidiary of the Borrower or any Person acting on behalf of any such Subsidiary shall deny or disaffirm such Subsidiary’s obligations under the Guaranty or such;
     (h) The Borrower or any Subsidiary (i) files a petition for relief under the Bankruptcy Code or any other insolvency law or seeking to adjudicate it bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fails to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (ii) takes any corporate action to authorize or effect any of the foregoing actions, (iii) generally fails to pay, or admits in writing its inability to pay, its debts as such debts become due; (iv) shall apply for, seek or consent to, or acquiesce in, the appointment of a custodian, receiver, trustee, examiner, liquidator or similar official for it or for any material portion of its assets; (v) benefits from or is subject to the entry of an order for relief under any bankruptcy or insolvency law; or (vi) makes an assignment for the benefit of creditors;
     (i) Failure of the Borrower or any Subsidiary within thirty (30) days after the commencement of any proceeding against it seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, to have such proceeding dismissed, or to have all orders or proceedings thereunder affecting the operations or the business of the Borrower or such Subsidiary stayed, or failure of the Borrower or such Subsidiary within thirty (30) days after the appointment, without its consent or acquiescence, of any custodian, receiver trustee, examiner, liquidator or similar official for it or for any material portion of its assets, to have such appointment vacated;
     (j) The Borrower ceases to be Solvent, or ceases to conduct its business substantially as now conducted or is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business affairs;
     (k) The entry of one or more judgments or orders for the payment of money in excess of $100,000 in the aggregate against the Borrower or any of its Subsidiaries and such judgment(s) or order(s) shall continue unsatisfied and unstayed for a period of thirty (30) days;
     (l) The issuance of a writ of execution, attachment or similar process against the Borrower or any of its Subsidiaries which shall not be dismissed, stayed, discharged or bonded within thirty (30) days after a Responsible Officer acquires knowledge thereof;
     (m) A notice of lien, levy or assessment in excess of $100,000 is filed of record with respect to all or any portion of the assets of the Borrower or any of its Subsidiaries by the United

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States, or any department, agency or instrumentality thereof, or by any other Governmental Authority, including, without limitation, the PBGC, or if any taxes or debts in excess of $100,000 owing at any time or times hereafter to any one of them becomes a lien or encumbrance upon any assets of the Borrower in each case and the same is not satisfied, released, discharged or bonded within thirty (30) days after the same becomes a lien or encumbrance or, in the case of ad valorem taxes, prior to the last day when payment may be made without material penalty;
     (n) Any ERISA Event or any other event or condition shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result thereof, together with all other ERISA Events and other events or conditions then existing, the Borrower and its ERISA Affiliates have incurred or would be reasonably likely to incur liability to any one or more Plans or Multiemployer Plans or to the PBGC (or to any combination thereof) in excess of $100,000;
     (o) Any one or more licenses, permits, accreditations or authorizations of the Borrower or any of its Subsidiaries shall be suspended, limited or terminated or shall not be renewed, or any other action shall be taken, by any Governmental Authority in response to any alleged failure by the Borrower or any of its Subsidiaries to be in compliance with applicable Requirements of Law, and such action, individually or in the aggregate, if the event giving rise to such action is not remediated within thirty (30) days of notice of any of the foregoing events, would be reasonably likely to have a Material Adverse Effect; or
     (p) Xxxxx Xxxxxxx and Xxxxx Xxxxxxxx cease collectively to own, either directly or indirectly through their company, HB Fairview Holdings, LLC, a Delaware limited liability company, on a fully diluted basis (x) a majority of the Capital Stock entitled to vote in the election of directors of the Borrower, or (y) a majority of Capital Stock entitled to share in the profits of the Borrower generally.
     8.2 Remedies. Upon the occurrence and during the continuance of any Event of Default:
     (a) Termination of Revolving Credit Commitment; Acceleration of Indebtedness.The Bank may, in its sole discretion, (i) terminate the Revolving Credit Commitment, which shall thereupon terminate; (ii) declare all or any part of the Obligations immediately due and payable, whereupon such Obligations shall become immediately due and payable without presentment, demand, protest, notice or legal process of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that all Obligations shall automatically become due and payable upon the occurrence of an Event of Default under Sections 8.1(g) or (i); and (iii) pursue all other remedies available to it by contract, at law or in equity, including but not limited to its rights under the Security Documents.
     (b) Right of Set-off. The Bank may, and is hereby authorized by the Borrower, at any time and from time to time, to the fullest extent permitted by applicable laws, without advance notice to the Borrower (any such notice being expressly waived by the Borrower), set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time owing by the Bank or any of its Affiliates to or for the credit or the account of the Borrower against any or all of the Obligations of the Borrower

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under this Agreement or the other Credit Documents now or hereafter existing, whether or not such obligations have matured. The Bank agrees promptly to notify the Borrower after any such set-off or application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.
     (c) Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the Bank’s rights and remedies set forth in this Agreement is not intended to be exhaustive and the exercise by the Bank of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder, under the other Credit Documents or under any other agreement between the Borrower and the Bank or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Bank in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Borrower and the Bank or their agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Credit Documents or to constitute a waiver of any Event of Default.
ARTICLE IX
MISCELLANEOUS
     9.1 Costs, Expenses and Taxes. The Borrower agrees to pay on demand all reasonable out-of-pocket expenses of the Bank, including reasonable fees and disbursements of counsel, in connection with: (i) the preparation, execution and delivery of this Agreement and the other Credit Documents, such fees not to exceed $15,000, plus reasonable disbursements, (ii) any amendments, supplements, consents or waivers hereto or to the Credit Documents, an d (iii) the administration or enforcement of this Agreement and the other Credit Documents. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement and the other Credit Documents and agrees to save the Bank harmless from an d against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. It is the intention of the parties hereto that the Borrower shall pay amounts referred to in this Section directly. In the event the Bank pays any of the amount s referred to in this Section directly, the Borrower will reimburse the Bank for such advances and interest on such advance shall accrue until reimbursed at the Default Rate.
     9.2 Indemnification. From and at all times after the date of this Credit Agreement, and in addition to all of the Bank’s other rights and remedies against the Borrower, the Borrower agrees to indemnify, defend and hold harmless the Bank and its directors, officers, employees, agents, successors, assigns and affiliates from and against the following (collectively “Costs”): any and all claims (whether valid or not), losses, damages, actions, suits, inquiries, investigations, administrative proceedings, judgments, liens, liabilities, penalties, fines, amount s paid in settlement, requirements of Governmental Authorities, punitive damages, interest, damages to natural resources and other costs and expenses of any kind or nature whatsoever (including without limitation reasonable attorneys’ fees and expenses, court costs and fees, and

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consultant and expert witness fees and expenses) arising in any manner, directly or indirectly, out of or by reason of (a) the negotiation, preparation, execution or performance of this Agreement or the other Credit Documents, or any transaction contemplated herein or therein, whether or not the Bank or any other party protected under this Section is a party to any action, proceeding or suit in question, or the target of any inquiry or investigation in question; provided, however, that no indemnified party shall have the right to be indemnified hereunder for any liability resulting from the willful misconduct or gross negligence of such indemnified party (as finally determined by a court of competent jurisdiction), (b) any breach of any of the covenants, warranties or representations of the Borrower hereunder or under any other Credit Document, (c) any lien or charge upon amounts payable hereunder by the Borrower to the Bank or any taxes, assessments, impositions and other charges in respect of the collateral secured by the Security Documents, (d) damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to any such collateral or the use thereof, (e) any violation or alleged violation of any Environmental Law, federal or state securities law, common law, equitable requirement or other legal requirement by the Borrower or with respect to any property owned, leased or operated by the Borrower (in the past, currently or in the future), or (f) any presence, generation, treatment, storage, disposal, transport, movement, release, suspected release or threatened release of any Hazardous Material on, in, to or from any property (or any part thereof including without limitation the soil and groundwater thereon and thereunder) owned, leased or operated by the Borrower (in the past, currently or in the future).
     All Costs shall be additional Obligations of the Borrower under this Credit Agreement, shall be payable on demand to the party to be indemnified, and shall be secured by the lien of the Security Documents.
     Without limiting the foregoing, the Borrower shall be obligated to pay, on demand, the costs of any investigation, monitoring, assessment, enforcement, removal, remediation, restoration or other response or corrective action undertaken by the Bank or any other indemnified party, or their respective agents, with respect to any property owned, leased or operated by the Borrower.
     It is expressly understood and agreed that the obligations of the Borrower under this Section shall not be limited to any extent by payment of the Obligations and termination of this Agreement and shall remain in full force and effect until expressly terminated by the Bank in writing.
     9.3 Arbitration; Preservation and Limitation of Remedies.
     (a) Upon demand of any party hereto, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any other Credit Document (“Disputes”) between the Borrower and the Bank shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from documents executed in the future, disputes as to whether a matter is subject to arbitration, or claims arising out of or connected with the transactions contemplated by this Agreement and the other Credit Documents. Arbitration shall be conducted under and

40

 

governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”), as in effect from time to time, and the Federal Arbitration Act, Title 9 of the U.S. Code, as amended. All arbitration hearings shall be conducted in the city in which the principal demand for arbitration and all hearings shall be concluded within 120 days of demand for arbitration. These time limitations may not be extended unless a party shows cause for extension and then for no more than a total of sixty (60) days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Financial Dispute Arbitration panel of the AAA. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted. Notwithstanding the foregoing, this arbitration provision does not apply to Disputes under or related to any Hedge Agreement. The parties do not waive applicable federal or state substantive law except a s provided herein.
     (b) Notwithstanding the preceding binding arbitration provisions, the parties hereto agree to preserve, without diminution, certain remedies that any party hereto may employ or exercise freely, either alone, in conjunction with or during a Dispute. Any party hereto shall have the right to proceed in any court of proper jurisdiction or by self-help to exercise or prosecute the following remedies, as applicable: (i) all rights to foreclose against any Collateral by exercising a power of sale granted pursuant to any of the Credit Documents or under applicable law or by judicial foreclosure and sale, including a proceeding to confirm the sale ; (ii) all rights of self-help, including peaceful occupation of real property and collection of rents, set-off, and peaceful possession of personal property; (iii) obtaining provisional or ancillary remedies, including injunctive relief, sequestration, garnishment, attachment, appointment of a receiver and filing an involuntary bankruptcy proceeding ; and (iv) when applicable, a judgment by confession of judgment. Any claim or controversy with regard to any party’s entitlement to such remedies is a Dispute. Preservation of these remedies does not limit the power of a n arbitrator to grant similar remedies that may be requested by a party in a Dispute. The parties hereto agree that no party shall have a remedy of punitive or exemplary damages against any other party in any Dispute, and each party hereby waives any right or claim to punitive or exemplary damages that it has now or that may arise in the future in connection with any Dispute, whether such Dispute is resolved by arbitration or judicially. The parties acknowledge that by agreeing to binding arbitration they have irrevocably waived any right they may have to a jury trial with regard to a Dispute. The Borrower agrees to pay the reasonable fees and expense s of counsel to the Bank in connection with any Dispute subject to arbitration as provided herein.
     9.4 Waiver of Automatic or Supplemental Stay. In the event that a petition for relief under any chapter of the Bankruptcy Code is filed by or against the Borrower, the Borrower promises and covenants that it will not seek a supplemental stay pursuant to Bankruptcy Code §§ 105 or 362 or any other relief pursuant to Bankruptcy Code § 105 or any other provision of the Bankruptcy Code, whether injunctive or otherwise, which would stay, interdict, condition, reduce or inhibit the Bank’s ability to enforce any rights it has, at law or in equity, to collect the Obligations from any Person other than the Borrower.

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     9.5 Notices. All demands, notices, approvals, consents, requests, and other communications hereunder shall be in writing and shall be deemed to have been given when the writing is delivered, if given or delivered by hand, overnight delivery service or facsimile transmitter (with confirmed receipt), or five (5) days after being mailed, if mailed, by first class, registered or certified mail, postage prepaid, to the address or telecopy number set forth below:
         
  Party   Address  
 
 
Borrower
  Xxxxxxx International, Inc.  
 
 
  0000 Xxxxxxxx Xxxx  
 
 
  Xxxxxxxxx, Xxxxx Xxxxxxxx 00000  
 
 
  Attention: Xxxx X. Xxxxxx  
 
 
  Telephone: (000) 000-0000  
 
 
  Fax: (000) 000-0000  
 
 
      
 
Bank
  Wachovia Bank, National Association  
 
 
  000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx  
 
 
  Xxxxxxxxx, Xxxxx Xxxxxxxx 28288-0334  
 
 
  Attention: Cavan Xxxxxx  
 
 
  Telephone : (000) 000-0000  
 
 
  Telecopy: (000) 000-0000  
The Borrower or the Bank may, by notice given hereunder, designate any further or different addresses or telecopy numbers to which subsequent demands, notices, approvals, consents, requests or other communications shall be sent or persons to whose attention the same shall be directed.
     9 .6 Continuing Obligations. All agreements, representations and warranties contained herein or made in writing by or on behalf of the Borrower in connection with the transactions contemplated hereby shall survive the execution and delivery of this Agreement an d the other Credit Documents. The Borrower further agrees that to the extent the Borrower makes a payment to the Bank, which payment or any part thereof is subsequently invalidated, declare d to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or other similar state or federal statute, or principle of equity, then, to the extent of such repayment by the Bank, the Obligation or part thereof intended to be satisfied by such payment shall be revived and continued in full force and effect as if such payment had not been received by the Bank.
     9.7 Controlling Law. This Agreement has been executed, delivered and accepted at, and shall be deemed to have been made in, North Carolina and shall be interpreted in accordance with the internal laws (as opposed to conflicts of laws provisions) of the State of North Carolina.
     9.8 Successors and Assigns. This Agreement shall be binding upon the Borrower and its successors and assigns and all rights against the Borrower arising under this Agreement shall be for the sole benefit of the Bank.

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     9.9 Assignment and Sale. The Borrower may not sell, assign or transfer this Agreement or any of the other Credit Documents or any portion hereof or thereof, including without limitation the Borrower’s rights, title, interests, remedies, powers, and duties hereunder or thereunder. The Bank may assign or sell a participation interest in all or any portion of the Loans to one or more other financial institutions.
     9.10 Entire Agreement. THIS AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF. THIS AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NO T BE CONTRADICTED BY PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
     9.11 Amendment. Any provision of this Agreement or any other Credit Document to which the Borrower is a party may be amended if such amendment is in writing and is signed by the Borrower and the Bank. In connection with any amendment entered into in accordance with this Section at the request of the Borrower or upon an Event of Default, the Borrower shall pay to the Bank a fee to be negotiated between the Borrower and the Bank. Payment of such fee by the Borrower to the Bank shall be a condition precedent to the effectiveness of such amendment and shall be due on the date such amendment is signed by the Bank. No such fee shall be due in connection with any amendment entered into at the request of the Bank; provided, that no Event of Default shall have occurred and be continuing.
     9.12 Severability. In the event that any provision of this Agreement shall be determined to be invalid or unenforceable by any court of competent jurisdiction, such determination shall not invalidate or render unenforceable any other provision hereof.
     9.13 Confidentiality. The Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates an d to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors an d other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it, (c) to the extent required by applicable Requirements of Law or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Credit Document or any Hedge Agreement or any action or proceeding relating to this Agreement or any other Credit Document or any Hedge Agreement or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee or prospective assignee of any of its rights or obligations under this Agreement, or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the

43

 

extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Bank or any of its Affiliates on a nonconfidential basis from a source other than the Borrower or any of its Subsidiaries or Affiliates.
     For purposes of this Section, “Information” means all information received from the Borrower relating to any of the Borrower and its Subsidiaries or any of their respective businesses, other than any such information that is available to the Bank on a nonconfidential basis prior to disclosure by the Borrower or its Subsidiaries, provided that, in the case of information received from any of the Borrower or its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
     9.14 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which, together shall constitute but one and the same instrument.
     9.15 Captions. The captions to the various sections and subsections of this Agreement have been inserted for convenience only and shall not limit or affect any of the terms hereof.
[The remainder of this page is left blank intentionally.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the date first above written.
             
    XXXXXXX INTERNATIONAL, INC.    
 
            
 
  By:   /s/ Xxxx X. Xxxxxx    
 
  Name:
Title: 		 
 
Xxxx X. Xxxxxx
 
Xx. Vice President
 
      
 
            
    WACHOVIA BANK, NATIONAL ASSOCIATION    
 
            
 
  By:   /s/ Cavan X. Xxxxxx    
 
  Name:
Title: 		 
 
Cavan X. Xxxxxx
 
Vice President
 
      

 

 

Exhibit A
REVOLVING NOTE
     
$5,000,000   November 14, 2005     
    Charlotte, North Carolina
     FOR VALUE RECEIVED, XXXXXXX INTERNATIONAL, INC. (the “Borrower”), hereby promises, jointly and severally, to pay to the order of
     WACHOVIA BANK, NATIONAL ASSOCIATION (the “Bank”), located at One Wachovia Center, 301 South College Street, Charlotte, North Carolina (or at such other place or places as the Bank may designate), at the times and in the manner provided in the Credit Agreement, dated as of November 14, 2005 (as amended, modified, restated or supplemented from time to time, the “Credit Agreement”), between the Borrower and the Bank, the principal sum of
     FIVE MILLION DOLLARS ($5,000,000), or such lesser amount as may constitute the unpaid principal amount of the Revolving Loans made by the Bank, under the terms and conditions of this promissory note (this “Revolving Note”) and the Credit Agreement. The defined terms in the Credit Agreement are used herein with the same meaning. The Borrower also promises to pay interest on the aggregate unpaid principal amount of this Revolving Note at the rates applicable thereto from time to time as provided in the Credit Agreement.
     This Revolving Note is issued to evidence the Revolving Loans made by the Bank pursuant to the Credit Agreement. All of the terms, conditions and covenants of the Credit Agreement are expressly made a part of this Revolving Note by reference in the same manner and with the same effect as if set forth herein at length, and any holder of this Revolving Note is entitled to the benefits of and remedies provided in the Credit Agreement and the other Credit Documents. Reference is made to the Credit Agreement for provisions relating to the interest rate, maturity, payment, prepayment and acceleration of this Revolving Note.
     In the event of an acceleration of the maturity of this Revolving Note, this Revolving Note shall become immediately due and payable, without presentation, demand, protestor notice of any kind, all of which are hereby waived by the Borrower.
     In the event this Revolving Note is not paid when due at any stated or accelerate d maturity, the Borrower agrees to pay, in addition to the principal and interest, all reasonable and documented out-of-pocket costs of collection, including reasonable attorneys’ fees.
     This Revolving Note shall be governed by and construed in accordance with the internal laws and judicial decisions of the State of North Carolina. The Borrower hereby submits to the nonexclusive jurisdiction and venue of the federal and state courts located in Mecklenburg County, North Carolina, although the Bank shall not be limited to bringing a n action in such courts.

 

 

     IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be executed by its duly authorized corporate officer as of the day and year first above written.
             
    XXXXXXX INTERNATIONAL, INC.    
 
            
 
  By:        
 
 
Title: 		 
 
    
 
     
 
    
Signature Page to Revolving Note

 

 

Exhibit B
SUBSIDIARY GUARANTY
     THIS GUARANTY, dated as of November 14, 2005 (as amended, supplemented or modified from time to time, this “Guaranty”), is made by each of the undersigned Subsidiaries of XXXXXXX INTERNATIONAL, INC., a Nevada corporation (the “Borrower”), and each other Subsidiary of the Borrower that, after the date hereof, executes an instrument of accession hereto substantially in the form of Exhibit A (a “Guarantor Accession”; the undersigned and such other Subsidiaries of the Borrower, collectively, the “Subsidiary Guarantors”), in favor of the Bank. Capitalized terms used herein without definition shall have the meanings given to them in the Credit Agreement referred to below.
BACKGROUND STATEMENT
     A. The Borrower and the Bank are parties to a Credit Agreement, dated as of eve n date herewith (as amended, modified or supplemented from time to time, the “Credit Agreement”), providing for the availability of a $5,000,000 revolving credit facility (the “Loan” ) to the Borrower upon the terms and conditions set forth therein.
     B. As a condition to making the Loan to the Borrower, each Subsidiary Guarantor has agreed, by executing and delivering this Guaranty, to guarantee to the Lender the payment i n full of the Guaranteed Obligations (as hereinafter defined). The Bank is relying on this Guaranty in its decision to make the Loan to the Borrower, and would not enter into the Credit Agreement without this Guaranty.
     C. Each Subsidiary Guarantor will obtain benefits as a result of the Loan, which benefits are hereby acknowledged, and, accordingly, desires to execute and deliver this Guaranty.
STATEMENT OF AGREEMENT
     NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Subsidiary Guarantor does hereby covenant and agree with the Bank as follows:
     1. Guaranty.
     (a) Each Subsidiary Guarantor hereby unconditionally and absolutely guarantees to the Bank, the full and prompt payment and performance when due, whether at stated maturity, acceleration or otherwise, of (i)(A) the Loan by the Borrower under the Credit Agreement an d pursuant to the Note and the other Credit Documents, including, without limitation, all principal of and interest on the Loan, all fees, expenses, indemnities and other amounts payable by the Borrower under the Credit Agreement or any other Credit Document (including interest accruing after the filing of a petition or commencement of a case by or with respect to the Borrower seeking relief under any applicable federal and state laws pertaining to bankruptcy, reorganization, arrangement, moratorium, readjustment of debts, dissolution, liquidation or other

 

 

debtor relief, specifically including, without limitation, the Bankruptcy Code and any fraudulent transfer and fraudulent conveyance laws, whether or not the claim for such interest is allowed in such proceeding), and (B) all obligations of the Borrower to the Bank under any swap agreements (as defined in 11 U .S .C. § 101, as in effect from time to time), and (ii) all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses ) incurred or paid by the Bank in connection with any suit, action or proceeding to enforce or protect any of its rights hereunder (collectively, “Guaranteed Obligations”).
     (b) Notwithstanding the provisions of subsection (a) above and notwithstanding any other provisions contained herein or in any other Credit Document:
     (i) no provision of this Guaranty shall require or permit the collection from any Subsidiary Guarantor of interest in excess of the maximum rate or amount that such Subsidiary Guarantor may be required or permitted to pay pursuant to applicable law; and
     (ii) the liability of each Subsidiary Guarantor under this Guaranty as of any date shall be limited to a maximum aggregate amount (the “Maximum Guaranteed Amount”) equal to the greatest amount that would not render such Subsidiary Guarantor’s obligations under this Guaranty subject to avoidance, discharge or reduction as of such date as a fraudulent transfer or conveyance under applicable federal and state laws pertaining to bankruptcy, reorganization, arrangement, moratorium, readjustment of debts, dissolution, liquidation or other debtor relief, specifically including, without limitation, the Bankruptcy Code and any fraudulent transfer and fraudulent conveyance laws (collectively, “Insolvency Laws”), in each instance after giving effect to all other liabilities of such Subsidiary Guarantor, contingent or otherwise, that are relevant under applicable Insolvency Laws (specifically excluding, however, any liabilities of such Subsidiary Guarantor in respect of intercompany indebtedness to the Borrower or any of its Affiliates to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Subsidiary Guarantor hereunder, and after giving effect as assets to the value (as determined under applicable Insolvency Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such Subsidiary Guarantor pursuant to (y) applicable law or (z) any agreement (including this Guaranty) providing for an equitable allocation among such Subsidiary Guarantor and other Affiliates of the Borrower of obligations arising under guaranties by such parties).
     (c) The Subsidiary Guarantors desire to allocate among themselves, in a fair an d equitable manner, their obligations arising under this Guaranty . Accordingly, in the event any payment or distribution is made hereunder on any date by a Subsidiary Guarantor (a “Funding Guarantor”) that exceeds its Fair Share (as hereinafter defined) as of such date, that Funding Guarantor shall be entitled to a contribution from each of the other Subsidiary Guarantors in the amount of such other Subsidiary Guarantor’s Fair Share Shortfall (as hereinafter defined) as of such date, with the result that all such contributions will cause each Subsidiary Guarantor’s Aggregate Payments (as hereinafter defined) to equal its Fair Share as of such date. “Fair Share” means, with respect to a Subsidiary Guarantor as of any date of determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum Guaranteed Amount (as hereinafter defined) with respect to such Subsidiary Guarantor to (y) the aggregate of the Adjusted Maximum Guarantee d Amounts with respect to all Subsidiary Guarantors, multiplied by (ii) the aggregate amount paid

2

 

or distributed on or before such date by all Funding Guarantors hereunder in respect of the obligations guarantied . “Fair Share Shortfall” means, with respect to a Subsidiary Guarantor a s of any date of determination, the excess, if any, of the Fair Share of such Subsidiary Guarantor over the Aggregate Payments of such Subsidiary Guarantor. “Adjusted Maximum Guaranteed Amount” means, with respect to a Subsidiary Guarantor as of any date of determination, the Maximum Guaranteed Amount of such Subsidiary Guarantor, determined in accordance with the provisions of subsection (b) above; provided that, solely for purposes of calculating the “Adjusted Maximum Guaranteed Amount” with respect to any Subsidiary Guarantor for purposes of this subsection (c), any assets or liabilities arising by virtue of any rights to subrogation, reimbursement or indemnity or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Subsidiary Guarantor. “Aggregate Payments” means, with respect to a Subsidiary Guarantor as of any date of determination, the aggregate amount of all payments and distributions made on or before such date by such Subsidiary Guarantor in respect of this Guaranty (including, without limitation, in respect of this subsection (c)). The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. Each Funding Guarantor’s right of contribution under this subsection (c ) shall be subject to the provisions of Section 6. The allocation among Subsidiary Guarantors of their obligations as set forth in this subsection (c) shall not be construed in any way to limit the liability of any Subsidiary Guarantor hereunder to the Bank.
     (d) The guaranty of each Subsidiary Guarantor set forth in this Section is a guaranty of payment as a primary obligor, and not a guaranty of collection. Each Subsidiary Guarantor hereby acknowledges and agrees that the Guaranteed Obligations, at any time and from time to time, may exceed the Maximum Guaranteed Amount of such Subsidiary Guarantor and ma y exceed the aggregate of the Maximum Guaranteed Amounts of all Subsidiary Guarantors, in each case without discharging, limiting or otherwise affecting the obligations of any Subsidiary Guarantor hereunder or the rights, powers and remedies of the Bank hereunder or under any other Credit Document.
     2. Guaranty Unconditional. The obligations of each Subsidiary Guarantor hereunder shall arise absolutely and unconditionally when the Loan has been made by the Bank to the Borrower. This Guaranty shall be a continuing, absolute and unconditional guaranty and shall remain in full force and effect until all of the Guaranteed Obligations shall have been paid in full and the period during which any payment of the Guaranteed Obligations to the Bank could be recovered as an avoidable preference under 11 U.S.C. § 547, or any successor provision thereof, has expired. Each Subsidiary Guarantor agrees that to the extent all or part of any payment of the Guaranteed Obligations is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then, to the extent of such repayment, this Guaranty shall continue in full force and effect or be revived and reinstated, as the case may be, as to the Guaranteed Obligations intended to be satisfied, as if such payment had not been received.
     3. Absolute and Primary Liability. Each Subsidiary Guarantor agrees that its obligations hereunder are irrevocable, absolute and unconditional, are independent of the Guaranteed Obligations, and shall not be discharged, released, limited, deferred, reduced or otherwise affected to any extent by reason of any of the following, whether or not such

3

 

Subsidiary Guarantor has notice or knowledge thereof: (a) the invalidity or unenforceability of the Credit Documents; (b) any bankruptcy, reorganization, arrangement, liquidation or insolvency of, or dissolution, termination, reorganization or other change in the structure or existence of, the Borrower, whether or not resulting in a discharge, reduction or restructuring of the Guaranteed Obligations; or (c) the application of any statute, regulation, order, rule, decree or other determination of any court or other governmental authority, the effect of which is to extend the term or time for payment of the Guaranteed Obligations.
     4. Releases, Extensions, Modifications, etc. Each Subsidiary Guarantor agrees that the Bank may at any time and from time to time, upon or without any terms or conditions and in whole or in part: (a) change the manner, place or terms of payment of, change or extend the time for payment of, or renew, accelerate or otherwise alter, the Guaranteed Obligations; (b) sell, exchange, release, substitute, compromise, realize upon or otherwise deal with in any manner and in any order, or fail to create, protect, perfect, secure, insure, continue or maintain any lien s in, any collateral or other security for the Guaranteed Obligations; (c) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to or substitutions for, the Guaranteed Obligations; (d) make or permit any amendment, modification or supplement to or restatement of, or consent to any rescission or waiver of or departure from, any provisions (including provisions relating to events of default) of the Credit Documents; and (e) exercise or refrain from exercising (whether voluntarily or involuntarily as a result of court order, operation of law or otherwise) any rights and remedies available under the Credit Documents, including, without limitation, foreclosing on any security held by the Bank in any order and by any manner of sale permitted under the Credit Documents and applicable law, whether or not every aspect of such sale is commercially reasonable. The Bank may act or fail to act in the foregoing manner without notice to or further assent by the Subsidiary Guarantors, whose obligations hereunder shall not be discharged, released, limited, deferred, reduced or otherwise affected in any manner or to any extent by reason of any of the foregoing, notwithstanding that any such action or failure to act may impair or extinguish any right of indemnification, contribution, reimbursement or subrogation or other right or remedy of each Subsidiary Guarantor against the Borrower or any collateral or other security for the Guaranteed Obligations.
     5. Waiver of Certain Rights; Subordination. Each Subsidiary Guarantor hereby knowingly, voluntarily and expressly waives all presentments, demands for payment, demand s for performance, protests and notices, including, without limitation, notices of nonpayment or other nonperformance, protest, dishonor, acceptance hereof, and of any of the matters referred to in Sections 3 and 4 and of any rights to consent thereto.
     6. No Subrogation; Subordination. Each Subsidiary Guarantor hereby agrees that, until all of the Guaranteed Obligations shall have been paid in full, it will not exercise or seek to exercise any claim or right that it may have against the Borrower or any other Subsidiary Guarantor at any time as a result of any payment made under or in connection with this Guaranty or the performance or enforcement hereof, including any right of subrogation to the rights of any of the Bank against the Borrower or any other Subsidiary Guarantor, any right of indemnity, contribution or reimbursement against the Borrower or any other Subsidiary Guarantor (including rights of contribution as set forth in Section 1(c)), any right to enforce any remedies of the Bank against the Borrower or any other Subsidiary Guarantor, or any benefit of, or any right to participate in, any security held by the Bank to secure payment of the Guaranteed

4

 

Obligations, in each case whether such claims or rights arise by contract, statute (including without limitation the Bankruptcy Code), common law or otherwise. Each Subsidiary Guarantor further agrees that all indebtedness and other obligations, whether now or hereafter existing, of the Borrower or any other Subsidiary of the Borrower to such Subsidiary Guarantor, including, without limitation, any such indebtedness in any proceeding under the Bankruptcy Code and any intercompany receivables, together with any interest thereon, shall be, and hereby are, subordinated and made junior in right of payment to the Guaranteed Obligations. Each Subsidiary Guarantor further agrees that if any amount shall be paid to or any distribution received by any Subsidiary Guarantor (i) on account of any such indebtedness at any time after the occurrence and during the continuance of an Event of Default, or (ii) on account of any such rights of subrogation, indemnity, contribution or reimbursement at any time prior to the repayment of the Guaranteed Obligation in full, such amount or distribution shall be deemed to have been received and to be held in trust for the benefit of the Bank, and shall forthwith be delivered to the Bank in the form received (with any necessary endorsements in the case of written instruments), to be applied against the Guaranteed Obligations, whether or not matured, in accordance with the terms of the applicable Credit Documents and without in any way discharging, limiting or otherwise affecting the liability of such Subsidiary Guarantor under any other provision of this Guaranty. Additionally, in the event the Borrower or any Subsidiary of the Borrower becomes a “debtor” within the meaning of the Bankruptcy Code or any successor statute, the Bank shall be entitled, at its option, and is hereby authorized and appointed by each Subsidiary Guarantor, to file proofs of claim on behalf of each relevant Subsidiary Guarantor and vote the rights of each such Subsidiary Guarantor in any plan of reorganization, and to demand, xxx for, collect and receive every payment and distribution on any indebtedness of the Borrower or such Subsidiary to any Subsidiary Guarantor in any such proceeding, each Subsidiary Guarantor hereby assigning to the Bank all of its rights in respect of any such claim, including the right to receive payments and distributions in respect thereof.
     7. Representations and Warranties. In order to induce the Bank to accept this Guaranty and to enter into the Credit Agreement, each Subsidiary Guarantor represents and warrants to the Bank (which representations and warranties shall survive the execution and delivery of this Guaranty) that:
     (a) Such Subsidiary Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation.
     (b) The execution, delivery and performance of this Guaranty (i) are within the corporate power and authority of such Subsidiary Guarantor, and (ii) have been duly authorized by all necessary corporate action on the part of such Subsidiary Guarantor.
     (c) This Guaranty has been duly executed and delivered to the Bank by an officer of the Subsidiary Guarantor who has been duly authorized to perform such acts.
     (d) This Guaranty constitutes the legal, valid and binding obligation of such Subsidiary Guarantor enforceable against such Subsidiary Guarantor in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, statutes or rules of general application affecting the enforcement of creditors’ rights or general principles of equity.

5

 

     (e) The execution and delivery by such Subsidiary Guarantor of this Guaranty and the performance by such Subsidiary Guarantor of its obligations hereunder (i) do not violate provisions of statutory laws or regulations applicable to it, (ii) do not violate its articles of incorporation or bylaws, (iii) do not breach or result in a default under any other agreement to which it is a party, and (iv) do not violate the terms of any judicial or administrative judgment, order, decree or arbitral decision that names such Subsidiary Guarantor and is specifically directed to it or its properties.
     (f) There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of such Subsidiary Guarantor, threatened against or affecting such Subsidiary Guarantor wherein a n unfavorable decision, ruling or finding would have a material adverse effect on the financial condition of such Subsidiary Guarantor or would adversely affect the transactions contemplate d by, or the validity or enforceability of, this Guaranty.
     (g) All information heretofore furnished by such Subsidiary Guarantor to the Bank, financial or otherwise, for purposes of or in connection with this Guaranty or any transaction contemplated hereby is true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. Such Subsidiary Guarantor has disclosed to the Bank in writing any and all facts which materially and adversely affect or may affect (to the extent such Subsidiary Guarantor can now reasonably foresee), the business, operations, prospects or condition, financial or otherwise, of such Subsidiary Guarantor, or the ability of such Subsidiary Guarantor to perform its obligation s under this Guaranty.
     8. Financial Condition of Borrower. Each Subsidiary Guarantor represents that it has knowledge of the Borrower’s financial condition and affairs and that it has adequate means to obtain from the Borrower on an ongoing basis information relating thereto and to the Borrower’s ability to pay and perform the Guaranteed Obligations, and agrees to assume the responsibility for keeping, and to keep, so informed for so long as this Guaranty is in effect with respect to such Subsidiary Guarantor. Each Subsidiary Guarantor agrees that the Bank shall have no obligation to investigate the financial condition or affairs of the Borrower for the benefit of any Subsidiary Guarantor nor to advise any Subsidiary Guarantor of any fact respecting, or any change in, the financial condition or affairs of the Borrower that might become known to any Bank at any time, whether or not the Bank knows or believes or has reason to know or believe that any such fact or change is unknown to any Subsidiary Guarantor, or might (or does ) materially increase the risk of any Subsidiary Guarantor as guarantor, or might (or would) affect the willingness of any Subsidiary Guarantor to continue as a guarantor of the Guaranteed Obligations.
     9. Payments; Application: Set-Off.
     (a) Each Subsidiary Guarantor agrees that, upon the failure of the Borrower to pay any Guaranteed Obligations when and as the same shall become due (whether at the stated maturity, by acceleration or otherwise), and without limitation of any other right or remedy that the Bank may have at law, in equity or otherwise against such Subsidiary Guarantor, such Subsidiary Guarantor will, subject to the provisions of Section 1(b), forthwith pay or cause to be

6

 

paid to the Bank, an amount equal to the amount of the Guaranteed Obligations then due and owing as aforesaid.
     (b) All payments made hereunder shall be applied upon receipt as follows:
     (i) first, to the payment of all reasonable costs and expenses owing to the Bank pursuant to Section 1(a)(ii);
     (ii) second, after payment in full of the amounts specified in clause (i) above, to the payment of the other Guaranteed Obligations owing to the Bank Section 1(a)(i); and
     (iii) third, after payment in full of the amounts specified in clauses (i) and (ii ) above, and following the termination of this Guaranty, to the Subsidiary Guarantors or any other Person lawfully entitled to receive such surplus.
     (c) The Subsidiary Guarantors shall remain jointly and severally liable to the extent of any deficiency between the amount of all payments made hereunder and the aggregate amount of the sums referred to in clauses (i) and (ii) of subsection (b) above.
     (d) In addition to all other rights and remedies available under the Credit Documents or applicable law or otherwise, upon and at any time after the occurrence and during the continuance of any Event of Default, the Bank may, and is hereby authorized by each Subsidiary Guarantor, at any such time and from time to time, to the fullest extent permitted by applicable law, without presentment, demand, protest or other notice of any kind, all of which are hereby knowingly and expressly waived by each Subsidiary Guarantor, to set off and to apply any an d all deposits (general or special, time or demand, provisional or final) and any other property at any time held (including at any branches or agencies, wherever located), and any other indebtedness at any time owing, by the Bank to or for the credit or the account of such Subsidiary Guarantor against any or all of the obligations of such Subsidiary Guarantor to the Bank hereunder now or hereafter existing, whether or not such obligations may be contingent or unmatured, each Subsidiary Guarantor hereby granting to the Bank a continuing security interest in and Lien upon all such deposits and other property as security for such obligations. The Bank agrees to notify any affected Subsidiary Guarantor promptly after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.
     10. No Waiver. The rights and remedies of the Bank expressly set forth in this Guaranty and the other Credit Documents are cumulative and in addition to, and not exclusive of, all other rights and remedies available at law, in equity or otherwise. No failure or delay on the part of the Bank in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or be construed to be a waiver of any Default or Event of Default. No course of dealing between any of the Subsidiary Guarantors and the Bank or its agents or employees shall be effective to amend , modify or discharge any provision of this Guaranty or any other Credit Document or to constitute a waiver of any Default or Event of Default. No notice to or demand upon any

7

 

Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor or any other Subsidiary Guarantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Bank to exercise any right or remedy or take any other or further action in any circumstances without notice or demand.
     11. Addition, Release of Subsidiary Guarantors. Each Subsidiary Guarantor recognizes that the provisions of the Credit Agreement require Persons that become Subsidiaries of the Borrower and that are not already parties hereto to become Subsidiary Guarantor s hereunder by executing a Subsidiary Guarantor Accession, and agrees that its obligation s hereunder shall not be discharged, limited or otherwise affected by reason of the same, or by reason of the Bank’s actions in effecting the same or in releasing any Subsidiary Guarantor hereunder, in each case without the necessity of giving notice to or obtaining the consent of any other Subsidiary Guarantor.
     12. Arbitration; Preservation and Limitation of Remedies
     (a) Upon demand of any party hereto, whether made before or after institution of an y judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Guaranty or any other Credit Document (“Disputes”) between any Subsidiary Guarantor and the Bank shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from documents executed in the future, disputes as to whether a matter is subject to arbitration, or claims arising out of or connected with the transactions contemplated by this Guaranty and the other Credit Documents. Arbitration shall be conducted under an d governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”), as in effect from time to time, and the Federal Arbitration Act, Title 9 of the U.S. Code, as amended. All arbitration hearings shall be conducted in the city in which the principal demand for arbitration and all hearings shall be concluded within 120 days of demand for arbitration. These time limitations may not be extended unless a party shows cause for extension and then for no more than a total of sixty (60 ) days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Financial Dispute Arbitration panel of the AAA. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted. Notwithstanding the foregoing, this arbitration provision does not apply to Disputes under or related to any Hedge Agreement. The parties do not waive applicable federal or state substantive law except a s provided herein.
     (b) Notwithstanding the preceding binding arbitration provisions, the parties here to agree to preserve, without diminution, certain remedies that any party hereto may employ or exercise freely, either alone, in conjunction with or during a Dispute. Any party hereto shall have the right to proceed in any court of proper jurisdiction or by self-help to exercise or prosecute the following remedies, as applicable: (i) all rights to foreclose against any Collateral

8

 

by exercising a power of sale granted pursuant to any of the Credit Documents or under applicable law or by judicial foreclosure and sale, including a proceeding to confirm the sale; (ii) all rights of self-help, including peaceful occupation of real property and collection of rents , set-off, and peaceful possession of personal property; (iii) obtaining provisional or ancillary remedies, including injunctive relief, sequestration, garnishment, attachment, appointment of a receiver and filing an involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by confession of judgment. Any claim or controversy with regard to any party’s entitlement to such remedies is a Dispute. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. The parties hereto agree that no party shall have a remedy of punitive or exemplary damages against any other party in any Dispute, and each party hereby waives any right or claim to punitive or exemplary damages that it has now or that may arise in the future in connection with an y Dispute, whether such Dispute is resolved by arbitration or judicially. The parties acknowledge that by agreeing to binding arbitration they have irrevocably waived any right they may have to a jury trial with regard to a Dispute. The Subsidiary Guarantors agree to pay the reasonable fees and expenses of counsel to the Bank in connection with any Dispute subject to arbitration as provided herein.
     13. Waiver of Automatic or Supplemental Stay. IN THE EVENT THAT A PETITION FOR RELIEF UNDER ANY CHAPTER OF THE BANKRUPTCY CODE IS FILED BY OR AGAINST THE BORROWER, EACH SUBSIDIARY GUARANTOR PROMISES AND COVENANTS THAT IT WILL NOT SEEK, OR CAUSE OR PERMIT THE COMPANY TO SEEK, A SUPPLEMENTAL STAY PURSUANT TO BANKRUPTCY CODE §§ 105 OR 362 OR ANY OTHER RELIEF PURSUANT TO BANKRUPTCY CODE § 105 OR ANY OTHER PROVISION OF THE BANKRUPTCY CODE, WHETHER INJUNCTIVE OR OTHERWISE, WHICH WOULD STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT THE BANK’S ABILITY TO ENFORCE ANY RIGHTS IT HAS UNDER THIS AGREEMENT, OR AT LAW OR IN EQUITY, OR ANY OTHER RIGHTS THE BANK HAS, WHETHER NOW OR HEREAFTER ACQUIRED, AGAINST ANY SUBSIDIARY GUARANTOR.
     14. Notices. All demands, notices, approvals, consents, requests, and other communications hereunder shall be in writing and shall be deemed to have been given when the writing is delivered if given or delivered by hand, overnight delivery service or facsimile transmitter (with confirmed receipt) or five (5) days after being mailed, if mailed, by first class, registered or certified mail, postage prepaid, addressed (a) if to any Subsidiary Guarantor, in care of the Borrower and at Borrower’s address for notices set forth in the Credit Agreement and (b) if to the Bank, at its address for notices set forth in the Credit Agreement; or to such other address as any of the Persons listed above may designate for itself by like notice to the other Persons listed above; and in each case, with copies to such other Persons as may be specified under the provisions of the Credit Agreement.
     15. Controlling Law. This Guaranty has been accepted at, and shall be deemed to have been made in, North Carolina and shall be interpreted in accordance with the internal law s (as opposed to conflicts of laws provisions) of the State of North Carolina.

9

 

     16. Successors and Assigns. This Guaranty shall be binding upon each Subsidiary Guarantor, its successors and assigns and all rights against such Subsidiary Guarantor arising under this Guaranty shall be for the sole benefit of the Bank.
     17. Amendment. This Guaranty can be amended or modified only by an instrument in writing signed by the parties hereto.
     18. Entire Agreement. THIS GUARANTY AND THE DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY AND THE DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
     19. Severability. In the event that any provision of this Guaranty shall be determined to be invalid or unenforceable by any court of competent jurisdiction, such determination shall not invalidate or render unenforceable any other provision hereof.
     20. Counterparts. This Guaranty may be executed in several counterparts, each of which shall be an original and all of which, together shall constitute but one and the same instrument.
[The remainder of this page is left blank intentionally.]

10

 

     IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this Guaranty Agreement to be executed as of the date first written above.
             
  SUBSIDIARY GUARANTORS:    
 
            
    XXXXXXX HYGIENE FRANCHISE CORP.    
 
            
 
  By:        
 
     
 
Xxxx X. Xxxxxx 		   
 
      Vice President    
 
            
    SHFC BUFFALO, LLC    
 
            
 
  By:        
 
     
 
Xxxx X. Xxxxxx 		   
 
      Manager    
 
            
    SHFC MINNEAPOLIS, LLC    
 
            
 
  By:        
 
     
 
Xxxx X. Xxxxxx 		   
 
      Manager    
 
            
    SHFC OKLAHOMA, LLC    
 
            
 
  By:        
 
     
 
Xxxx X. Xxxxxx 		   
 
      Manager    
 
    SHFC OPERATIONS, LLC    
 
            
 
  By:        
 
     
 
Xxxx X. Xxxxxx 		   
 
      Manager    
Signature Page to Guaranty

 

 

             
    XXXXXXX PEST CONTROL CORP.    
 
            
 
  By:        
 
     
 
Xxxx X. Xxxxxx 		   
 
      Vice President    
 
            
    XXXXXXX MAIDS, INC.    
 
            
 
  By:        
 
     
 
Xxxx X. Xxxxxx 		   
 
      Vice President    
ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN :
WACHOVIA BANK, NATIONAL ASSOCIATION
         
By:
        
 
 
 
    
Name:
        
 
 
 
    
Title :
        
 
 
 
    
Signature Page to Guaranty

 

 

EXHIBIT A
GUARANTOR ACCESSION
     THIS GUARANTOR ACCESSION (this “Accession”), dated as of                     , is executed and delivered by [NAME OF NEW GUARANTOR], a                      corporation (the “Company”), pursuant to the Guaranty referred to hereinbelow.
     Reference is made to the Credit Agreement, dated as of November 14, 2005, between Xxxxxxx International, Inc. (the “Borrower”) and Wachovia Bank, National Association (the “Bank”) (as amended, modified or supplemented from time to time, the “Credit Agreement”). In connection with and as a condition to the initial and continued extensions of credit under the Credit Agreement, the Borrower and certain of its subsidiaries have executed and delivered a Guaranty, dated as of November 14, 2005 (as amended, modified or supplemented from time to time, the “Guaranty”), pursuant to which such subsidiaries have guaranteed the payment in full of the obligations of the Borrower under the Credit Agreement and the other Credit Documents (as defined in the Credit Agreement). Capitalized terms used herein without definition shall have the meanings given to them in the Guaranty.
     The Borrower has agreed under the Credit Agreement to cause each of its future subsidiaries to become a party to the Guaranty as a guarantor thereunder. The Company is a subsidiary of the Borrower. The Company will obtain benefits as a result of the continue d extension of credit to the Borrower under the Credit Agreement, which benefits are hereby acknowledged, and, accordingly, desire to execute and deliver this Accession. Therefore, in consideration of the foregoing and other good and valuable consideration, the receipt an d sufficiency of which are hereby acknowledged, and to induce the Bank to continue to extend credit to the Borrower under the Credit Agreement, the Company hereby agrees as follows:
     1. The Company hereby joins in and agrees to be bound by each and all of the provisions of the Guaranty as a Subsidiary Guarantor thereunder. In furtherance (and without limitation) of the foregoing, pursuant to Section 1 of the Guaranty, the Company hereby irrevocably, absolutely and unconditionally, and jointly and severally with each other Subsidiary Guarantor, guarantees to the Bank the full and prompt payment, at any time and from time to time as and when due (whether at the stated maturity, by acceleration or otherwise), of all of the Guaranteed Obligations, all on the terms and subject to the conditions set forth in the Guaranty.
     2. The Company hereby represents and warrants that after giving effect to this Accession, each representation and warranty contained in Section 7 of the Guaranty is true an d correct with respect to the Company as of the date hereof, as if such representations and warranties were set forth at length herein.
     3. This Accession shall be a Credit Document (within the meaning of such term under the Credit Agreement), shall be binding upon and enforceable against the Company and its successors and assigns, and shall inure to the benefit of and be enforceable by the Bank and its successors and assigns. This Accession and its attachments are hereby incorporated into the Guaranty and made a part thereof.

 

 

     IN WITNESS WHEREOF, the Company has caused this Accession to be executed by its duly authorized officer as of the date first above written.
             
    [NAME OF NEW GUARANTOR]    
 
            
 
  By:        
 
     
 
    
 
  Title :        
 
     
 
    

2

 

Exhibit C
COMPLIANCE CERTIFICATE
     THIS CERTIFICATE is delivered pursuant to the Credit Agreement, dated as of November 14, 2005 (the “Credit Agreement”), among Xxxxxxx International, Inc., a Nevada corporation (the “Borrower”) and Wachovia Bank, National Association. Capitalized terms use d herein without definition shall have the meanings given to such terms in the Credit Agreement.
     The undersigned hereby certifies that:
     1. He is the duly elected [President][Chief Financial Officer].
     2. Enclosed with this Certificate are copies of the financial statements of the Borrower and its Subsidiaries as of __________, and for the [________-month period] [year] then ended, required to be delivered under [Section 5.1(a)] [5.1(b)] of the Credit Agreement. Such financial statements have been prepared in accordance with GAAP [(subject to the absence of notes required by GAAP and subject to normal year-end adjustments)] ‘ and fairly present the financial condition of the Borrower and its Subsidiaries on a consolidated basis as of the date indicated and the results of operation of the Borrower and its Subsidiaries on a consolidated basis for the period covered thereby.
     3. The undersigned has reviewed the terms of the Credit Agreement and has made , or caused to be made under the supervision of the undersigned, a review in reasonable detail of the transactions and condition of the Borrower and its Subsidiaries during the accounting period covered by such financial statements.
     4. The examination described in paragraph 3 above did not disclose, and the undersigned has no knowledge of the existence of, any Default or Event of Default during or at the end of the accounting period covered by such financial statements or as of the date of this Certificate. [, except as set forth below.
Describe here or in a separate attachment any exceptions to paragraph 4 above by listing, i n reasonable detail, the nature of the Default or Event of Default, the period during which it existed and the action that the Borrower and/or Guarantor has taken or proposes to take with respect thereto.]
     5. Attached to this Certificate as Attachment A is a covenant compliance worksheet reflecting the computation of the financial covenants set forth in Article VI of the Credit Agreement as of the last day of and for the period covered by the financial statements enclose d herewith.
 
1   Insert in the case of quarterly financial statements.

 

 

     IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the ________ day of ____________, ___.
             
    XXXXXXX INTERNATIONAL, INC.    
 
            
 
  By:        
 
     
 
    
 
  Name:        
 
     
 
    
 
  Title :        
 
     
 
    

2

 

ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
A. Fixed Charge Coverage Ratio (Section 6.1 of the Credit Agreement)
                 
(1) Consolidated EBITDA for the reference period ending on the date of determination (from Line D(3 ) below)
           $                       
 
                
(a) Aggregate amount of payments on leases of real or personal property scheduled or required to have been made during such period
   $                               
 
                
(b) Cash dividends and distributions during such period
   $                               
 
                
(c) Line A(1)(a) minus Line A(l)(b)
   $                               
 
                
(2) Consolidated EBITDA, as adjusted for purposes of calculating the Fixed Charge Coverage Ratio:
                
Add Lines A(l) and A(l)(c)
           $                       
 
                
(3) Fixed Charges:
                
 
                
(a) Cash Consolidated Interest Expense for such period
   $                               
 
                
(b) Aggregate amount of principal payments on Funded Debt scheduled or required to have been made during such period
   $                               
 
                
(c) Tax expense for such period
   $                               
 
                
(d) Aggregate amount of payments on leases of real or personal property scheduled or required to have been made during such period
   $                               
 
                
(e) Fixed Charges:
                
Add Lines A(3)(a) through A(3)(d)
           $                       
 
                
(4) Fixed Charge Coverage Ratio:
                
Divide Line A(2) by Line A(3)(e)
                                   
 
                
(5) Minimum Fixed Charge Coverage Ratio as of the date of determination
             1.25:1.00  

 

 

B. Consolidated Tangible Net Worth (Section 6.2 of the Credit Agreement)
                 
(1) Base for calculating Consolidated Tangible Net Worth:
           $ 3,310,000  
 
                
(2) (a) Consolidated Net Income for each Fiscal Year (if positive) ending after Closing Date:
   $                               
 
                
(b) Net income adjustment:
                
Multiply Line 2(a) by 75%
           $                       
 
                
(3) (a) Aggregate amount of all increases in the stated capital and additional paid-in capital accounts of the Borrower and its Subsidiaries resulting from the issuance of equity securities or other Capital Stock after Closing Date:
   $                               
 
                
(b) Equity securities adjustment:
                
Multiply Line 3(a) by 50%
           $                       
 
                
(4) Required Consolidated Tangible Net Worth:
                
Add Lines B(1), B(2)(b) and B(3)(b)
           $                       
 
                
(5) Actual Consolidated Tangible Net Worth as of measurement date
(Total assets other than assets which would be treated as intangible assets for balance sheet presentation purposes under GAAP and Affiliate Note Receivables minus total liabilities)
           $                       

 

 

C. Funded Debt to EBITDA Ratio (Section 6.3 of the Credit Agreement)
         
(1) Funded Debt as of the date of determination
   $                       
 
        
(2) Consolidated EBITDA for the reference period ending on the date of determination (from Line D(3) below)
   $                       
 
        
(3) Total Funded Debt to EBITDA Ratio:
        
Divide Line C(1) by Line C(2)
                           
 
        
(4) Maximum Funded Debt to EBITDA Ratio as of the date of determination
     3.00:1.00  
D. Consolidated EBITDA
                 
(1) Consolidated Net Income for the reference period ending on the date of determination (from
Line E(2) below)
           $                       
 
                
(2) Additions to Consolidated Net Income (to the extent taken into account in the calculation of Consolidated Net Income for such period):
                
 
                
(a) Interest expense for such period
   $                               
 
                
(b) Income taxes for such period
   $                               
 
                
(c) Depreciation and amortization for such period
   $                               
 
                
(d) Add Lines D(2)(a) through D(2)(c)
   $                               
 
                
(3) Consolidated EBITDA :
                
Add Lines D(1) and D(2)(d)
           $                       

 

 

E. Consolidated Net Income
                 
(1) Net income or loss of the Borrower and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP
           $                       
 
                
(a) Extraordinary losses or charges for such period (attach itemized schedule)
   $                               
 
                
(b) Extraordinary gains or income for such period (attach itemized schedule)
   $                               
 
                
(2) Consolidated Net Income (Line E(l) plus Line E(1)(a) minus Line E(1)(b))
           $                       
F. Net Tangible Assets
                 
(1) Total assets of the Borrower and its Subsidiaries (other than assets which would be treated a s intangible assets for balance sheet presentation purposes under GAAP)
           $                       
 
                
(a) Restricted Cash and Affiliate Note Receivables
   $                               
 
                
Net Tangible Assets (Line F(1) minus Line F(1)(a)
   $                               
 
                
(2) Minimum Net Tangible Assets required to make Threshold Amount equal to Revolving Credit Commitment
           $ 750,000  
G. Unrestricted Cash
 
(1) Unrestricted Cash of the Borrower
           $                       
 
                
(2) Minimum Unrestricted Cash required to make Threshold Amount equal to Revolving Credit Commitment
           $ 500,000  

 

 

Exhibit D
NOTICE OF BORROWING
November 10, 2005
Wachovia Bank, National Association
Charlotte Plaza Building
201 South College Street, 8th Floor NC 0680
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Syndication Agency Services
Ladies and Gentlemen:
     The undersigned, Xxxxxxx International, Inc. (the “Borrower”), refers to the Credit Agreement, dated as of November 14, 2005, among the Borrower and you (as amended, modified, restated or supplemented from time to time, the “Credit Agreement,” the terms defined therein being used herein as therein defined), and, pursuant to Section 3.2(a) of the Credit Agreement, hereby gives you irrevocable notice that the Borrower requests a Borrowing of Revolving Loan under the Credit Agreement, and to that end sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 3.2(a) of the Credit Agreement:
     (i) The aggregate principal amount of the Proposed Borrowing is $                     .1
     (ii) The Proposed Borrowing is requested to be made on November 14, 2005 (the “Borrowing Date”).
     The Borrower hereby certifies that the following statements are true on and as of the date hereof and will be true on and as of the Borrowing Date:
     A. Each of the representations and warranties contained in Article IV of the Credit Agreement and in the other Credit Documents is and will be true and correct on and as of each such date, with the same effect as if made on and as of each such date, both immediately before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom (except to the extent any such representation or warranty is expressly stated to have been made as of a specific date, in which case such representation or warranty shall be true and correct as of such date);
     B. No Default or Event of Default has occurred and is continuing or would result from the Proposed Borrowing or from the application of the proceeds therefrom; and
 
1   Amount of Proposed Borrowing must comply with Section 2.1 of the Credit Agreement.

 

 

     C. After giving effect to the Proposed Borrowing, the sum of the aggregate principal amount of Revolving Loans outstanding will not exceed the lesser of the Revolving Credit Commitment or the Threshold Amount.
         
  Very truly yours,

XXXXXXX INTERNATIONAL, INC.
 		  
  By:      
 
  Name:      
 
  Title:      
 

 

 

Schedule 4.10(b)
Solvency
NONE

 

 

Schedule 4.10(c)
Notes Receivable
Note Schedule
Oct 31, 2005 - unaudited
                         
                Payment      
USD NOTES   Name   Payment Amount     Frequency   Balance 10/31/05  
NR002
   Charlotte     5,510.00     Monthly     287,852.99  
NR002-1
   Charlotte     1,000.68     Monthly     19,642.77  
NR002-3
   Charlotte     272.65     Weekly     9,565.35  
NR075
   Knoxville     292.66     Weekly     20,549.19  
NR089-4
   Tulsa     1,206.44     Weekly     295,852.67  
NR165-1
   NJ / Philly Metro     1,406.67     Monthly     37,382.18  
NR165-2
   Delaware     1,875.36     Monthly     104,165.19  
NR179
   Miami     1,059.36     Monthly     94,817.56  
NR199
   Reno     556.96     Monthly     19,064.62  
NR207-1
   Norfolk     703.73     Bi-weekly     17,223.75  
NR223
   Richmond     1,753.82     Monthly     78,491.08  
NR225
   Wichita     570.96     Monthly     11,153.83  
NR234
   Fresno     1,115.00     Monthly     25,875.31  
NR238
   Northern Virginia     475.35     Monthly     14,636.77  
NR242
   Staten Island     495.05     Monthly     15,159.16  
NR248
   Lincoln     308.63     Monthly     3,881.17  
NR253
   Oklahoma City     1,111.80     Monthly     49,005.80  
NR254
   Xxxxxx Valley     924.11     Monthly     40,200.25  
NR255
   Corpus Christi     496.26     Monthly     18,699.97  
 
                        
Xxx Xxxxxx
         500.00     Monthly     7,538.30  
 
                        
CAD NOTES
                        
NR149-2
   SW Ontario   CAD 105.10     Weekly   $ 5,277.80  
 
                        
SHFC KaiVac Leases
                        
KV070
   Greenville     324.00     Monthly     1,146.14  
KV162
         324.00     Monthly     1,154.49  
KV165
         324.00     Monthly     1,492.29  
KV199
         324.00     Monthly     1,167.03  
KV207
         324.00     Monthly     1,830.41  
KV225
         324.00     Monthly     1,845.79  
KV231
         363.00     Monthly     1,581.04  
KV234
         324.00     Monthly     1,146.14  
KV235
         363.00     Monthly     2,205.73  
KV248
         324.00     Monthly     1,160.36  
KV251
         324.00     Monthly     1,478.36  
KV258
         363.00     Monthly     193.96  
KV258-1
         363.00     Monthly     2,214.72  
 
                        
KV149
       CAD 401.49     Monthly     1,594.41  
 
                      
SHFC Notes Receivable
                   $ 1,196,246.58  
 
                      

 

 

                         
                Payment      
USD NOTES   Name   Payment Amount     Frequency   Balance 10/31/05  
AUD NOTES
                        
NR702
   Victoria Hygiene     1,888.05     Weekly   AUD 235,009.20  
NR710
   Xxxx Xxxxxxxx           Dec 05 Balloon   AUD 30,000.00  
 
                      
 
                        
SIANZ Notes Receivable
                   AUD 265,009.20  
 
                      
 
                        
SII NOTES
                        
Xxx Xxxxx
   Xxx Xxxxx     101.45     Monthly     499.26  
 
                      
 
                        
SII Notes Receivable
                     499.26  
 
                      

 

 

Schedule 4.13
Environmental Compliance
NONE

 

 

Schedule 4.14
Ownership of Properties
Owned Property: None
Leased Property:
  1.   Corporate Office of Xxxxxxx International, Inc. located at:
0000 Xxxxxxxx Xxxx, Xxxxxxxxx, XX 00000
Owned by Old Xxxx Properties, Xxxxx X. Xxxxx, III, Xxxx X. XxXxx and H. Xxxxxxx XxXxx
c/o Mr. Xxxx XxXxx
XxXxx Properties
000 Xxxxxxx Xxxx, Xxxxx X
Xxxxxxxxx, XX 00000
 
  2.   Corporate Office of Xxxxxxx International, Inc. located contiguous to the above at:
0000 Xxxxxxxx Xxxx, Xxxxxxxxx, XX 00000
Owned by Old Xxxx Properties, Xxxxx X. Xxxxx, III, Xxxx X. XxXxx and H. Xxxxxxx XxXxx
c/o Mr. Xxxx XxXxx
XxXxx Properties
000 Xxxxxxx Xxxx, Xxxxx X
Xxxxxxxxx, XX 00000
 
  3.   Warehouse office of SHFC Minneapolis, LLC, used for storing products and for operation of the Minneapolis company-owned Xxxxxxx Hygiene business located at:
00000 Xxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000
Owned by Xxxxxxx X. Xxxxxx dba Nicollet Business Center
c/o Wellington Management, Inc.
0000 Xxxxxx Xxxx Xxxxx, Xxxxx 000
Xx. Xxxx, XX 00000
 
  4.   Warehouse office of SHFC Buffalo, LLC, used for storing products and for operation of the Minneapolis company-owned Xxxxxxx Hygiene business located at:
000 Xxxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxx, XX 00000
Owned by The Uniland Partnership of Delaware, L.P.
University Corporate Centre
000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000

 

 

Schedule 4.15
Intellectual Property
See Report Attached

 

 

XXXXXXX INTERNATIONAL, INC.
INTERNATIONAL AND DOMESTIC TRADEMARKS
TRADEMARK STATUS REPORT
a/o October 21, 2005
                                         
    Our                                    
    File               Appln.   Appln.   Reg.   Reg.   Renewal    
    No.   Country   Status*   Xxxx   No.   Date   No.   Date   Due   Comments
1
   .0609   Australia   REG   XXXXXXX & Design   713983   07/30/96   713983   07/30/96   07/30/06    
2
   .0606   Canada   REG   SANISERVICE   744,438   12/22/93   TMA 462,236   08/30/96   08/30/11    
3
   .0607   Canada   REG   “S” Design   744,427   12/22/93   TMA 471,527   02/25/97   02/25/12    
4
   .0608   Canada   REG   “S” XXXXXXX MAIDS & Design   755,673   05/26/94   TMA 471,555   02/25/97   02/25/12    
5
   N/A   Canada   ABD   XXXXXXX & Design   149,485   02/22/93   N/A   N/A   N/A   Abandoned on 08/18/94
6
   .0610   China   REG   XXXXXXX & Design   9700106284   10/09/97   1,219,941   10/28/98   10/27/08    
7
   .0603   CTM   REG   XXXXXXX & Design   287565   07/10/96   287565   01/26/99   07/10/06    
8
   .0620   CTM   Use-Based   XXXXXXX   3920683   06/29/04   N/A   N/A   N/A   Due to opposition proceedings, Cls. 3 and 5 will be withdrawn; however, the application will proceed for Class 37
9
   .0621   CTM   ABD   XXXXXXX & Design [WITHDRAWN]   3920717   06/29/04   N/A   N/A   N/A   Application is being withdrawn due to opposition proceeding
10
   .0632   CTM   Use-Based   “S” Design   4580437   09/09/05   N/A   N/A   N/A   Awaiting copy of application.
00
   .0000   Xxxxxxx   X/X   XXXXXXX   X/X   X/X   X/X   X/X   X/X   Xxxxxxxx Xxxxxx is not the responsible attorney. Assisted with Power of Attorney only
00
   .0000   Xxxxxxxxx   REG   XXXXXXX & Design   007336-2003   10/09/03   131162   07/29/04   07/29/14    
13
   .0613   Hong Kong   REG   XXXXXXX & Design   99/08072   06/24/99   200006353   06/24/99   06/23/06    
14
   .0628   India   REG   XXXXXXX & Design (Cl. 3)   950100   08/25/00   950100   08/25/00   08/25/10    

1

 

XXXXXXX INTERNATIONAL, INC.
INTERNATIONAL AND DOMESTIC TRADEMARKS
TRADEMARK STATUS REPORT
a/o October 21, 2005
                                         
    Our                                    
    File               Appln.   Appln.   Reg.   Reg.   Renewal    
    No.   Country   Status*   Xxxx   No.   Date   No.   Date   Due   Comments
15
   .0629   India   Use-Based   XXXXXXX & Design (Cl. 5)   950103   08/25/00   N/A   N/A   N/A   Application pending before Trade Xxxx Office - awaiting response from foreign associate
16
   .0630   India   REG   XXXXXXX XX CONCENTRATE   950102   08/25/00   950102   08/25/00   08/25/10    
17
   .0631   India   Use-Based   XXXXXXX CHROME CLEANER   950101   08/25/00   N/A   N/A   N/A   Application pending before Trade Xxxx Office - awaiting response from foreign associate
18
   .0622   Indonesia   REG   XXXXXXX & Design   J96-24802   11/08/96   402108   11/08/96   11/08/06 (opens 11/08/05)    
19
   .0614   Ireland   REG   XXXXXXX & Design   99/2377   07/14/99   214241   07/14/99   07/14/09    
00
   .0000   Xxxxx   REG   XXXXXXX & Design   89829/96   12/05/97   4089444   12/05/97   12/05/07    
00
   .0000   Xxxxx   REG   XXXXXXX   2004-017576   02/26/04   4808860   10/08/04   10/08/14    
22
   .0615   Korea   REG   XXXXXXX & Design   97-11601   08/16/97   49435   11/13/98   11/13/08    
23
   .0619   Macau   REG   XXXXXXX & Design   N/003045   01/21/98   N/003045   07/03/98   1st renewal filed

2nd renewal
due by
01/21/12		   Actual renewal date is January 21, 2012 (prev. information supplied to WM was 07/03/2012)
00
   .0000   Xxxxxxxx   REG   XXXXXXX & Design   97/18894   12/01/97   97/18894   12/01/97   12/01/07    
25
   .0000   Xxxxxx   REG   XXXXXXX   752320   08/29/01   752320   06/27/02   08/29/11    
26
   .0616   New Zealand   REG   XXXXXXX   232932   12/17/93   232932   01/22/97   12/17/14    
27
   .0617   New Zealand   REG   XXXXXXX   232933   12/17/93   232933   01/22/97   12/17/14    

2

 

XXXXXXX INTERNATIONAL, INC.
INTERNATIONAL AND DOMESTIC TRADEMARKS
TRADEMARK STATUS REPORT
a/o October 21, 2005
                                         
    Our                                    
    File               Appln.   Appln.   Reg.   Reg.   Renewal    
    No.   Country   Status*   Xxxx   No.   Date   No.   Date   Due   Comments
 
28
   .0618   Norway   REG   XXXXXXX & Design   199906182   06/24/99   199799   10/07/99   10/07/09    
 
                                        
00
   .0000   Xxxxxxxxxxx   REG   XXXXXXX & Design   123789   08/20/97   41997123799   04/04/02   04/04/08 – 5th anniversary 04/04/13 – 10th Anniversary 04/04/18 – 15th    
 
                                        
30
   .0612   Singapore   REG   XXXXXXX & Design   8108/96   08/03/96   8108/96   08/03/96   08/03/06    
 
                                        
31
   .0626   Taiwan   REG   XXXXXXX & Design   (00)000000   00/02/96   93545   09/01/97   08/31/07    
 
                                        
32
   .0627   Thailand   REG   XXXXXXX & Design   314800   08/13/96   BOR5642   09/02/97   09/02/07    
 
                                        
33
   .0000   Xxxxxx   Use-Based   XXXXXXX   2004/37716   11/19/04   N/A   N/A   N/A   Before examining attorney
 
                                        
00
   .0000   Xxxxxx   Use-Based   XXXXXXX & Design   2004/37717   11/19/04   N/A   N/A   N/A   Before examining attorney
 
                                        
35
   .0400   U.S.   REG   XXXXXXX & Design   74250147   02/27/92   1744818   01/05/93   01/05/13    
 
                                        
36
   .0401   U.S.   REG   XXXXXXX   74362093   02/25/93   1818173   01/25/94   01/25/14    
 
                                        
37
   .0402   U.S.   REG   “S” XXXXXXX MAIDS & Design   74532900   06/03/94   1904647   07/11/95   07/11/05   Grace period will expire on 01/11/06 – if a renewal is not filed the registration will be canceled.

3

 

XXXXXXX INTERNATIONAL, INC.
INTERNATIONAL AND DOMESTIC TRADEMARKS
TRADEMARK STATUS REPORT
a/o October 21, 2005
                                         
    Our                                    
    File               Appln.   Appln.   Reg.   Reg.   Renewal    
    No.   Country   Status*   Xxxx   No.   Date   No.   Date   Due   Comments
 
38
   .0403   U.S.   Use–Based   “S” Design   78575314   02/25/05   N/A   N/A   N/A   Application will be published on 11/22/05 – awaiting notification from Trademark Office and will forward to client upon receipt
 
                                        
39
   .0404   US   REN   “S” XXXXXXX
HYGIENE & Design (Cls 35 and 36)		   N/A   N/A   N/A   N/A   N/A   Awaiting specimens to file as a use – based application or approval to file as an intent-to-use application.
 
                                        
40
   0405   US   ITU   “S” XXXXXXX HYGIENE & Design (Cls 5 and 37)   78677819   07/25/05   N/A   N/A   N/A   Application will be published on 11/29/05 – awaiting notification from Trademark Office and will forward to client upon receipt
 
                                        
41
   .0406   U.S.   ITU   “S” XXXXXXX SERVICES FOR LIFE   78678205   7/26/05   N/A   N/A   N/A   Application will be published on 11/29/05 – awaiting notification from Trademark Office and will forward to client upon receipt
 
                                        
42
   .0407   U.S.   ITU   “S” XXXXXXX SERVICES AMERICA TRUSTS   78678283   07/26/05   N/A   N/A   N/A   Application will be published on 11/29/05 – awaiting notification from Trademark Office and will forward to client upon receipt

4

 

XXXXXXX INTERNATIONAL, INC.
INTERNATIONAL AND DOMESTIC TRADEMARKS
TRADEMARK STATUS REPORT
a/o October 21, 2005
                                         
    Our                                    
    File               Appln.   Appln.   Reg.   Reg.   Renewal    
    No.   Country   Status*   Xxxx   No.   Date   No.   Date   Due   Comments
 
43
   .0408   U.S.   ITU   “S” XXXXXXX SERVICES   78678233   07/26/05   N/A   N/A   N/A   Application will be published on 11/29/05 — awaiting notification from Trademark Office and will forward to client upon receipt
 
                                        
44
   .0409   U.S.   Use-Based   XXXXXXX TOTAL IMAGE   78691594   08/12/05   N/A   N/A   N/A   Application will be published on 11/22/05 — awaiting notification from Trademark Office and will forward to client upon receipt
 
                                        
45
   .0410   U.S.   PEN   STI   NOT FILED   N/A   N/A   N/A   N/A   Waiting to near back from client.
 
                                        
46
   .0411   U.S.   Use-Based   SANIGENICS   78721268   09/27/05   N/A   N/A   N/A   New application not yet assigned to examining attorney
 
                                        
47
   .0412   U.S.   Use-Based   SANIGENICS & Design   78721440   09/27/05   N/A   N/A   N/A   New application not yet assigned to examining attorney

5

 

XXXXXXX INTERNATIONAL, INC
INTERNATIONAL AND DOMESTIC TRADEMARKS
TRADEMARK STATUS REPORT
a/o October 21, 2005
                                         
    Our                                    
    File               Appln.   Appln.   Reg.   Reg.   Renewal    
    No.   Country   Status*   Xxxx   No.   Date   No.   Date   Due   Comments
 
48
   .0413   U.S.   Use-Based   A HEALTHY RESPECT FOR HYGIENE   78738048   10/21/05   N/A   N/A   N/A   Newly filed application not yet assigned to examining attorney
 
*   REG – Registered; ABD – Abandoned; Use-Based – Use-Based Application is pending; Intent-to-Use – Intent-to-Use

Application is pending

6

 

Schedule 4.16
Insurance
See attached.

 

 

(FULL PAGE IMAGE)
MARSH CERTIFICATE OF INSURANCE CERTI MCAT XX XXXXX ATL-001094181-02 — PRODUCER THIS CERTIFICAT E181 TEL ED AS A MATTER OF INFORMATION ONLY AND CONFER S Xxxxx USA inc . NO RIGHT S UPON THECERTIFICATE MOLDER OTHER THAN T HOSE PROVIDED IN TH E P 0 Box 459010 FOIICY . T HIS CERTIFICATE 00E8 NOT AMEND, EXTEND OR Ali ER THE COVERAG X Xxxxxxx, XX 00000-0000 AFFOROEDBYT8Emma ElDESCRIBED HEREIN . COMPANIES AFFORDING COVERAG E CO MP ANY 334186-GL—0405 A HARTFORD FIRE INSURANCE C O IAEll RED CO IIP ANY XXXXXXX INTERNATIONAL,IN C 8 HARTFORD CASUALTY INS C O 0000 XXXXXXX XXX X XXXXXXXXX, XX 2821 0 CO LIP AN Y C TWIN CITY FIRE INSURANCE C O CO NP AN Y 0 C OVERAGES This certil cats supersedes and replaces any preAioudy Issued certiNcats for the policy period noted below . 1 THIS S TO CERTIFY THAT POLCIES OF INSURANCE DESCRIBED HEREIN HAVE BEEP LAVED 10 THE INSURED NAMED HEREIN FOR THE POLICY PERIOD INDICATED . NOTLN ITHSTAN D ING A llY REQ U [REM ENT, TERN OR CON D TTO N OF A NY CO NTRACT OR O TH ER DOCUMENT WITH RESPECT TO TORCH THE CE RTLF XXXX XXX OE SSU E D OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN S S U BJ ECT TO ALL THE TERMS, COMMIES AND E)OCL US o NS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN R ED LC ED BY PAID CLAIMS . TYPE OFI N SU RA MCE POLICY EFFECTIVE ROIICY EX RRATION LIMIT S LTR POLCY NUMBER DAT E(MMIDDIYY) OAT E(MMIDDYY) A GENERAL IIABILITY 20 UUN 1W 7088 K3 12/31104 12131105 2,000,000 GENERAL AGGREGATE $ )( COMMERCIAL GENERAL LABRTTY PRODUCTS-CO MPAP AGG $2,000,000 CLAIMS MADE El OCCUR PERSONAL&ADV INJURY $1,000,000 OWNER’S& CONTRACTOR’S P ROT EACH OCCU RRENCE $1,000,000 FIRE DADAG EQtlyole tle) $ 300,000 MED DIP QAly01e pe sob $10,000 A Am OMOULEmoat IT Y 20 UUN 1W 708813 12731/04 12/31/05 COMBINED SING LE UNIT $ 1,000,000 X . ANV AUTO ALL OW NE D AUTO S BO OILY INJURY perpen’ ) _ SCHEDULED AUTO S X HIRE DAUTOS X . 80 OILY INJURY eTECCNeI) I IA N-OW N ED A UTDS PROP ERN DAMAG E GARAGE LIABILIT Y AUTO ONLY - EA ACCIDENT $ ANY A MO OTHER THAN AUTO ONLY: EACH ACCIDENT $ AGGREGATE $ EXCESS IIAMLIT Y 20 RHU 1W6536 12131104 12/31105 EACH OCCURRENCE $10,000,000 UNBRELIA FORM AGGREOATE _ $10000,000 OTHER THAN UMBRELLA FORM SI $10,000 C WORK ERBCOMPEA BATIONAII D 20WBPH2954 12/31105 ‘TA10- I IORt-12131104 X I TORYLIMRS ER BAPIOTERB’ LIABILITY EL EACH ACCIDENT $1,000,000 THE PROP RIEID R! INCL EL’DSEASE-EOLCY LIMIT $1,000,000 PARTNE RSIEXEC UTN E 0 OFF CERS ARE : FXCL El. DI SEAS XXXXX EMPLOYEE $1,000,00 OTHER DEECRIPTIONOF OPERATION SILOCAIIONSNEHICIE818P EOM IT BA S PROOF OF INSURANCE . CERTIFICATE HOLDER CANCELLATIO N 8110 MD MYOH TM E POLEHAD EEC RD ED HEREIN 8ECANCELIED 890 REIMEBCPIPAT10N DATE TNEPHDI , THE PAUPER AI FOPDINO COVER/OE WILL ENDEAHOR TO MAIL , DAYS WPITIEN NOTCE TD TI E XXXXXXX INTERNATIONAL, INC. C ERTI XXXX XXXXXX NAMED N EPEIM, BUT FAILURE TD !NAIL SLOP ‘,slice SMALL MPOEE MD 0I LDATM X 0 X 0000 XXXXXXX XXX X XXXX XXXXX,XX 00000 LUA1111YOT ANY KIN D UPON TIEINEURER’XX XXXX MO COVERAGE, 1113MPEIT80 A REPR NlATVE3,0R THE Eel EROF T1 CC E111KATE XXXXX USA INC . BY : Xxxx en Gordo n MM1(3102) VALID AS OF : 0912110 5

 

 

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MARSH EVIDENCE OF PROPERTY INSURANCE I IATL-00109485-01 nATL-IC ,109 185.0 THIS CERTIFICATE IS ISSUED AS AMATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER OTHER THAN THOSE PROVIDE D IN THE P O LIC Y. T HIS CERTIFICATE DOES NOT AMEND , EXTEND o R ALTER THE C OVERAG E AFF 0 RD ED B Y T HE POLICIES UST ED HEREIN . PRODUCER COMPAN Y Xxxxx USA Inc         . HARTFORD FIRE INSURANCE X X X 0 Xxx 00000 0 Xxxxxxx, XX 00000-0000 934186—PROP-0405 INSURED LOAN NUMBER POLICY NUMBE R XXXXXXX INTERNATIONAL, IN C 20 UUN TW 7088 K3 0000 XXXXXXXX XXXX . UNTI L CHARLOTTE, NC 2821 0 EFFECTIVE DATE (MMIDDlYY) EXPIRATION DAT E(MMIDDITY) CONT FYI TERMINATED 12/31ID4 12131105 IF CHECK ED THIS REPLACES PROP EAT DEICE DAT ED : PROPERTY INFORMATIO N LOCATION I DESCRIPTIO N EVIDENCE OF INSURANCE . COVERAGE IN F OR MAT ION This certificaesupersedes andreplaces elypre>douslyissued catific etOrthepolicyperiodnotedbelow 1 THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED HEREIN HAVE BEEN ISSUED TO THE INSURED NAMED HEREIN FOR THE POLICY PERIOD INDICATED , NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OFANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THE CERTIFICATE MAY B E ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES LISTED HEREIN IS SUBJECT TO ALL THE TERMS, CONDITIONS AND EXCLUSIONS OF SUC H POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. COVERAGES/PERILS/FORMS MOUNT OFINSURANCE (3) DEDUCTIBLE BUSINESS PERSONAL PROPERTY INCL . STOCK — PREMISES #1 912,500 1,00 0 BUSINESS PERSONAL PROPERTY INCL . STOCK — PREMISES #2 912,50 0 BUSINESS PERSONAL PROPERTY INCL . STOCK — PREMISES #3 25,000 BUSINESS PERSONAL PROPERTY INCL . STOCK — PREMISES #4 25,000 BUSINESS PERSONAL PROPERTY INCL . STOCK — PREMISES #5 25,000 REMARKS( Including Sped al Conditions ) ‘CANCELLATION. SHOULDANY CIF THE POLICIES LISTED HEREIN BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, t HE INSURER AFFORDING COVERAGE WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICETO THE CERTIFICATE HOLDER NAMED HEREIN, BUT FAILURE TO. MAIL SUCH NOTICE SHAL L MPOSENOOBUGATION OR LIABILITY OF ANY KIND UPON THE INSURER AFFORDING COVERAGE, ITS AGENTS OR REPRESENTATNES, OR THE ISSUER OF THIS CERTIFICATE. CERTIFICATE HOLDE R NAME AN DAD DREN S XXX XXX OF INTERES T XXXXXXX INTERNATIONAL, INC . ADOTIOSAL INSURED 0000 XXXXXXXX XXXX XXXXXXXXX XXXXXXXXX,XX 00000 LOSS PAYEE (DINER ) MARSH USAI N C BY Xxxxxx Gordo n VALID AS OF : 09/21/05 MM3 (3102)

 

 

Schedule 4.20
Subsidiaries
Xxxxxxx Hygiene Franchise Corp., a North Carolina corporation, a wholly owned subsidiary of Xxxxxxx International, Inc.
F.M.S., Inc., a Bahamian corporation, a wholly owned subsidiary of Xxxxxxx International, Inc.
SHFC Operations, LLC, a DE limited liability company, a wholly owned subsidiary of Xxxxxxx International, Inc. (Formerly known as SHFC Salt Lake City, LLC)
      SHFC Buffalo, LLC, a DE limited liability company, whose sole member is SHFC Operations, LLC. Also qualified to do business in New York.
 
      SHFC Minneapolis, LLC, a DE limited liability company, whose sole member is SHFC Operations, LLC. Also qualified to do business in Minnesota.
 
      SHFC Oklahoma, LLC, a DE limited liability company, whose sole member is SHFC Operations, LLC. Currently not in use.
Xxxxxxx Pest Control, Inc., a North Carolina corporation, a wholly owned subsidiary of Xxxxxxx International, Inc.
Xxxxxxx Maids, Inc., a North Carolina corporation, a wholly owned subsidiary of Xxxxxxx International, Inc.
Xxxxxxx International (Australia New Zealand) Pty Ltd, an Australian corporation, a wholly owned subsidiary of Xxxxxxx International, Inc.

 

 

Schedule 7.3(viii)
Liens Securing the Terminating Indebtedness
1.   Nevada UCC #2005010686-6 filed 04/08/2005, listing Xxxxxxx International, Inc., as debtor and Bank of America, N.A., as secured party.
 
2.   North Carolina UCC #20050033793C filed 04/08/2005, listing Xxxxxxx Hygiene Franchise Corp., as debtor and Bank of America, N.A., as secured party.
 
3.   Nevada UCC #2002016630-9 filed 06/26/2002, listing Xxxxxxx International, Inc., as debtor / CFH Acquisition LLC, as secured party.

 

 

Schedule 7.7
Transactions with Related Persons
For the years ended October 31, 2004, 2003 and 2002, Xxxxxxx International, Inc. (hereinafter “Borrower”) realized revenue from the franchises owned by related parties of $1,770,004, $1,753,204 and $1,603,085, respectively. Total accounts receivable of the franchises owned by related parties were $328,484, $279,111 and $362,978 for the years ended October 31, 2004, 2003 and 2002, respectively.
During the nine months ended July 31, 2005 and the year ended October 31, 2004, the Borrower paid its former President and a corporation in which its former President is a major stockholder $$62,029 and $103,585, respectively, for the use of an airplane for business and travel. The lease expires in April, 2006.
During the nine months ended July 31, 2005, an affiliate of HB Fairview Holdings, LLC, a Delaware limited liability company (the “HB Affiliate”) acquired 16 franchises from unrelated third party franchisees in Florida, North Carolina, Kentucky, Ohio, Virginia and California. HB Fairview Holdings, LLC is the majority stockholder of the Borrower.
Between August 1 and October 15, 2005, the HB Affiliate acquired four franchises from unrelated third party franchisees in Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxxxxx and Tennessee. In connection with these acquisitions, the HB Affiliate assumed the existing Xxxxxxx Hygiene franchise agreements and businesses, thereby assuming certain indebtedness to the Borrower for accounts receivable for products, services and fees, and in some transactions, notes payable to the Borrower. In addition, the HB Affiliate acquired the franchise rights for Birmingham, Alabama and Indianapolis, Indiana from the Borrower. As a part of the agreement for these two markets, the HB Affiliate granted the Borrower the option to repurchase the operations for a period of time. HB Affilate will continue to acquire franchises from unrelated third party franchisees and to acquire franchise rights for other non-franchisee owned territories.
Following is a list of franchises acquired by the HB Affiliate(s):
       
 
Beverly Hills, CA
  Service Xxxxxxx Hills, LLC
 
Washington, DC
  Service DC, LLC
 
Gold Coast (Florida)
  Service Gold Coast, LLC
 
Cincinnati, OH
  Service Cincinnati, LLC
 
Central Florida
  Service Central FL, LLC
 
Columbus/Akron, OH
  Service Columbus, LLC
 
Gainesville, FL
  Service Gainesville, LLC
 
Tallahassee, FL
  Service Tallahassee, LLC
 
West Coast (Florida)
  Service West Coast, LLC
 
Service North (Florida)
  Service North, LLC
 
Raleigh, NC
  Service Raleigh, LLC
 
Charlotte, NC
  Service Charlotte, LLC
 
Space Coast, FL
  Service DC, LLC
 
Louisville, KY
  Service Space Coast, LLC
 
Tampa, FL
  Service Louisville, LLC
 
Columbia, SC
  Service Tampa, LLC
 
Greensboro, NC
  Service Greensboro, LLC
 
Myrtle Beach, FL
  Service Myrtle Beach, LLC
 
???
  Service FCS, LLC
 
Columbia, SC
  Service Columbia, LLC
 
Memphis, TN
  Service Memphis, LLC
 
Southern Georgia
  Service South GA, LLC
For the nine months ended July 31, 2005 and the year ended October 31, 2004, revenue was earned from transactions with the HB affiliate and other related parties from product sales, royalties, marketing and service fees that were charged on the same terms as other franchisees.

 

 

The Borrower pays SGB Management, Inc., an affiliate of HB Fairview, a fee in the sum of $20,000 per month for the services provided, including product development, marketing and branding strategy and management advisory assistance.
The Borrower has retained Certilearn, Inc., an affiliate of HB Fairview, to construct an e-learning training platform and entered into a contract for the development of e-learning courses and access to an e-learning delivery platform. The remaining committed course development work is expected to be at competitive prices.

 

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Filed: November 9th, 2010
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