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CREDIT AGREEMENT
AMONG
THE PROVIDENT BANK,
ADMINISTRATIVE AND COLLATERAL AGENT,
EASY GARDENER ACQUISITION CORP.,
BORROWER,
U.S. HOME & GARDEN INC.,
GUARANTOR
AND
VARIOUS LENDERS
DESCRIBED HEREIN
August 9, 1996
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TABLE OF CONTENTS
Page
ARTICLE 1 INTERPRETATION..........................................1
1.1 Definitions.............................................1
1.2 Rules of Construction..................................19
ARTICLE 2 LOAN TERMS AND AMOUNTS.................................21
2.1 Revolving Credit Commitment............................21
2.2 Revolving Credit Notes.................................22
2.3 Fees...................................................23
2.4 Term Loan Commitment...................................23
2.5 Term Promissory Notes..................................23
2.6 Interest Payable on the Loans..........................25
2.7 Procedures for Making Draws............................27
2.8 Interest on Overdue Payments; Default Rate.............30
2.9 Prepayments of Principal...............................30
2.10 Time and Place of Payments.............................32
2.11 Application of Funds...................................32
2.12 Payments to be Free of Deductions......................33
2.13 Use of Proceeds........................................34
2.14 Additional Costs, Etc..................................34
2.15 Libor Breakage Cost....................................35
ARTICLE 3 SECURITY INTERESTS.....................................35
3.1 Grant of Security Interest.............................35
3.2 One General Obligation; Cross Collateral...............36
3.3 Additional Security for Loans..........................36
3.4 .......................................................36
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.........................37
4.1 Corporate Existence....................................37
4.2 Corporate Power; Authorization.........................37
4.3 Enforceable Obligations................................37
4.4 No Legal Bar...........................................38
4.5 No Litigation..........................................38
4.6 Financial Condition....................................38
4.7 No Change..............................................38
4.8 No Default.............................................38
4.9 Intellectual Property..................................38
4.10 Compliance with Laws...................................39
4.11 Contractual Obligations................................39
4.12 Taxes..................................................39
4.13 Margin Stock...........................................39
4.14 ERISA..................................................39
4.15 Environmental Matters..................................39
4.16 Investment Company Act.................................40
4.17 Capitalization.........................................40
4.18 Brokerage..............................................40
4.19 Place of Business......................................41
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4.20 General Collateral Representation.......................41
4.21 Accounts................................................42
4.22 Inventory...............................................43
4.23 Disclosure..............................................43
4.24 Solvency................................................43
4.25 Ownership and Control...................................43
4.26 Undisclosed Liabilities.................................43
4.27 Indemnity Agreements....................................44
4.28 Operating Agreements....................................44
4.29 Reports with Governmental Bodies........................44
4.30 Employee Matters........................................44
4.31 Survival of Representations and Warranties..............44
ARTICLE 5 AFFIRMATIVE COVENANTS...................................45
5.1 Financial Statements....................................45
5.2 Certificates; Other Information.........................46
5.3 Payment of Obligations..................................48
5.4 Conduct of Business and Maintenance of Existence........48
5.5 Debtor's Condition. ...................................48
5.6 Maintenance of Property; Insurance......................49
5.7 Liability Insurance.....................................49
5.8 Inspection of Property; Books and Records...............50
5.9 Notices.................................................50
5.10 Environmental Laws......................................51
5.11 Inventory...............................................52
5.12 Equipment...............................................52
5.13 Reclamation, Returns and Repossessions..................53
5.14 Collateral..............................................53
5.15 Banking Services........................................53
5.16 Further Documents.......................................53
5.17 Life Insurance..........................................54
5.18 Employee Benefit Plans..................................54
5.19 Other Information.......................................54
ARTICLE 6 NEGATIVE COVENANTS......................................54
6.1 Limitations on Restricted Payments......................54
6.2 Transactions with Affiliates............................55
6.3 Limitations on Indebtedness.............................56
6.4 Ownership of Borrower...................................56
6.5 Interest Coverage Ratio.................................56
6.6 Maintenance of Net Worth................................57
6.7 Debt Service Coverage Ratio.............................57
6.10 Limitations on Operating Lease Expense..................60
6.11 Limitations on Capital Expenditures.....................60
6.12 Limitation on Liens.....................................60
6.13 Limitation on Guarantee Obligations.....................60
6.14 Limitation on Fundamental Changes.......................61
6.15 Limitation on Sale of Assets............................61
6.16 Limitation on Investments, Loans and Advances...........62
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6.17 Limitation on Optional Payments and
Modifications of Debt Instruments.......................62
6.18 Limitation on Creation or Acquisition of
Subsidiaries............................................63
6.19 Corporate Documents......................................63
6.20 Dividends and Similar Transactions.......................63
6.21 Change of Locations; Collateral..........................63
ARTICLE 7 CONDITIONS PRECEDENT.....................................63
7.1 Conditions Precedent to Initial Loan.....................63
7.2 Conditions Precedent to All Loans........................67
ARTICLE 8 EVENTS OF DEFAULT........................................67
8.1 Payments.................................................67
8.2 Representations and Warranties...........................67
8.3 Certain Covenants........................................68
8.4 Registration of Warrant Stock............................68
8.5 Additional Covenants.....................................68
8.6 Effectiveness of Security Documents......................68
8.7 Destruction of Collateral................................68
8.8 Cross-Default to Other Indebtedness......................68
8.9 Commencement of Bankruptcy or Reorganization
Proceeding..............................................69
8.10 Default by Guarantor.....................................69
8.11 Material Judgments.......................................69
8.12 ERISA....................................................70
8.13 Material Adverse Change..................................70
ARTICLE 9 REMEDIES, COLLECTION OF COLLATERAL, ETC..................70
9.1 Remedies.................................................70
9.2 Application of Proceeds..................................71
9.3 Set-off; Pro Rata Sharing................................71
9.4 Rights Cumulative; Waiver................................72
9.5 Collections on Accounts..................................72
9.6 Notification of Debtors; Grant of Powers.................72
9.7 Disclaimer of Liability..................................73
ARTICLE 10 AGENCY PROVISIONS........................................74
10.1 Appointment of the Agent.................................74
10.2 Authority................................................74
10.3 Acceptance of Appointment................................74
10.4 Application of Moneys....................................75
10.5 Reliance by the Agent....................................75
10.6 Exculpatory Provisions...................................75
10.7 Action by the Agent......................................76
10.8 Amendments, Waivers and Consents.........................76
10.9 Indemnification..........................................77
10.10 Reimbursement of the Agent...............................77
10.11 Sharing of Funds Received................................78
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10.12 Dealing with Lenders.....................................78
10.13 Agent as Lender..........................................78
10.14 Duties Not to be Increased...............................78
10.15 Lender Credit Decisions..................................78
10.16 Resignation or Removal of Agent..........................78
10.17 Assignment of Notes; Participation.......................79
ARTICLE 11 MISCELLANEOUS............................................80
11.1 Amendments and Waivers...................................80
11.2 Notices..................................................80
11.3 Successors and Assigns...................................80
11.4 Expenses; Indemnity......................................80
11.5 Collection Costs.........................................81
11.6 Counterparts.............................................82
11.7 Consent to Jurisdiction..................................82
11.8 WAIVER OF JURY TRIAL.....................................82
11.9 Other Waivers............................................83
11.10 Confidentiality .........................................83
EXHIBITS
A Borrowing Base Report
B Borrower's Facilities
C Revolving Credit Notes
D Term I Promissory Notes
E Term II Promissory Notes
F Collateral Assignment of Trade Names and Trademarks
G Collateral Assignment of Patents
H Collateral Assignment of Life Insurance
I Pledge Agreement
J Guaranty and Subordination Agreement
K Licenses, Patents, Permits, Trademarks, Trade Names,
Copyrights
L Opinion of Borrower's Counsel
M Assignment and Assumption Agreement
N Notice of Election to Convert to a Libor Rate Loan
O Subsidiary Guaranty
P Subsidiary Security Agreement
Q Warrant
SCHEDULES:
1 Lenders
1.1 Permitted Liens
4.2 Required Consents and Filings
4.5 Litigation
4.6 Equity/Long-Term Investments
4.7 Changes Since June 30, 1994
4.8 Defaults
4.9 Intellectual Property Matters
4.10 Compliance with Laws
4.12 Tax Matters
4.14 Employee Benefit Plans
4.15 Environmental Matters
4.18 Brokers
4.20 Required Filing Locations
4.27 Indemnity Agreements with Directors and Officers
6.3 Indebtedness Existing on Closing Date
6.16(a) Borrower Exceptions to Limitations on Investments, Loans
and Advances
THIS CREDIT AGREEMENT is made as of August 9, 1996, by and among EASY
GARDENER ACQUISITION CORP., a Delaware corporation ("Borrower"), U. S. HOME &
GARDEN INC., a Delaware corporation ("Guarantor"), THE PROVIDENT BANK, an Ohio
banking corporation ("Provident"), the banks and lending institutions set forth
on Schedule 1 hereto ("Lenders"), and THE PROVIDENT BANK, an Ohio banking
corporation ("Provident"), executing this Agreement in its capacity as
administrative and collateral agent for the Lenders under this Agreement
(hereinafter called "Agent", which expressions shall, where the context so
admits, include a successor Agent).
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions.
The following capitalized terms are defined as follows:
"Accounts" means and includes all of present and future rights to payment
for goods, merchandise or Inventory sold, rented or leased or for services
rendered of Borrower and its Subsidiaries, including, without limitation, those
which are not evidenced by instruments or chattel paper, and whether or not they
have been earned by performance; all accounts (as that term is defined in the
Uniform Commercial Code) accounts receivable, chattel paper, contract rights,
documents and instruments of Borrower and its Subsidiaries; all other
obligations or indebtedness owed to the Borrower and its Subsidiaries from
whatever source arising; all guarantees of any of the foregoing and all security
therefor; all of the right, title and interest of the Borrower and its
Subsidiaries in and with respect to the goods, services or other property which
gave rise to or which secure any of the foregoing and all insurance policies and
proceeds relating thereto; and all of the foregoing whether now owned by the
Borrower and/or its Subsidiaries or hereafter acquired or in existence.
"Additional Purchase Price" means the additional purchase price as defined
in Section 2.5 of the Easy Gardener Acquisition Agreement.
"Adjusted Prime Rate" means the rate of interest per annum equal to the sum
of the Prime Rate plus the Applicable Margin.
"Adjusted Prime Rate Loans" means a Loan which bears interest at the
Adjusted Prime Rate.
"Affiliate" means any Person which directly or indirectly controls, or is
controlled by, or is under common control with, any Person. The term "control"
means the 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, by contract or otherwise. The term "Affiliate"
does not include any Lender or Agent.
"Agency Fee" means an annual amount payable to Agent, as an administrative
and collateral agency fee, as described in Agent's commitment letter with
Borrower dated June 25, 1996. Such fee shall be payable quarterly in arrears on
each Principal Payment Date.
"Agent" means Provident acting (whether or not the term "Agent" is preceded
or followed by the phrases "on behalf of Lenders" or "for the benefit of
Lenders", or words or phrases of similar import) in an administrative and
collateral agency capacity for the Lenders under the Loan Documents, and any
successor agent.
"Agent Deposit Account" has the meaning set forth in Section 2.7(b) hereof.
"Agreement" or "this Agreement" means this Loan and Security Agreement
(including all exhibits annexed hereto) as originally executed, or if
supplemented, amended, or restated from time to time, as so supplemented,
amended, or restated.
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"Applicable Margin" shall initially mean 1.25 percent for Adjusted Prime
Rate Loan and 3.50 percent for Libor Rate Loans; provided that commencing with
the first Interest Adjustment Date after September 30, 1996, the Applicable
Margin shall mean the amount set forth below, as a percentage, to be added to
the Prime Rate or the Libor Rate, as the case may be, and used in calculating
the rate of interest for applicable Revolving Credit Loans and Term Loan I (but
not Term Loan II) at any time:
Margin Ratio Applicable
Margin
(expressed as
a percent)
Adjusted Prime Libor Rate
Rate Loan Loan
Less than 2.00 to 1.00 0.75 3.00
Greater than or equal to 2.00 to 1.00 1.25 3.50
In the event that the Borrower fails to timely provide to Agent the
financial statements and compliance certificates required to be provided
pursuant to Section 5.1, the Applicable Margin shall be deemed to be the
highest margin set forth above.
"Average Daily Loan Balance" means the sum of the unpaid balances of
Revolving Credit Loans owing by Borrower to Lenders at the end of each day for
each day during the period in question, divided by the number of days in such
period.
"Average Yearly Loan Balance" means (x) the sum of the Average Daily Loan
Balances for the immediately preceding one year period (or if the Closing Date
occurred less than one year ago, then the sum of the Average Daily Loan Balances
for the number of days since the Closing Date) divided by (y) 365 or 366, as
applicable (or if the Closing Date occurred less than one year ago, then by the
number of days elapsed since the Closing Date).
"Borrowing Base" means the sum of (A) Fifty Percent (50%) of the cost or
market value, whichever is lower, of Eligible Inventory, not to exceed Five
Million and 00/100 Dollars ($5,000,000.00), and (B) Eighty Percent (80%) of the
outstanding amount of Eligible Accounts (excepting those Eligible Accounts which
have a due date more than ninety (90) days but not more than one hundred fifty
(150) days past the invoice date, with respect to which the advance rate shall
be Fifty Percent (50%), not to exceed Four Million Dollars ($4,000,000.00)),
less deductions for co-op advertising liability, customer rebate liabilities and
the other deductions specified on the Borrowing Base Report.
"Borrowing Base Report" means a report including schedules furnished by
Borrower, in substantially the form of Exhibit attached hereto or otherwise in a
form provided by (or otherwise satisfactory to) Agent.
"Business Day" means any day except a Saturday, Sunday or legal holiday on
which commercial banking institutions are open for business in Cincinnati, Ohio.
"Capital Expenditures" means any amounts paid or incurred in connection
with the purchase of plant, machinery, equipment or similar expenditures
(including a Financing Lease of any of the foregoing) which would be required to
be capitalized and shown as an asset on a balance sheet in accordance with GAAP.
"Cash Equivalents" means: (i) (A) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and unconditionally
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guaranteed or backed by the full faith and credit of the United States, in each
case maturing within one (1) year from the date of acquisition thereof or (B)
marketable direct obligations issued by any State of the United States of
America or other political subdivision or agency thereof rated at least AA by
Standard & Poor's Rating Group ("S&P") or the equivalent thereof by Xxxxx'x
Investors Service, Inc. ("Moody's") having a maturity of not more than one (1)
year from the date of acquisition; (ii) investments in certificates of deposit,
time deposits, Euro-dollar deposits or bankers' acceptances maturing within one
(1) year from the date of acquisition issued by any Lender which is a commercial
bank or Agent or any other commercial bank organized under the laws of the
United States or any state thereof having capital surplus and undivided profits
aggregating at least Two Hundred Fifty Million Dollars ($250,000,000); (iii)
investments in commercial paper of any lender or Agent or their holding
companies, or any commercial paper which at the time of issuance have a rating
of at least A-1 from S&P or at least P-1 from Moody's and maturing not more than
two hundred seventy (270) days from the date of creation thereof; (iv)
obligations of the type described in (i), (ii) or (iii) above purchased pursuant
to a repurchase agreement obligating the counterparty to repurchase such
obligations not later than thirty (30) days after the purchase thereof, secured
by a fully perfected security interest in any such obligation, and having a
market value at the time such repurchase agreement is entered into of not less
than 100% of the repurchase obligation of the issuing bank; (v) time deposits or
Eurodollar time deposits maturing no more than thirty (30) days from the date of
creation with commercial banks having membership in the Federal Deposit
Insurance Corporation in amounts not exceeding the lesser of One Hundred
Thousand Dollars ($100,000) or the maximum insurance applicable to the aggregate
amount of such Person's deposits in such institution; (vi) deposits or
investments in mutual funds or similar funds offered or sponsored by brokerage
or other companies having membership in the Securities Investor Protection
Corporation in amounts not exceeding the lesser of One Hundred Thousand Dollars
($100,000) or the maximum insurance applicable to the aggregate amount of such
Person's deposits in such institution and investing exclusively in any or all of
the investments in (i) through (v) above; (vii) the securities of any investment
company registered under the Investment Company Act of 1940 which is a no-load
"money market fund" within the meaning of regulations of the Securities and
Exchange Commission, or an interest in a pooled fund maintained by a commercial
bank having comparable investment restrictions; and (viii) cumulative preferred
stock of corporations having senior unsecured long-term debt ratings of AA or
AA2 or better by S&P or Moody's, respectively.
"Cash Flow" means, for any period of determination thereof, Net Income of
the Borrower and its Subsidiaries determined on a consolidated basis for such
period plus depreciation and amortization (net of any non-cash credits), minus
the sum of the following items for such period (without duplication):
extraordinary gains, Capital Expenditures, scheduled principal repayments on the
Obligations, mandatory prepayments on the Revolving Credit Loans pursuant to
Section 2.9(c), principal repayments with respect to any other Indebtedness of
the Borrower (other than representing Capital Expenditures already deducted in
computing Cash Flow), the Seller Contingent Payments (to the extent paid in cash
or Cash Equivalents), the Additional Purchase Price and the Emerald Contingent
Payments.
"Closing Date" means the Business Day on which all conditions precedent
specified in Article hereof shall have been satisfied in full.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all real and personal property of Borrower and/or any of
its Subsidiaries, whether now owned or hereafter acquired, including: (a) all of
the Equipment, General Intangibles, Inventory, Accounts, and all other items of
personal property now owned or hereafter acquired by the Borrower and/or any of
its Subsidiaries or in which the Borrower and/or any of its Subsidiaries has
granted or may in the future grant a security interest to Agent, on behalf of
the Lenders, (b) the Pledged Stock, (c) all proceeds and products of any of the
foregoing in whatever form, including cash, negotiable instruments and other
evidences of indebtedness, chattel paper, security agreements or
4
other documents and all rights of the Borrower and/or any of its Subsidiaries
in, to and under all leases and rental agreements relating to the foregoing, (d)
all of the right, title and interest of the Borrower and/or any of its
Subsidiaries in and to all goods or other property represented by or securing
any of the Accounts, including all goods that may be reclaimed or repossessed
from or returned by Debtors, (e) all of the rights of the Borrower and/or any of
its Subsidiaries as an unpaid seller, including stoppage in transit, detinue and
reclamation, (f) all additional amounts due to the Borrower and/or any of its
Subsidiaries from any Debtor, irrespective of whether such additional amounts
have been specifically assigned to the Agent on behalf of the Lenders, (g) all
guaranties, or other agreements or property securing or relating to any of the
items referred to in (a) above, or acquired for the purpose of securing and
enforcing any of such items, (h) all instruments, documents, securities, cash,
property, deposit accounts, and the proceeds of any of the foregoing, owned by
the Borrower and/or any of its Subsidiaries or in which Borrower and/or any of
its Subsidiaries has an interest, which are now or may hereafter be in the
possession or control of the Agent or any Lender or in transit by mail or
carrier to or from the Agent or any Lender, or in the possession of any third
party acting on behalf of the Agent or any Lender, without regard to whether the
Agent or any Lender received same in pledge, for safekeeping, as agent for
collection or transmission or otherwise or whether the Agent or any Lender had
conditionally released the same, (i) all ledger sheets, files, records,
documents, blueprints, drawings and instruments (including, without limitation,
computer programs, tapes and related electronic data processing software)
evidencing an interest in or relating to the foregoing, (j) all other rights,
properties or interests granted by the Borrower and/or any of its Subsidiaries
to the Agent or any Lender to secure the Loans and (k) all proceeds and products
of the Collateral described above, including without limitation, all claims
against third parties for damage to or loss or destruction of any of the
foregoing, including proceeds, accounts, contract rights, chattel paper and
general intangibles arising out of any sale, lease or other disposition of any
of the foregoing.
"Collateral Assignment of Patents" means the Collateral Assignment of
Patents dated of even date herewith between Borrower and Agent.
"Collateral Assignment of Trade Names and Trademarks" means the Collateral
Assignment of Trade Names and Trademarks between Borrower and Agent.
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Computation Date" means the last day of each March, June, September and
December following the date of this Agreement.
"Contractual Obligation" means, with respect to any Person, any provision
or requirement of any security issued by such Person or of any agreement,
instrument or other undertaking to which such Person is a party or by which it
or any of its property is bound.
"Credit Commitment" means, in the context of more than one Lender
hereunder, the maximum amount to be loaned by such Lender to Borrower as set
forth on the signature page hereof or as from time to time amended pursuant to
Section 10.17 hereof.
"Debtor" means an account debtor with respect to any of the Accounts and/or
the prospective purchaser with respect to any contract right, and/or any party
who enters into or proposes to enter into any contract or other arrangement with
the Borrower pursuant to which the Borrower is to deliver any personal property
or perform any service.
"Debt Service Coverage Ratio" means, for any period of determination
thereof, the ratio which (a) Cash Flow plus all scheduled payments of principal
on the Obligations and payments of principal on any other Indebtedness of the
Borrower (including Financing Leases) for such period bears
5
to (b) all scheduled payments of principal on the Obligations and payments of
principal on any other Indebtedness of the Borrower and its Subsidiaries, if any
(including Financing Leases) for such period.
"Default" means any of the events set forth in Article which with giving of
notice, the lapse of time, or both, would constitute an Event of Default.
"Default Rate" means two percentage points (2%) in excess of the applicable
Interest Rate.
"Disbursement Account" has the meaning set forth in Section 2.7(a) hereof.
"Draw Date" means in relation to any Revolving Credit Loan, the day on
which such Loan is made or to be made to Borrower pursuant to this Agreement.
"EBITDA" means, for any period of determination thereof, Net Income of such
Borrower and its Subsidiaries determined on a consolidated basis prior to
provision for interest and income taxes, depreciation and amortization,
excluding extraordinary gains and losses, all as calculated in accordance with
GAAP.
"Easy Gardener Acquisition Agreement" means the Asset Purchase Agreement
dated as of August 31, 1994 among Borrower, Easy Gardener, Inc., a Texas
corporation, and the stockholders of Easy Gardener, Inc.
"Eligible Accounts" means any Account of the Borrower or any Subsidiary of
Borrower which complies with all of Borrower's representations and warranties to
Lenders applicable to Eligible Accounts in all material respects and is
reasonably acceptable to Agent and a Majority of Lenders. Without limiting the
generality of the foregoing, an Eligible Account must meet the following minimum
requirements (and those determined from time to time by Agent in the reasonable
exercise of its discretion):
(a) The Account has not aged more than sixty (60) days from the due
date of the invoice or, if the due date of the Account is more than sixty
(60) days from the date of the invoice, has not aged more than thirty (30)
days from the due date of the invoice;
(b) The Account is owed by a Debtor who is not more than ninety (90)
days delinquent in the payment of Twenty-Five Percent (25%) or more of all
Accounts owed by such Debtor to the Borrower;
(c) The Account is owed by a Debtor located in the United States;
(d) The Account is not owed by an employee, director, officer, partner
or Affiliate of the Borrower, except as approved in writing by Agent;
(e) The Account is not owed by a Debtor in bankruptcy, liquidation,
receivership or similar proceedings;
(f) The collection of the Account is not determined by Agent in its
reasonable judgment to be doubtful by reason of the financial condition of
the Debtor;
(g) The due date of the Account is not more than one hundred fifty
(150) days from the date of the invoice;
(h) The Account, when aggregated with all other Accounts owed by the
Debtor, does not constitute more than twenty-five percent (25%) of all
Eligible Accounts;
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(i) A credit balance does not exist with respect to the Account which
has been in existence for more than ninety (90) days;
(j) The amounts due under the Account do not consist of financing
charges;
(k) The Debtor which owes the Account is not the United States or any
department, agency or instrumentality of the United States, unless the
Borrower has complied with all requirements of the Federal Assignment of
Claims Act of 1940 as such requirements relate to the assignment of any
Accounts to Lenders; and
(l) The Account does not exceed a credit limit determined by Agent and
a Majority of Lenders with respect to the Account owed by the Debtor.
An Account which was previously an Eligible Account will cease to be an
Eligible Account if it ceases to comply with the above minimum requirements.
"Eligible Inventory" means any Inventory of the Borrower and/or any
Subsidiary of Borrower which meets the following standards (and those determined
from time to time by Agent and a Majority of Lenders in the reasonable exercise
of their discretion) and complies with the terms of Section 4.22:
(a) is in the possession of Borrower or any Subsidiary of Borrower and
located within one of the facilities listed on Exhibit or is stored with a
bailee or warehouseman if approved by Agent in writing or if Borrower or
any of its Subsidiaries has delivered non-negotiable warehouse receipt to
Agent covering such Inventory,
(b) meets in all material respects all standards imposed by any
governmental agency or department or division thereof having regulatory
authority over such Inventory, its use or sale;
(c) is currently usable or saleable in the normal course of the
Borrower's business without any notice to, or consent of, any third party
as reasonably determined by Agent in good faith, i.e., such Eligible
Inventory does not consist of (i) slow moving items, (ii) Inventory
exceeding a recommended shelf life, (iii) packaging and shipping materials,
(iv) supplies used or consumed in the Borrower's business, (v) Inventory in
transit or held at the premises of third parties, (vi) xxxx and hold goods,
(vii) defective goods, or (viii) returned goods or seconds;
(d) is subject to a properly perfected first priority security
interest in favor of the Agent on behalf of the Lenders, except for
Permitted Liens (but the value of any such Inventory subject to a Permitted
Lien shall be excluded from the calculation of Eligible Inventory for
purposes of Section 2.1(a)(y)(A) to the extent of liens described in
subparagraphs (e) through (i) under the definition of "Permitted Liens")
and landlord liens if Agent has received a landlord's waiver in form and
substance reasonably satisfactory to Agent;
(e) complies in all material respects with Borrower's representations
and warranties to Lenders as to Eligible Inventory;
(f) consists of raw materials and finished goods; and
(g) is otherwise reasonably acceptable to Agent in all material
respects.
"Emerald" means Emerald Products Corp., a Delaware corporation.
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"Emerald Acquisition Agreement" means the Asset Purchase Agreement referred
to in the definition of Emerald Contingent Payments below.
"Emerald Contingent Payments" means certain payments required to be paid by
Borrower to Emerald Products, LLC, a Texas limited liability company ("EPLLC"),
pursuant to Section 2.6 of a certain Asset Purchase Agreement dated as of August
11, 1995 among EPLLC, Emerald and CDHII Management Partners LLC, a Texas limited
liability company, based on sales by Guarantor and its Affiliates of a product
known as "Emerald Edge" and improvements of such product.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA, other than a Multiemployer Plan.
"Environmental Laws" means with respect to any Person, all federal, state
and local laws, rules, regulations, ordinances, permits, orders, writs,
judgments, injunctions, decrees, determinations, awards and consent decrees
relating to hazardous substances and environmental matters applicable to the
business and facilities of such Person (whether or not owned by it). Such laws
and regulations include the Resource Conservation and Recovery Act of 1976
("RCRA"); the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"); the Toxic Substance Control Act; the Clean Water Act;
and the Clean Air Act, all as amended from time to time; state and federal
superlien and environmental cleanup programs; and U.S. Department of
Transportation hazardous materials transportation regulations. The terms
"hazardous substance" and "release" shall have the meanings specified in CERCLA
as the definition of such terms may be subsequently modified, supplemented or
amended, and the terms "solid waste" and "disposed" shall have the meanings
specified in RCRA, as the definition of such terms may be subsequently modified,
supplemented or amended; provided, however, that in the event either CERCLA or
RCRA is amended so as to broaden the meaning of any term defined thereby, such
broader meaning shall apply subsequent to the effective date of such amendment;
and provided, further, however, that to the extent a parcel of real property is
situated in a state or other jurisdiction in which the applicable laws may
establish a meaning for "hazardous substance," "release," "solid waste," or
"disposal" which is broader than that specified in either CERCLA or RCRA, such
broader meaning shall apply.
"Equipment" means all equipment (as that term is defined in the Uniform
Commercial Code) of the Borrower including, without limitation, all furniture,
fixtures, machinery and other equipment of any kind and all substitutions and
replacements thereof and accessories and parts therefor, all whether now owned
or hereafter acquired.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
rules and regulations issued thereunder, as amended from time to time, and any
successor statute.
"ERISA Affiliate" means, in relation to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of the
regulations promulgated under Section 414 of the Code.
"Event of Default" has the meaning set forth in Article hereof.
"Excess Cash Flow" means Sixty Percent (60%) of Cash Flow of the Borrower
for each fiscal year as the same shall be adjusted for changes in Working
Capital (increased for any decrease in Working Capital and decreased for any
increase in Working Capital) for such fiscal year from the prior fiscal year,
provided that such adjustments based upon changes in Working Capital have been
approved by Agent and relate to changes in the ordinary course of business (and
not to extraordinary occurrences).
"Financial Statements" means audited financial statements of Borrower for
the fiscal years ended June 30, 1995 and June 30, 1994, and, with respect to the
Guarantor, its Form 10-QSB for the
8
quarter ended March 31, 1996 and audited financial statements for the fiscal
years ended June 30, 1995 and June 30, 1994, previously delivered to Lenders,
together with such other financial statements as Borrower and Guarantor are
required to deliver in accordance with the terms hereof.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
EBITDA for such period, to (b) Fixed Charges for such period.
"Fixed Charges" means, for any period, the following, each calculated for
such period, without duplication: (a) Interest Expense paid or accrued, minus
(b) consolidated interest income earned or accrued by Borrower and its
Subsidiaries as determined in accordance with GAAP, plus (c) the sum of (i)
scheduled payments of principal made during such period with respect to all
Indebtedness of Borrower, including the principal component of any cash payments
made on any Financing Lease, (ii) state and federal taxes applicable to the
taxable income for such period, (iii) Capital Expenditures made during such
period, (iv) payments of the Seller Contingent Payments made in cash or Cash
Equivalents during such period, (v) the Additional Purchase Price paid during
such period, and (vi) the Emerald Contingent Payments made during such period.
"GAAP" means generally accepted accounting principles in the United States
at the time in effect.
"General Intangibles" means all general intangibles (as that term is
defined in the Uniform Commercial Code) of the Borrower including, without
limitation, all goodwill, patents, formulae, blueprints, proprietary
manufacturing processes, trademarks, licenses, franchises, beneficial interests
in trusts, joint venture interests, partnership interests, rights to tax
refunds, pension plan overfundings, literary rights and other contractual rights
of the Borrower, all whether now owned or hereafter acquired.
"Golden West" means Golden West Agri-Products, Inc., a California
corporation and wholly-owned subsidiary of Guarantor.
"Guarantee Obligation" means, with respect to any Person, any obligation in
the nature of a guaranty, repurchase arrangement, loan or advancement agreement,
reimbursement obligation, comfort letter, hold harmless, indemnity or
counter-indemnity or similar obligation, with respect to any indebtedness,
lease, dividend or other obligations of any other Person, directly or
indirectly, fixed or contingent, matured or unmatured; provided, however, that
the term shall not include endorsements of instruments for deposit or collection
in the ordinary course of business and, the indemnification of officers,
directors and employees under applicable corporate law or the articles of
incorporation and by-laws of such Person and, with respect to the Borrower, such
written indemnity agreements with officers and directors as are disclosed on
Schedule 4.27 hereto, all arising in the ordinary course of business. The amount
of any Guarantee Obligation shall be deemed to be the maximum amount for which
the guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, or if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof.
"Guarantor" means U.S. Home & Garden Inc., a Delaware corporation, which is
the owner of One Hundred Percent (100%) of the outstanding capital stock of
Borrower and Emerald.
"Guaranty Agreement" means the Guaranty and Subordination Agreement dated
of even date herewith by Guarantor in favor of Agent for the benefit of Lenders
and in favor of Lenders.
9
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"Head Office" means, in relation to the Agent so long as Provident is
Agent, the head office of The Provident Bank located at Xxx Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxx 00000 or such office designated in writing to Borrower and
Lenders by Provident or any successor Agent.
"Indebtedness" means, without duplication, with respect to any Person at
any date, (a) all indebtedness of such Person for borrowed money, including
overdrafts and charges related thereto, (b) indebtedness of such Person for the
deferred purchase price of services or property, which purchase price is (i) due
twelve (12) months or more from the date of incurrence of the obligation in
respect thereof or (ii) is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Financing Leases, (d) all
obligations of such Person in respect of acceptances, letters of credit or
similar facilities issued or created for the account of such Person, (e) all
interest whether accrued or actually paid or payable, (f) all liabilities of
taxes, and (g) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof.
"Interest Adjustment Date" means the first day of the first month after the
date on which the following are required to be delivered to Agent: (i) the
quarterly compliance certificates required to be delivered under Section 5.2(a)
with respect to the most recent quarter and (ii) the monthly unaudited financial
statements required to be delivered under Section 5.1(b) with respect to the
last month in such quarter.
"Interest Coverage Ratio" means, for any period, the ratio of (a) EBITDA
for such period to (b) Interest Expense for such period.
"Interest Expense" means, for any period, and with respect to any Borrower
and its Subsidiaries on a consolidated basis, interest expense of such Persons
determined in accordance with GAAP, including interest paid or expensed during
such period, plus interest required or permitted to be capitalized in accordance
with GAAP.
"Interest Period" means:
(a) For each Libor Rate Loan, the period commencing on the Draw Date
or the date of conversion of a Prime Rate Loan and ending 30, 60 or 90 days
thereafter; provided that
(i) any Interest Period which would otherwise end on a day which
is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Business Day;
(ii) any Interest Period which begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iii) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end on
the Termination Date; and
(b) For an Adjusted Prime Rate Loan, the period ending on the earlier
of repayment by the Borrower, the date on which such Adjusted Prime Rate
Loan is converted to a Libor Rate Loan pursuant to Section 2.4(a) hereof,
or the Termination Date.
10
"Inventory" means all inventory (as that term is defined in the Uniform
Commercial Code) of the Borrower and/or any of its Subsidiaries, including,
without limitation, all goods, merchandise and other personal property,
wheresoever located and whether or not in transit, now owned or hereafter
acquired by Borrower and/or any of its Subsidiaries, which are held for sale or
lease, or are furnished or to be furnished under any contract or service by the
Borrower and/or any of its Subsidiaries, or are raw materials, work-in-progress,
finished goods, supplies or materials used or consumed in the business of the
Borrower and/or any of its Subsidiaries, and all products thereof, all whether
now owned or hereafter acquired by the Borrower and/or any of its Subsidiaries;
and all right, title and interest of the Borrower and/or any of its Subsidiaries
in and to any leases or rental agreements for such inventory.
"Liabilities" means all indebtedness, obligations and other liabilities,
whether matured or unmatured, liquidated or unliquidated, direct or contingent
or joint or several, that should, in accordance with GAAP, be classified as
liabilities on a balance sheet of a Person.
"Libor" shall mean the rate (rounded upward to the next highest 1/100 of
1%) obtained by dividing (x) the rate of interest per annum determined by the
Agent equal to the offered rates for deposits in U.S. Dollars of one, two or
three-month periods (as the case may be) commencing of the first date of the
applicable Interest Period for which such rate is determined as such rate
appears on the Telerate system as of 11:00 a.m. (London, England time) on the
date which is two (2) Business Days preceding the first day of such Interest
Period, for a period comparable to the duration of such Interest Period and in
an amount comparable to the amount of the Libor Rate Loan to be outstanding
during such Interest Period, by (y) a percentage equal to 100% minus the stated
maximum rate of all reserves required to be maintained against "Libor Rate
liabilities" as specified in Regulation D (or against any other category of
liabilities which includes deposits by reference to which the interest rate on
Libor Rate Loans or loans is determined or any category of extensions of credit
or other assets which includes loans by a non-United States office of a bank to
United States residents) on such date to any member bank of the Federal Reserve
System.
"Libor Break Funding Costs" means an amount sufficient to reimburse each
Lender for any and all loss, cost or expense (including, without limitation, any
loss incurred in obtaining, liquidating or reemploying deposits from third
parties acquired to maintain any Loan or part thereof as a Libor Rate Loan)
incurred or sustained by each of them as the consequence of the occurrence of
any Libor Break Funding Event. Such indemnification shall include, without
limitation, an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
repaid or not borrowed for the period, beginning with the date of such payment,
prepayment or repayment until the last day of the Interest Period that would
otherwise have been in effect for such Libor Rate Loan, at the applicable rate
of interest for such Libor Rate Loan over (ii) the amount of interest
(reasonably determined by Agent) that otherwise would have accrued on such
principal amount by reemploying such amount at a rate equal to Libor for such
period or nearest available period for deposits bearing a rate equal to Libor.
"Libor Break Funding Event" means any of the events or occurrences set
forth in Sections 2.15(a) or 2.15(b).
"Libor Rate" shall mean for each Interest Period, the rate of interest per
annum equal to the sum of Libor plus the Applicable Margin "Libor Rate Loan"
means a Loan which bears interest at the Libor Rate.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Financing Lease having substantially the same economic
effect as
11
any of the foregoing, and the filing of any Financing Statement under the
Uniform Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing). The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting property.
"Loans" means the Revolving Credit Loans and the Term Loans.
"Loan Documents" means this Agreement, the Notes and the Security Documents
and all other documents, instruments, financing statements, certificates and
other agreements now or hereafter executed in connection with the Loans.
"Loan Year" means each period of twelve (12) consecutive months, commencing
on the Closing Date and on each anniversary thereof.
"Majority of Lenders" means at such times as there are any Loans
outstanding, the Lenders whose aggregate Pro Rata Shares of the outstanding
Loans are greater than or equal to Sixty-Six and 2/3 Percent (662/3%) of the
aggregate amount of the outstanding Loans, and at all other times, the Lenders
whose aggregate Credit Commitments are greater than or equal to Sixty-Six and
2/3 Percent (662/3%) of the aggregate Credit Commitments of all the Lenders.
"Margin Ratio" means, as of any date subsequent to the date of this
Agreement, the ratio of (a) Indebtedness of Borrower and its Subsidiaries with
respect to borrowed money as of the date of determination, provided that in
calculating such Indebtedness for purposes of determining the Margin Ratio, any
amount of Indebtedness arising from the Revolving Loans shall be deemed equal to
the average daily outstanding balance of the Revolving Loan for the twelve month
period immediately preceding the date of such determination, to (b) EBITDA, all
calculated for the four fiscal quarters ending on the Computation Date
immediately preceding the date for which such ratio is calculated.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or financial condition of the Borrower and its
Subsidiaries, taken as a whole, or the Borrower and its Subsidiaries and
Guarantor taken as a whole, (b) the Collateral, (c) the ability of the Borrower
or Guarantor to perform their obligations under this Agreement or any other Loan
Document to which they are a party, or (d) the validity or enforceability of
this Agreement, the Notes or any of the other Loan Documents or the rights or
remedies of the Agent and any Lender.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Income" means, for any period of determination thereof, the net income
(or loss) of a Person for such period in accordance with GAAP.
"Net Worth" means, at any particular date, all amounts which, in accordance
with GAAP, should be included under shareholders' equity including without
limitation the par or stated value of all outstanding capital stock, additional
paid-in capital and retained earnings on a balance sheet of a Person at such
date.
"Notes" means the Revolving Credit Notes and the Term Notes evidencing the
Loans.
"Obligations" means, without limitation, the Loans and all other debts,
obligations, or liabilities of every kind and description of the Borrower to the
Agent or any Lender and arising under this Agreement, whether now due or to
become due, direct or indirect, absolute or contingent, presently existing or
hereafter arising, joint or several, secured or unsecured, whether for payment
or performance, regardless of how the same arise or by what instrument,
agreement or book account
12
they may be evidenced, or whether evidenced by any instrument, agreement or book
account, including, without limitation, all Loans (including any Loan by renewal
or extension). Obligations shall also include all interest and other charges
chargeable to the Borrower or due from the Borrower to the Agent or any Lender
from time to time and all costs and expenses referred to in Sections 11.4 and
11.5.
"Operating Lease Expense" means, with respect to any Person for any period
of determination, all payment obligations of such Person under agreements for
lease, hire or use of any real or personal property (net of sublease income and
excluding taxes, insurance and similar related expenses unless payable as
additional rent), other than obligations under Financing Leases.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Participation Percentage" means, in relation to the particular Lender, the
percentage set forth with respect to such Lender on Schedule 1.
"Permitted Liens" means the liens and interests in favor of Lenders or the
Agent for the benefit of Lenders granted in connection herewith securing any of
the Obligations hereof and:
(a) Liens arising by operation of law for taxes not yet delinquent or
thereafter payable without penalty or interest;
(b) statutory Liens of mechanics, materialmen, shippers and
warehousemen for services or materials for which payment is not yet overdue
for a period of more than sixty (60) days and which occur in the ordinary
course of business;
(c) Liens incurred or pledges or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security;
(d) claims and liens for taxes due and payable and claims of
mechanics, materialmen, shippers, warehousemen, carriers and landlords;
provided, that the validity or amount thereof is being contested in good
faith and by appropriate and lawful proceedings promptly initiated and
diligently conducted (of which the Borrower has given prior written notice
to the Agent in the case of any single lien in excess of Ten Thousand and
00/100 Dollars ($10,000.00)) and, in all cases, for which appropriate
reserves (in accordance with GAAP) have been established and so long as
levy and execution have been and continue to be stayed;
(e) Liens incurred in connection with transactions permitted under
Section 6.3(c);
(f) judgment liens taken against the Borrower and/or any of its
Subsidiaries not in excess of One Hundred Thousand and 00/100 Dollars
($100,000.00) in the aggregate;
(g) pledges and deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and approval bonds,
performance bonds, obligations to public utilities, liens in favor of
customs or revenue authorities arising as a matter of law to secure customs
duties in connection with the importation of goods, all in an aggregate
amount not to exceed Fifty Thousand and 00/100 Dollars ($50,000.00);
(h) Liens in existence on the Closing Date listed on Schedule 1.1
securing Indebtedness permitted by Section hereof;
13
(i) Liens on goods, the purchase price of which is financed by a
letter of credit for the account of a Debtor where such lien secures the
obligation of Debtor and/or any of its Subsidiaries in respect of such
letter of credit;
(j) easements, rights of way and other similar encumbrances incurred
in the ordinary course of business which, in the aggregate are not
substantial in amount and do not materially detract from the value of
property subject thereto or materially interfere with the ordinary course
of business of Borrower or any Subsidiary of Borrower; and
(k) any Lien permitted in writing by Agent.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Pledge Agreement" means a pledge agreement substantially in the form of
Exhibit I hereto pledging (a) all of the issued and outstanding capital stock of
Borrower, of whatever class or description, made by Guarantor to the Agent for
the benefit of Lenders as additional collateral security for the payment of
Guarantor's obligations under the Guaranty Agreement; (b) all of the issued and
outstanding capital stock of each existing direct Subsidiary of Borrower, of
whatever class or description, made by Borrower to the Agent for the benefit of
the Lenders as additional collateral security for the Loans; (c) all of the
issued and outstanding capital stock of each direct Subsidiary of Xxxxxxxxx, of
whatever class or description, made by Xxxxxxxxx as additional collateral
security for its Subsidiary Guaranty; and (d) all of the capital stock of each
direct or indirect Subsidiary of Borrower hereafter formed or acquired, of
whatever class or description, made by the holder of such stock to the Agent for
the benefit of the Lender as additional collateral security for the Loans or the
Subsidiary Guaranty of such Subsidiary, as the case may be; in each case, with
such changes in the text of the Pledge Agreement to reflect the obligations
secured thereby.
"Pledged Stock" means, as the context requires, all of the issued and
outstanding shares of capital stock of the Borrower, or a Subsidiary of the
Borrower which have been or will be pledged by Guarantor (in the case of the
outstanding capital stock of the Borrower) or by Borrower or a Subsidiary of
Borrower (in the case of the outstanding capital stock of a Subsidiary of
Borrower) as collateral security for the Loans or a guaranty obligation of the
Guarantor or a Subsidiary, as applicable.
"Prepayment Amount" means the amount of any principal prepaid on the Loans
under Section hereof.
"Prime Rate" means the annual percentage rate of interest which is
established by Provident, from time to time as its prime rate, whether or not
such rate is publicly announced, and which provides a base to which loan rates
may be referenced. The Prime Rate is not necessarily the lowest lending rate of
Provident. Provident shall determine the Prime Rate in effect from time to time.
Any change in the Prime Rate shall, for all purposes of this Agreement and any
of the other Loan Documents, become effective on the effective date of such
change as announced by Provident in accordance with Provident's customary
practices. If Provident ceases to publish a "prime rate," the term "Prime Rate"
shall mean a variable rate of interest per annum equal to the rate of interest
from time to time most recently published as the "Prime Rate" in the "Money
Rates" section of the Wall Street Journal (Western Edition).
"Principal Payment Date" means each March 31, June 30, September 30, and
December 31 from and after the Closing Date until the Termination Date.
"Pro Rata Share" means, in the context of more than one Lender hereunder,
and in relation to any particular item, the share of a Lender in such item,
which shall be in the same proportion which
14
the aggregate amount of all of the Obligations owing to such Lender with respect
to such item at such time shall bear to the aggregate amount of all of the
Obligations owing to all of the Lenders with respect to such item at such time
net of any and all charges or fees due and payable to Agent under the Loan
Documents.
"Rate Option" means the Adjusted Prime Rate or the Libor Rate.
"Reference Period" means, with respect to a particular Computation Date,
unless otherwise provided, the period of four (4) consecutive calendar quarters
ending on such Computation Date, provided such date occurs subsequent to the
date of this Agreement except that with respect to any Computation Date prior to
September 30, 1997, the applicable reference period shall be the period from and
including the calendar quarter in which falls the Closing Date through such
Computation Date.
"Reportable Event" means any of the events set forth in section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. ss.2615.
"Requirements of Law" means, with respect to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other governmental authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" means, with respect to any Person, the (i) chief
executive officer, the president or any executive or senior vice-president of
such Person, and (ii) with respect to financial matters, the chief financial
officer of such Person, and (iii) with respect to any documents to be delivered
at Closing, any vice president or the secretary of such Person.
"Restricted Payment" means (a) any dividend or distribution on the capital
stock of the Borrower (except dividends payable solely in existing or presently
issued shares of such capital stock of Borrower delivered to Agent as secured
party under the Pledge Agreement and subject to the terms of the Pledge
Agreement), (b) any purchase, redemption or other acquisition for value of any
capital stock of the Borrower, (c) any loan, advance, extension of credit or
Guarantee Obligation by the Borrower to any Affiliates of the Borrower or any
Affiliates of the Guarantor, other than as permitted hereby, or (d) any
investment in any Affiliates of the Borrower or any Affiliates of the Guarantor,
other than as permitted hereby.
"Revolving Credit Commitment" means Thirteen Million and 00/100 Dollars
($13,000,000.00).
"Revolving Credit Loans" means, collectively, the Revolving Credit Loans,
each singly a Revolving Credit Loan, made or to be made to Borrower by each
Lender pursuant to this Agreement as set forth in Article 2 hereof.
"Revolving Credit Notes" means the promissory notes referred to in Section
2.2 to evidence the Revolving Credit Loans.
"Security Documents" means all of the documents and instruments now or
hereafter evidencing the collateral security of Lenders, including without
limitation, all UCC-1 Financing Statements and UCC-3 Continuation Statements
with respect to the Collateral, the Collateral Assignment of Trademarks and
Trade Names, the Collateral Assignment of Patents, the Collateral Assignment of
Life Insurance, the Guaranty Agreement, the Subsidiary Guaranties, the Security
Agreements and the Pledge Agreements, whether such documents are issued to or
signed by Agent, Agent for the benefit of Lenders, or Lenders.
15
"Seller Contingent Payments" means certain payments required to be made to
Messrs. Xxxxxxx Xxxxxx and Xxxxxx X. Xxxxx XX upon the occurrence of certain
contingencies pursuant to Section 2.6 of the Easy Gardener Acquisition
Agreement.
"Solvent" means, with respect to any Person, that as of any date of
determination, (a) the then present fair saleable value of the property of such
Person on a going concern basis is greater than the total amount of liabilities
(including contingent liabilities) of such Person, (b) such Person's property is
not unreasonably small in relation to its business or any contemplated or
undertaken transaction, and (c) such Person does not intend to incur and does
not believe or reasonably should not believe that it will incur, debts beyond
its ability to pay such debts as they become due.
"Subsidiary" means, with respect to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to any Subsidiary or all
Subsidiaries of the Borrower, whether now in existence or hereafter organized.
"Term Loan I" and "Term Loan II" have the respective meanings set forth in
Section 2.4.
"Term Loans" means the Term Loan I and Term Loan II.
"Term Notes I" and " Term Notes II" have the respective meanings set forth
in Section 2.4.
"Term Notes" means the Term Notes I and Term Notes II.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code in
each case in effect in the jurisdiction where the Collateral is located.
"Warrants" means the warrants delivered to each Lender on the Closing Date,
substantially in the form of Exhibit Q hereto, and any other warrants issued to
the Lenders in substitution or modification thereof or as a supplement thereto.
"Xxxxxxxxx" means Xxxxxxxxx Consumer Products Group, Inc., a Delaware
corporation, whose principal office is located at 000 Xxxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxxxx, Xxxxxxxx.
"Xxxxxxxxx Acquisition" means the acquisition by Borrower of all of the
capital stock of Xxxxxxxxx pursuant to the terms of the Xxxxxxxxx Acquisition
Agreement.
"Xxxxxxxxx Acquisition Agreement" means the Stock Purchase Agreement dated
as of August 9, 1996, among Borrower, U. S. Home & Garden Inc., Xxxxxxxxx and
the Xxxxxxxxx Stockholders.
"Xxxxxxxxx Stockholders" means Xxxxx X. Xxxxxxx, Xx., Xxxxxxx X. Xxxx, X.X.
Xxxxxx, and Xxxxx X. Hills.
"Working Capital" means current assets (excluding cash) minus current
liabilities (excluding current maturities of long-term indebtedness).
Section 1.2 Rules of Construction.
16
(a) Use of Capitalized Terms. For purposes of this Agreement, unless
the context otherwise requires, the capitalized terms used in this
Agreement shall have the meanings herein assigned to them, and such
definitions shall be applicable to both singular and plural forms of such
terms. In addition, all terms defined in the Uniform Commercial Code shall
have the meanings given therein unless otherwise defined herein.
(b) Construction. All references in this Agreement to the single
number and neuter gender shall be deemed to mean and include the plural
number and all genders, and vice versa, unless the context shall otherwise
require.
(c) Headings. The underlined headings contained herein are for
convenience only and shall not affect the interpretation of this Agreement.
(d) Entire Agreement. This Agreement and the other Loan Documents
shall constitute the entire agreement of the parties with respect to the
subject matter hereof.
(e) Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(f) Governing Law. This Agreement, the Notes and the other Loan
Documents and the rights and obligations of the parties under this
Agreement, the Notes and the other Loan Documents shall be governed by, and
construed and interpreted in accordance with, the law of the State of Ohio.
(g) Accounting Terms and Determinations. All accounting terms not
specifically defined herein shall be construed, all accounting
determinations shall be made, and all financial statements required to be
delivered pursuant hereto shall be prepared, in accordance with GAAP
consistently applied in the preparation of such Person's financial
statements. In the event that any accounting changes occur and such changes
result in a change in the method of calculation of financial covenants,
standards and terms contained in this Agreement, then Borrower and Lender
agree to enter into negotiations to amend such provisions of this Agreement
so as to reflect such changes with the desired result that the criteria for
evaluating the financial condition of Borrower shall be the same after
giving effect to the accounting changes, as if such accounting changes had
not been made.
(h) Borrower's Knowledge. Any statements, representations and
warranties that are based upon the best knowledge of the Borrower or
Guarantor shall be deemed to have been made after due inquiry by such
Person with respect to the matter in question. "Knowledge" of Borrower or
Guarantor means the knowledge of a Responsible Officer of Borrower or
Guarantor, as the case may be, following the time such Responsible Officer
has been informed of or otherwise learns of the information of which
Borrower or Guarantor is sought to be charged.
(i) Loan Documents. The definition of each Loan Document shall be
deemed to include all renewals, amendments, modifications, restatements and
replacements of such document from time to time duly executed by the party
to be charged with performance thereunder.
17
ARTICLE 2
LOAN TERMS AND AMOUNTS
Section 2.1 Revolving Credit Commitment.
(a) Commitment. Each Lender, severally and not jointly, agrees, upon
the terms and subject to the conditions contained in this Agreement, to
make the Revolving Credit Loans to the Borrower, from time to time, in an
amount not to exceed its Participation Percentage in the Revolving Credit
Commitment available to the Borrower. The aggregate amount of all Revolving
Credit Loans shall be the lesser of the Borrowing Base and the Revolving
Credit Commitment. No Lender shall have any obligation to make any
Revolving Credit Loan under this Section to the extent any requested loan
or advance would cause the principal balance of the Revolving Credit Loan
then outstanding to exceed the Revolving Credit Commitment. Subject to the
limitations herein, until termination of the Revolving Credit Commitment,
any amounts borrowed may be repaid in whole or in part without prepayment
penalty (except as described in Section ) and may be reborrowed until such
termination as provided herein and provided that at the time of such
borrowing request no Default or Event of Default exists. The Revolving
Credit Commitment shall terminate and all of the indebtedness evidenced by
the Revolving Credit Notes shall, if not sooner due and payable pursuant to
the provisions hereof, be in any event absolutely and unconditionally due
and payable in full by the Borrower on June 30, 2002, the date of the
maturity of the Revolving Credit Notes.
(b) Conditions Required for Subsequent Revolving Credit Loans. The
obligation of the Lenders to make any Revolving Credit Loans after the
Closing Date shall be subject to the satisfaction, prior thereto or
concurrently therewith, of each of the following conditions precedent:
(i) Legality of Transactions. It shall not be unlawful (A) for
the Agent or any Lender to perform any of their respective agreements
or obligations under any of the Loan Documents to which the Agent or
Lender is a party on the date of such Loan, or (B) for the Borrower or
Guarantor to perform any of their respective agreements or obligations
under any of the Loan Documents to which it is a party on such date.
(ii) Representations and Warranties. Each of the representations
and warranties made by the Borrower and Guarantor to the Agent or any
Lender in this Agreement or any Loan Document (A) shall be true and
correct in all material respects when made, and (B) shall, for all
purposes of this Agreement, be deemed to be repeated on and as of the
date any Loan, and shall be true and correct in all material respects
as of each of such dates, except to the extent such representations
and warranties relate expressly to an earlier date.
(iii) Performance, Etc. The Borrower and Guarantor shall have
duly and properly performed, complied with and observed in all
material respects each of their respective covenants, agreements and
obligations contained in this Agreement and all of the other Loan
Documents to which they are parties. No event shall have occurred on
or prior to such date and be continuing on such date, and no condition
shall exist on such date, which constitutes a Default or an Event of
Default.
(iv) Proceedings and Documents. All corporate, governmental and
other proceedings in connection with the transactions contemplated by
the Loan Documents and all instruments and documents incidental
thereto shall be in form and substance reasonably satisfactory to
Lenders and Lenders shall have received all such counterpart originals
or
18
certified or other copies of all such instruments and documents as
Lenders shall have reasonably requested.
In addition, if requested by Lenders, Borrower and Guarantor shall execute
and deliver a certificate of a Responsible Officer in form and substance
reasonably satisfactory to Agent certifying that each of the conditions set
forth in subparagraphs (ii) and (iii) above applicable to it have been
satisfied. The Borrower shall furnish to Agent (for further delivery to Lenders)
a Borrowing Base Report signed by a Responsible Officer of Borrower on a monthly
basis, by the fifteenth (15th) day of each month as to the immediately preceding
calendar month, unless otherwise reasonably requested by Agent. Such report
shall show the age of the Accounts in intervals of not more than thirty (30)
days and contain such further information as Agent may reasonably require from
time to time.
Section 2.2 Revolving Credit Notes.
The absolute and unconditional obligation of the Borrower to repay each
Lender its respective Pro Rata Share of the principal of each Revolving Credit
Loan and the interest thereon shall be evidenced by Revolving Credit Notes
executed by the Borrower in the form of Exhibit C attached to this Agreement
(the "Revolving Credit Notes"). Each Revolving Credit Loan made by each Lender
to the Borrower and each payment made on account of principal on the Revolving
Credit Notes shall be recorded by the Agent on the books of the Agent which
record shall constitute prima facie evidence of the accuracy of the information
contained therein; provided, however, that the failure of the Agent to make such
notation shall not limit or otherwise affect the obligations of the Borrower
under the Revolving Credit Notes or this Agreement. The Revolving Credit Notes
shall include the following terms:
(a) Term. The Revolving Credit Notes shall be in the form of Exhibit
C, and shall mature and be due and payable in full on or before, the
earlier of: (i) June 30, 2002, or (ii) the date upon which the entire
principal and interest of the Revolving Credit Notes shall otherwise become
due and payable pursuant to the provisions hereof;
(b) Interest Rate. The Revolving Credit Notes shall bear interest
(computed on the basis of the actual number of days elapsed over a 360-day
year) on the daily outstanding principal balance thereunder at an annual
rate calculated pursuant to Section 2.6;
(c) Interest Payment Dates. Interest on the Revolving Credit Notes
shall be payable in accordance with Section 2.6(g), and on the date the
Revolving Credit Loans are due (whether by maturity, acceleration, or
otherwise); and
(d) Annual Zero Balance Requirement. For a period of not less than ten
(10) consecutive days during each year of this Agreement in the month of
August, commencing with August 1997, the entire principal and interest on
the Revolving Credit Notes shall be paid in full and no amounts shall be
borrowed on such Revolving Credit Loans during such period.
Section 2.3 Fees.
(a) Unused Commitment Fee. The Borrower agrees to pay the Agent for the
ratable benefit of the Lenders a loan fee equal to One-half of One Percent
(.50%) per annum (based on a year of 360 days and actual days elapsed) on the
unborrowed amount of the Revolving Credit Commitment for each day from and
including the date hereof to and including the maturity of the Revolving Credit
Notes. Such fee shall be payable quarterly in arrears on the last day of
September, December, March and June of each year prior to the maturity of the
Revolving Credit Notes.
(b) Service Fee. The Borrower shall (i) promptly upon request, reimburse
the Agent for all reasonable out-of-pocket travel expenses relating to its
audits (as discussed below) not to exceed $7,000.00 per year, and (ii) pay the
Agent a service fee for the
19
maintenance of the Revolving Credit Commitment of Two Thousand Five Hundred
and 00/100 Dollars ($2,500.00) per month, payable in advance on the first
day of each month, to cover all additional expenses incurred in connection
with the monitoring by the Agent of the Revolving Credit Loans. The Agent
and the Lenders shall have the right to conduct a comprehensive field audit
of the Borrower not more than twice per year prior to the occurrence of an
Event of Default, and the Borrower shall cooperate fully with the Agent in
the completion of such audit.
(c) Agency Fee. The Agent (and no other Lender) shall receive the
Agency Fee.
Section 2.4 Term Loan Commitment. Each Lender, severally and not jointly,
subject to the terms and conditions of this Agreement, hereby agrees to make
loans to Borrower in an amount equal to its Participation Percentage of the term
loans of Twenty-three Million and 00/100 Dollars ($23,000,000.00) ("Term Loan
I") and (i) Two Million Two Hundred Fifty Thousand and 00/100 Dollars
($2,250,000.00) ("Term Loan II").
Section 2.5 Term Promissory Notes. The absolute and unconditional
obligation of the Borrower to repay the principal of the Term Loans and the
interest thereon shall be evidenced by promissory notes executed by the Borrower
to each Lender in substantially the form of Exhibits and G attached to this
Agreement (respectively, "Term Notes I" and "Term Notes II"). In the event of an
assignment under Section 10.17(a), Borrower shall issue new notes to reflect the
new Credit Commitments of the assigning Lender and the assignee thereof. The
Term Notes shall include the following terms:
(a) Terms. Each Term Note shall be dated as of the Closing Date and
shall mature and be due and payable in full on June 30, 2002.
(b) Interest Rate. Each Term Note shall bear interest (computed on the
basis of the actual number of days elapsed over a 360-day year) on the
daily outstanding principal balance thereunder at a rate per annum
calculated in accordance with Section 2.6 hereof.
(c) Interest Payment Dates. Interest on the Term Notes shall be
payable in accordance with Section 2.6(g), and on the date a Term Loan is
due (whether by maturity, acceleration or otherwise).
(d) Principal Payments on Term Loan I. Quarterly installments of
principal on Term Loan I shall be payable commencing on September 30, 1996
and on each Principal Payment Date thereafter in accordance with the
following schedule and such payment shall be distributed ratably among the
Lenders in accordance with their respective Credit Commitments:
Payment Date Principal Payment
September 30, 1996 $570,000
December 31, 1996 570,000
March 31, 1997 1,350,000
June 30, 1997 1,350,000
September 30, 1997 570,000
December 31, 1997 570,000
20
March 31, 1998 1,350,000
June 30, 1998 1,350,000
September 30, 1998 570,000
December 31, 1998 570,000
March 31, 1999 1,350,000
June 30, 1999 1,350,000
September 30, 1999 570,000
December 31, 1999 570,000
March 31, 2000 1,350,000
June 30, 2000 1,350,000
September 30, 2000 570,000
December 31, 2000 570,000
March 31, 2001 1,350,000
June 30, 2001 1,350,000
September 30, 2001 570,000
December 31, 2001 570,000
March 31, 2002 1,350,000
June 30, 2002 1,310,000
(e) Principal Payments on Term Loan II. Quarterly installments of
principal on Term Loan II shall be payable commencing on September 30, 1998
and on each Principal Payment Date thereafter in an amount of $140,625.00
on each Principal Payment Date until paid in full.
Section 2.6 Interest Payable on the Loans.
(a) Interest Rate. Except as otherwise provided herein, the Revolving
Credit Loans and Term Loans I shall bear interest on the daily outstanding
principal balance thereunder at an annual rate equal to, at Borrower's
option, the Adjusted Prime Rate or Libor Rate. The Term Loans II shall
bear interest on the outstanding principal amount thereof at an annual rate
equal to the Prime Rate plus six percent (6%). Each Libor Rate Loan shall
21
bear interest from and including the first day of the Interest Period
applicable thereto to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such Libor Rate
Loan. Borrower shall select Interest Periods with respect to Libor Rate
Loans so that it is not necessary to pay a Libor Rate Loan prior to the
last day of the applicable Interest Period in order to repay the Loans on
June 30, 2002.
The determination of Applicable Margin hereunder as of any Interest
Adjustment Date shall be based on unaudited monthly financial statements of
Borrower and Subsidiaries for the last month of the most recent quarter prior to
such Date required to be delivered pursuant to Section 5.1(b) and compliance
certificate of Borrower required to be delivered pursuant to Section 5.2(a)
hereof, provided, that in the event of any discrepancy between computations
based upon any compliance certificate of Borrower and the related unaudited
financial statements of Borrower and its Subsidiaries furnished pursuant to
Section 5.1(b) and the audited financial statements of Borrower and its
Subsidiaries delivered pursuant to Section 5.1(a), the computation based upon
the audited financial statements of Borrower and its Subsidiaries delivered
pursuant to Section 5.1(a) shall govern (retroactive to the most recent Interest
Adjustment Date). In the event of a retroactive correction of the determinations
of the Applicable Margin in favor of the Lenders, the amount of interest thereby
overdue and payable by the Borrower shall be paid to the Lenders within five (5)
days after the date of such retroactive correction. Upon any upward adjustment
of the Applicable Margin, there shall be no downward adjustment of the
Applicable Margin until the first day of the first month after the Margin Ratio
shall have been less than or equal to the Margin Ratio which would result in
such downward adjustment as of the end of a subsequent fiscal quarter. No
downward adjustment of the Applicable Margin shall occur if, at the time such
downward adjustment would otherwise be made, there shall exist any Default or
Event of Default, provided, that such downward adjustment shall be made on the
first day of the first month after the date on which any Default or Event of
Default shall have been waived or cease to exist.
(b) Notice. Except as otherwise provided herein, if, on any day any
part of the Revolving Credit Loans or Term Loan is outstanding with respect
to which notice has not been timely received by the Agent in accordance
with this Agreement specifying that the Libor Rate shall be applicable
thereto, then for that day such Loan shall bear interest at the Adjusted
Prime Rate.
(c) Conversions. Borrower may elect from time to time to convert all
or part of the outstanding principal balance of any Revolving Credit Loan
or any Term Loan I (but no part of the Term Loan II) from an Adjusted Prime
Rate Loan to a Libor Rate Loan by the Borrower's giving Agent at least
three (3) Business Days prior irrevocable notice of such an election;
provided, that no Loan may be converted to a Libor Rate Loan while a
Default or an Event of Default has occurred and is continuing. Borrower may
also elect from time to time to continue any outstanding Libor Rate Loan
(whether for a similar or a different Interest Period) upon expiration of
the Interest Period then applicable thereto by the Borrower's giving the
Agent at least three (3) Business Days' prior irrevocable notice of suchc
ontinuation of such Libor Rate Loan; provided, that no Revolving Credit
Loan or Term Loan I may be continued as a Libor Rate Loan while a Default
or an Event of Default has occurred and is continuing.
22
(d) Election. Each notice of election to convert to a Libor Rate
Loan or to continue a Libor Rate Loan shall be in the form of Exhibit
hereto and shall specify (i) the proposed conversion or continuation
date; (ii) the amount of the Revolving Credit Loan or Term Loan I, as
the case may be, to be converted or continued; (iii) whether a
conversion or a continuation is being requested; and (iv) the
requested Interest Period, which shall be one (1), two (2) or three
(3) months. Each such notice shall also certify that no Default or
Event of Default has occurred and is then continuing.
(e) Effectiveness. On the date upon which each conversion to a
Libor Rate Loan or continuation of a Libor Rate Loan is being made
pursuant to a notice given in accordance with this Agreement, the
Agent shall take such action as is necessary to effect such conversion
or continuation. Subject to the limitations set forth in this Section
and in the definition of Interest Period, all or any part of the
Revolving Credit Loans or Term Loan I may be xxxxxx xxx into Libor
Rate Loans or continued as Libor Rate Loans as provided herein;
provided, that partial conversions or continuations of any Libor Rate
Loan shall be in the minimum amount of $500,000 and, if in excess
thereof, in integral multiples of $100,000; provided, further, that
there shall be no more than four (4) borrowings comprised of Libor
Rate Loans outstanding at any time.
(f) Determination of Adjusted Prime Rate. Agent shall determine
the Adjusted Prime Rate in effect from time to time. Any change in the
Adjusted Prime Rate shall, for all purposes of this Agreement and any
of the other Loan Documents, become effective on the effective date of
such change in the Prime Rate as announced by Agent in accordance with
Agent's customary practices.
(g) Monthly Installments. Borrower shall pay to Agent:
(i) for the account of Lenders in accordance with their
respective Pro Rata Shares, monthly in arrears on the last
Business Day of each month beginning with the month in which the
Closing Date falls, interest on the outstanding principal amount
of the Adjusted Prime Rate Loans at the annual rate equal to the
Adjusted Prime Rate; provided, however, that if Borrower elects,
pursuant to the last paragraph of Section 2.6(c) to convert an
Adjusted Prime Rate Loan, or any portion thereof, to a Libor Rate
Loan, Borrower shall pay to Agent, for the account of Lenders in
accordance with their respective Pro Rata Shares, all accrued but
unpaid interest on the Adjusted Prime Rate Loan, or such portion
thereof, being converted for the period commencing the date of
the last payment date under this paragraph to the first day of
the Interest Period for the Libor Rate Loan into which the
Adjusted Prime Rate Loan was converted.
(ii) For the account of Lenders in accordance with their
respective Pro Rata Shares, in arrears on the last Business Day
of each Interest Period for each Libor Rate Loan interest on the
outstanding principal amount of the Libor Rate Loans at the
annual rate equal to the Libor Rate; provided, however, that for
each Libor Rate Loan having an Interest Period longer than three
months, interest accrued on such Loan shall also be payable on
the last day of each three month interval during such Interest
Period.
23
Section 2.7 Procedures for Making Draws.
(a) A Revolving Credit Loan shall be advanced at Borrower's request
either by a request by Borrower for a wire transfer of the proceeds of such
Loan or by a check drawn by Borrower on a central disbursement account (the
"Disbursement Account") of Borrower maintained with Agent. Any request for
a Revolving Credit Loan by wire transfer may be transmitted to Agent at its
Head Office via facsimile provided Borrower concurrently notifies Agent by
telephone of such request. All such requests for wire transfer advances
shall be made to, and received by, Agent not later than 3:00 p.m, (Eastern
time) on the Draw Date of the particular Loan and each such check or
request for wire transfer of funds shall be deemed to be a request for an
advance of a Revolving Credit Loan on the date when received and processed
by Agent. Borrower hereby designates its President, Treasurer or Chief
Financial Officer (or any other officer authorized by Borrower and
designated as such to Agent by a writing signed by the President, Treasurer
or CFO) acting individually or jointly to make all requests for draws and
advances.
(b) Except as provided in Section 2.7(a), all collections of Accounts
shall be directed to an account at Agent's Head Office (the "Agent Deposit
Account") as provided in Section 9.5. Agent shall on each Business Day
automatically debit the Agent Deposit Account and apply the proceeds
pursuant to the provisions of Section 2.11. So long as no Event of Default
shall have occurred and be continuing, if funds remain in the Agent Deposit
Account following the application provided for in the preceding sentence,
the balance will be promptly transferred to the Disbursement Account or any
other account designated by Borrower and maintained with Agent. The
crediting of items deposited in the Agent Deposit Account to the reduction
of the Obligations shall be conditioned upon final payment of the item and
if any item is not so paid, the amount of any credit given for it may be
charged back to the Borrower in accordance with Section 2.10, whether or
not the item is returned.
(c) In order to administer the Revolving Credit Loans in an efficient
manner and to minimize the transfer of funds between the Agent and the
Lenders, so long as the conditions for borrowing in Section 7.2 remain
satisfied, the Agent may, in its sole discretion, make available, on behalf
of the Lenders, the full amount of all Revolving Credit Loans requested by
the Borrower pursuant to subsection 2.7(a). Agent may, in lieu of advancing
funds pursuant to this Section 2.7(c), promptly notify each Lender by
facsimile of its proportionate share of a requested Revolving Credit Loan
and the date of such borrowing. On the borrowing date specified in such
notice by Agent to each Lender, each Lender shall make its share of the
borrowing available at the Head Office of the Agent for deposit to such
account as the Agent shall designate, no later than 3:00 Cincinnati, Ohio
time in federal or other immediately available funds. Upon receipt of the
funds to be made available by Lenders to fund any Revolving Credit Loan
hereunder, the Agent shall disburse such funds by depositing them into the
Disbursement Account.
(i) If the Agent shall have advanced Revolving Credit Loans on
behalf of the Lenders, as provided in this subsection 2.7(c), the
amount of each
24
Lender's Participation Percentage of Revolving Credit Loans shall be
computed weekly rather than daily and shall be adjusted upward or
downward on the basis of the amount of outstanding Revolving Credit
Loans as of 5:00 p.m. (Eastern time) on the Business Day immediately
preceding the date of each computation; provided, however, that the
Agent retains the absolute right at any time or from time to time to
make the aforedescribed adjustments at intervals more frequent than
weekly. The Agent shall deliver to each of the Lenders after the end
of each week, or such lesser period or periods as the Agent shall
determine, a summary statement of the amount of outstanding Revolving
Credit Loans and a summary of the Borrowing Base Report Activity for
such period (such week or lesser period or periods being hereinafter
referred to as a "Settlement Period"). If the summary statement is
sent by the Agent and received by the Lenders prior to 12:00 Noon
(Eastern time), each Lender shall make the transfers described in the
next succeeding sentence no later than 3:00 p.m. (Eastern time) on the
day such summary statement was sent; and if such summary statement is
sent by the Agent and received by the Lenders after 12:00 Noon
(Eastern time), each Lender shall make such transfers no later than
3:00 p.m. (Eastern time) on the next succeeding Business Day. If in
any Settlement Period, the amount of a Lender's Participation
Percentage of the Revolving Credit Loans is more than such Lender's
Participation Percentage of the Revolving Credit Loans for the
previous Settlement Period, the Lender shall forthwith (but in no
event later than the time set forth in the next preceding sentence)
transfer to such Agent by wire transfer in immediately available funds
the amount of the increase; and, if in any Settlement Period, the
amount of a Lender's Participation Percentage of the Revolving Credit
Loans is less than such Lender's Participation Percentage of the
Revolving Credit Loans for the previous Settlement Period, the Agent
shall forthwith (but in no event later than the time set forth in the
next preceding sentence) transfer to such Lender by wire transfer in
immediately available funds the amount of the decrease. The obligation
of each of the Lenders to transfer such funds shall be irrevocable and
unconditional and without recourse to or warranty by the Agent. Each
of the Agent and the Lenders agree to xxxx their respective books and
records at the end of each Settlement Period to show at all times the
Dollar amount of their respective Participation Percentages of the
outstanding Revolving Credit Loans.
(ii) To the extent that the Agent has made any such amounts
available and the settlement described above shall not yet have
occurred, upon repayment of Revolving Credit Loans by the Borrower,
the Agent may apply such amounts repaid directly to the amounts made
available by the Agent pursuant to this subsection 2.7(c).
(iii) Because the Agent on behalf of the Lenders may be advancing
and/or may be repaid Revolving Credit Loans prior to the time when the
Lenders will actually advance and/or be repaid Revolving Credit Loans,
interest with respect to Revolving Credit Loans shall be allocated by
the Agent to each Lender (including the Agent) in accordance with the
amount of Revolving Credit Loans actually advanced by and repaid to
each Lender (including the
25
Agent) during each Settlement Period and shall accrue from and
including the date such Loans are advanced by the Agent to but
excluding the date such Loans are repaid by the Borrower in accordance
with Section or actually settled by the applicable Lender as described
in this subsection 2.7(c).
(iv) The Agent may advance funds as described above so long as
the Agent shall not have received prior to such borrowing an officers'
certificate from the Borrower under Section 5.9(a) indicating the
existence of a Default or Event of Default, or a written notice from
any Lender that the conditions to such borrowing have not been
satisfied.
Section 2.8 Interest on Overdue Payments; Default Rate. If any payment of
interest on or principal of a Note is not paid when due and within any
applicable grace period, then, at the option of any Lender, interest may be
charged and collected in accordance with each Note from the Borrower at the
Default Rate as provided in such Note.
Upon the occurrence and during the continuance of any Event of
Default, or if Lenders elect to exercise their remedies hereunder to
accelerate the Notes following the occurrence of an Event of Default, or
upon the Borrower's failure to pay the principal amount of the Notes at
maturity, the outstanding principal and all accrued interest as well as any
other charges due the Agent or any Lender hereunder or under any Loan
Document, shall bear interest from the date on which such amount shall have
first become due and payable to the Agent or any Lender to the date on
which such amount shall be paid to the Agent or any Lender (whether before
or after judgment), at the Default Rate. The accrued unpaid interest shall
become and be absolutely due and payable to the Lenders, on demand, at any
time. Interest will continue to accrue and will (to the extent permitted by
applicable law) be compounded daily until the Obligations in respect of the
payment are discharged (whether before or after judgment).
Section 2.9 Prepayments of Principal.
(a) Optional Prepayment of Revolving Credit Loans. In the event
Borrower decides to terminate the Revolving Credit Commitment hereunder
prior to June 30, 2002, Borrower shall prepay the outstanding principal
amount Revolving Credit Loans in full upon notice to Lenders at least three
(3) Business Days prior to the specified termination date, together with
accrued interest thereon to the date fixed for such prepayment, plus a
premium calculated as follows:
If the Prepayment Occurs: Then the Premium Shall Be:
------------------------ --------------------------
During the first Loan Year 3% of the Average Yearly Loan Balance
During the second Loan Year 2% of the Average Yearly Loan Balance
During the third Loan Year 1% of the Average Yearly Loan Balance
and each Loan Year thereafter
If Borrower decides to terminate the Revolving Credit Commitment
hereunder, Borrower will simultaneously with the prepayment of the
Revolving Credit Loans prepay in
26
full the entire outstanding principal of the Term Loans, all accrued and unpaid
interest on the Term Loans and all other charges owing in connection therewith.
(b) Optional Prepayment of Term Loan. The Borrower shall have the
right to prepay the principal of Term Loan I in full at any time and in
part from time to time upon notice to Lenders at least three (3) Business
Days prior to the specified prepayment date and upon payment to Lenders of
the principal amount to be prepaid, together with accrued interest thereon
to the date fixed for such prepayment, plus a premium calculated as
follows:
If the Prepayment Occurs: Then the Premium Shall Be:
-------------------------- ---------------------------
During the first Loan Year 3% of the Prepayment Amount
During the second Loan Year 2% of the Prepayment Amount
During the third Loan Year 1% of the Prepayment Amount
and each Loan Year thereafter
If the Borrower prepays the principal of any Loan at any time as a result
of Sections 2.7(b), 2.9(c), 2.9(d), or as the result of an Event of Default,
then no premium on such prepayment shall be payable to any Lender. Borrower
shall have no right to prepay Term Loan II, unless Borrower shall have prepaid
in full Term Loan I and terminated the Revolving Credit Commitment, in which
event Term Loan II shall be prepaid in full and without premium or penalty
applicable to Term Loan II.
(c) Mandatory Prepayments Under Revolving Credit Loan. If at any time
the aggregate amount of the Revolving Credit Loans outstanding to the
Borrower exceeds the Borrowing Base, the Borrower shall be obligated to
immediately prepay, without premium or penalty, the amount that exceeds the
Borrowing Base.
(d) Mandatory Prepayments Under Term Loan I. The net cash proceeds
(which for purposes hereof shall mean the gross selling price or amounts
received less transfer and gains taxes, conveyance fees imposed by
governmental authorities, brokerage fees, reasonable legal fees and other
reasonable fees and expenses of the transaction, including litigation and
negotiation costs reasonably related to the transaction, and income taxes
incurred as a result of the transaction) available to Borrower as a result
of (i) any asset sales permitted by Section 6.15 hereof, other than
finished goods in the ordinary course of business and except to the extent
any other assets disposed of pursuant to Section 6.15 are replaced or the
proceeds of investments are reinvested as permitted hereby, (ii) any
condemnation awards, (iii) any casualty loss insurance recoveries to the
extent the affected assets are not replaced in accordance with the
provisions of Section 5.6 hereof, (iv) Excess Cash Flow for any given
fiscal year, or (v) any adjustment in favor of Borrower in the purchase
price payable by Borrower in connection with the Xxxxxxxxx Acquisition
occurring after the Closing Date, shall, with respect to amounts described
in subparagraphs (i) through (v), be paid to Lenders in the amount of their
respective Pro Rata Share within ten (10) days after receipt thereof by
Borrower and with respect to any Excess Cash Flow, within fifteen (15) days
of delivery of the Financial Statements for the applicable fiscal
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year of Borrower, which amounts each Lender shall apply to the regularly
scheduled principal payments on Term Loan I until paid, in inverse order of
the stated maturity of principal payments thereof. No premium shall be due
on any payment made in compliance with this Section 2.9(d).
(e) Application of Prepayments. Except as provided in Section , any
prepayment of the Obligations under the Notes or any of the other Loan
Documents shall be applied by Agent as set forth in Section 2.11 hereof.
Any amounts received in connection with a payment, repayment or prepayment
shall be applied to the extent possible, first, to Adjusted Prime Rate
Loans and, then, to Libor Rate Loans. To the extent that such payment,
repayment or prepayment shall be applied to a Libor Rate Loan, Agent shall
retain such amount until the expiration of the Interest Period applicable
to such Libor Rate Loan or deposit such amount into the Disbursement
Account for application in accordance with Section 2.7(b), and apply such
payment at such time so as to minimize the Libor Break Funding Costs
applicable to such payment, repayment or prepayment, unless otherwise
instructed by Borrower, to pay, repay or prepay such Libor Rate Loan and
nonetheless incur the applicable Libor Break Funding Cost.
(f) Libor Breakage Costs. Upon any repayment or prepayment pursuant to
this Section 2.9 of any Loan which is also a Libor Rate Loan not made on
the last day of any Interest Period for such Libor Rate Loan, Borrower
shall pay to Agent for the ratable benefit of the Lenders, such Libor
Breakage Costs pursuant to Section 2.14 hereof, but not as the result of a
mandatory prepayment pursuant to Sections 2.9(c) or 2.9(d) if Agent does
not observe Section 2.9(e).
Section 2.10 Time and Place of Payments. Notwithstanding anything in this
Agreement or any of the other Loan Documents to the contrary, except when Agent
applies the proceeds of a the Agent Deposit Account as permitted hereby or
debits the Disbursement Account or any other account of Borrower, each payment
payable by the Borrower to the Agent under this Agreement or any of the other
Loan Documents, shall be made directly to Agent, for the account of each Lender,
by wire transfer to the account of Agent at the address set forth on the
signature page hereof, or to such other address as Agent shall notify to
Borrower not later than 3:00 p.m. (Eastern time), on the due date of each such
payment in immediately available and freely transferrable funds. Upon receipt of
any such payment, Agent shall forward to each Lender its Pro Rata Share thereof
by wire transfer in good funds at the address of such Lender set forth on the
signature page hereof, or to such other address as a Lender shall notify to
Agent. In order to cause the timely payment to be made of all Obligations as and
when due, Borrower hereby authorizes and directs Agent, at Agent's option, to
debit the Disbursement Account or any other deposit account of Borrower
maintained by the Agent or to apply the proceeds of a Revolving Credit Loan to
pay such Obligations and for that purpose Agent is hereby authorized, to the
extent funds are available under the Revolving Credit Commitment, to advance a
Revolving Credit Loan.
Section 2.11 Application of Funds. Subject to Section 2.9(e) in respect of
LIBOR Rate Loans, the funds received by the Agent pursuant to Section 2.7(b)
shall be applied toward the Obligations as follows provided, however, that if an
Event of Default exists, the
28
funds may be applied to the Obligations in such order and manner as Agent may
(or if directed by a Majority of Lenders shall) determine:
(a) First, to the payment of all fees, charges and other sums (with
the exception of principal and interest) when due and payable to the Agent
or Lenders under the Notes, this Agreement or the other Loan Documents at
such time including, without limitation, all costs, expenses, disbursements
and losses which shall have been reasonably incurred or sustained in good
faith by the Agent or Lenders in or incidental to the collection of the
Obligations hereunder or the exercise, protection, or enforcement by the
Agent or Lenders of all or any of the rights, remedies, powers and
privileges of the Agent or Lenders under this Agreement, the Notes, or any
of the other Loan Documents and in and towards the provision of adequate
indemnity to the Agent or Lenders against all taxes or Liens which by law
shall have, or may have priority over the rights of the Agent or Lenders in
and to such funds;
(b) Second, to the payment of the interest which shall be due and
payable on the principal of the Revolving Credit Notes at the time of such
payment;
(c) Third, to the payment of interest on the Term Notes then due;
(d) Fourth, to the payment of principal then due on the Term Loan I
Notes;
(e) Fifth, to the payment of any outstanding principal on the
Revolving Credit Notes;
(f) Sixth, if such payment is received in connection with a prepayment
in full of the Term Loan I and a termination of the Revolving Credit
Commitment, the payment of any outstanding principal of the Term Loan II
Notes; and
(g) Seventh, if no Default or Event of Default exists or if all
Obligations have been paid or satisfied in full, the surplus remaining (if
any) to the Borrower as provided in Section 2.7(b).
Section 2.12 Payments to be Free of Deductions. Each payment payable by the
Borrower to the Agent or any Lender under this Agreement, any Note, or any of
the other Loan Documents shall be made in accordance with Section 2.10 hereof,
without set-off or counterclaim and free and clear of and without any deduction
of any kind for any taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, restrictions or conditions of any nature now or hereafter imposed
or levied by any political subdivision or any taxing or other authority therein,
unless the Borrower is compelled by law to make any such deduction or
withholding. If any such obligation to deduct or withhold is imposed upon the
Borrower with respect to any such payment payable by the Borrower to the Agent
or any Lender, (a) the Borrower shall be permitted to make the deduction or
withholding required by law in respect of the said payment, and (b) there shall
become and be absolutely due and payable by the Borrower to the Agent or such
Lender on the date on which the said payment shall become due and payable, and
the Borrower hereby promises to pay to the Agent or such Lender on such date,
such additional amount as shall be necessary to enable the Agent or such
29
Lender to receive the same net amount which the Agent or such Lender would have
received on such due date had no such obligation been imposed by law. Anything
in this Section to the contrary notwithstanding, the foregoing provisions of
this Section shall not apply in the case of any deductions or withholdings made
in respect of taxes charged upon or by reference to the overall net income,
profits or gains of the Agent or any Lender (or any transferee or assignee
thereof). If Agent or any Lender receives a refund in respect of any taxes which
Borrower shall have paid for or on an account of taxes payable by Agent or
Lender pursuant to this Section 2.12, it will promptly notify Borrower of such
refund and, within ten (10) Business Days after giving Borrower such notice (and
promptly upon receipt, if Borrower has applied for such refund), pay such refund
to Borrower (to the extent of amounts paid by Borrower under this Section 2.12).
Section 2.13 Use of Proceeds. The Borrower represents, warrants and
covenants to the Agent and each Lender that all proceeds of the Revolving Credit
Loans and the Term Loans shall be used by the Borrower solely for the purpose of
(i) financing all or a portion of the transactions contemplated by the Xxxxxxxxx
Acquisition, (ii) refinancing existing Indebtedness to institutional lenders,
(iii) funding expenses relating to the Loans and related transactions, (iv)
working capital and other general corporate purposes, and (v) funding payments
permitted pursuant to Section 6.1(a), (c) and (d).
Section 2.14 Additional Costs, Etc.
(a) Anything in this Agreement to the contrary notwithstanding, if
after the Closing Date, any change in any applicable United States law
shall (i) materially change the basis of taxation of payments to Agent or
any Lender of the principal of or the interest on any Loan or any other
amounts payable to Agent or any Lender under this Agreement, or any of the
other Loan Documents, or (ii) impose or increase or render applicable any
special or supplementary special deposit or reserve or similar requirements
(whether or not having the force of law) against assets held by, or
deposits in or for the account of, or any eligible liabilities of, or loans
by any office or branch of, Agent or any Lender (except any Reserve
Requirement which is reflected in LIBOR), or (iii) impose on Agent or any
Lender any other condition or requirement with respect to this Agreement,
any Note or any of the other Loan Documents, and the result of any of the
foregoing is (A) to increase the cost to Agent or any Lender of making,
funding or maintaining all or any part of the principal of the LIBOR Rate
Loans by an amount deemed in good faith by such Lender or the Agent to be
material, or (B) to reduce the amount of principal, interest or any other
sum payable by Borrower to Agent or any Lender under this Agreement, any
Note or any of the other Loan Documents, or (C) to require Agent or any
Lender to make any payment or to forego any interest or other sum payable
by Borrower to Agent (other than the Agency Fee) or any Lender under this
Agreement, any Note or any of the other Loan Documents, the amount of which
payment or foregone interest or other sum is measured by or calculated by
reference to the gross amount of any sum receivable by Agent or any Lender
from Borrower under this Agreement, any Note or any of the other Loan
Documents, then, and in each such case, Borrower will pay to Agent for
Agent or the account of a Lender, as the case may be, within forty-five
(45) days of written notice by Agent or such Lender, such additional
amounts as will compensate
30
Agent or such Lender for such additional cost, reduction, payment or
foregone interest or other sum. Agent or any Lender, as the case may be,
shall provide to Borrower reasonable documentation, including calculations
in reasonable detail, to support the basis for such costs, etc., being
claimed, together with such written notice. Anything in this paragraph to
the contrary notwithstanding, the foregoing provisions of this paragraph
shall not apply in the case of any additional cost, reduction, payment or
foregone interest or other sum resulting solely from or arising solely as a
consequence of any taxes charged upon or by reference to the overall net
income, profits or gains of Agent or any Lender.
(b) If any Lender shall reasonably determine that any present or
future applicable law, rule or regulation regarding capital adequacy, or
any change therein or in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender
with any request or directive regarding capital adequacy (whether or not
having the force of law) from any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital as a consequence of its obligations
hereunder, to a level below that which such Lender could have achieved but
for such adoption, change or compliance (taking into consideration such
Lender's policies with respect to capital adequacy) by any amount deemed in
good faith by such Lender to be material, then Borrower shall pay to such
Lender within forty-five (45) days upon receipt of written notice thereof,
such amount or amounts, in addition to the amounts payable under the other
provisions of this Agreement, the Notes or any of the other Loan Documents,
as will compensate for such reduction. Such Lender shall provide to
Borrower a copy of the calculations showing how in reasonable detail such
determination has been made together with such notice. Determinations by
any Lender of the additional amount or amounts required to compensate such
Lender in respect of the foregoing shall be prima facie evidence of the
correctness of such calculations. In determining such amount or amounts,
Lenders may use any reasonable averaging and attribution methods.
Section 2.15 Libor Breakage Cost. Subject to Sections 2.9(e) and 2.9(f),
Borrower shall pay to Agent, for the ratable benefit of each Bank, the Libor
Break Funding Costs that Agent determines are attributable to the following
events (regardless of whether such events occur as a result of the occurrence of
an Event of Default or the exercise of any right or remedy of the Agent or the
Lenders under this Agreement or any other agreement, or at law):
(a) any payment (including, without limitation, the acceleration of
the Loans pursuant to this Agreement or any Loan Document), repayment,
optional prepayment, or conversion of a Libor Rate Loan for any reason on a
date other than the last day of the Interest Period for such Libor Rate
Loan; or
(b) any failure by Borrower for any reason to borrow a Libor Rate Loan
on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to this Agreement.
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ARTICLE 3
SECURITY INTERESTS
Section 3.1 Grant of Security Interest. To secure the payment and
performance of all of the Obligations, the Borrower hereby grants to Lenders,
and will cause its Subsidiaries and Emerald to grant to Lenders, a continuing
security interest in and assigns to the Agent, on behalf of the Lenders, all of
the Collateral. The Collateral shall also include the property and rights
subject to:
(a) the Collateral Assignment of Trade Names and Trademarks in
substantially the form attached hereto as Exhibit F;
(b) the Collateral Assignment of Patents in substantially the form
attached hereto as Exhibit G; and
(c) the Collateral Assignment of Life Insurance in substantially the
form attached hereto as Exhibit H.
Section 3.2 One General Obligation; Cross Collateral. All loans and
advances by the Lenders to the Borrower under this Agreement and under all other
agreements constitute one loan, and all indebtedness and obligations of the
Borrower to Lenders under this and under all other agreements, present and
future, constitute one general obligation secured by the Collateral and security
held and to be held by Lenders or the Agent on behalf of the Lenders hereunder
and by virtue of all other assignments and security agreements between the
Borrower and Lenders or the Agent on behalf of the Lenders now and hereafter
existing. It is expressly understood and agreed that all of the rights of the
Agent and each Lender contained in this Agreement shall likewise apply insofar
as applicable to any modification of or supplement to this Agreement and to any
other agreements, present and future, among the Agent, Lenders and the Borrower.
Section 3.3 Additional Security for Loans. As additional collateral
security for such of the Obligations as are described therein, the following
documents constituting part of the Security Documents hereunder shall be
delivered to the Agent on behalf of the Lenders:
(a) a Pledge Agreement in substantially the form attached hereto as
Exhibit executed by (i) Guarantor with respect to the stock of Borrower,
(ii) Borrower with respect to the stock of each direct Subsidiary thereof,
and (iii) Xxxxxxxxx with respect to each of its direct Subsidiaries; in
each case with appropriate changes in text thereof to reflect whether such
Pledge Agreement secures the direct obligations of Borrower, the Guaranty
Agreement or a Subsidiary Guarantee, as the case may be;
(b) the Guaranty Agreement in substantially the form attached hereto
as Exhibit J;
32
(c) a Subsidiary Guaranty from Emerald, Xxxxxxxxx and each Subsidiary
of Xxxxxxxxx, in substantially the form attached hereto as Exhibit O; and
(d) a Subsidiary Security Agreement from Emerald, Xxxxxxxxx and each
Subsidiary of Xxxxxxxxx, in substantially the form attached hereto as
Exhibit P.
Section 3.4 Future Real Property Interest. Concurrently with the
acquisition of any fee interest in real property, Borrower shall deliver to the
Agent a Mortgage with respect to such property and such other security documents
encumbering the acquired real property as a Majority of Lenders may reasonably
require.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and each Lender to enter into this Agreement,
the Borrower and Guarantor hereby represent and warrant to the Agent and each
Lender that:
Section 4.1 Corporate Existence. The Borrower and Guarantor are
corporations duly organized, validly existing, and in good standing under the
laws of the State of Delaware with full power and authority to conduct their
businesses as presently conducted. The Borrower is duly qualified as a foreign
corporation in the State of Texas, and Borrower and Guarantor are duly qualified
as foreign corporations in all other jurisdictions in which their activities or
ownership of property requires such qualification, except to the extent that the
failure to so qualify could not be expected to have a Material Adverse Effect.
Section 4.2 Corporate Power; Authorization. The Borrower and Guarantor have
the corporate power and authority to make, deliver and perform this Agreement
and such other Loan Documents to which they are a party and have taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement and the Notes and to authorize the execution,
delivery and performance of this Agreement, the Notes and such other Loan
Documents to which they are a party. No consent or authorization of, or filing
with, any Person (including, without limitation, any governmental authority), is
required in connection with the borrowings hereunder or the execution, delivery
and performance by the Borrower and Guarantor, and the validity or
enforceability (with respect to the Borrower and Guarantor) of this Agreement,
the Notes or such other Loan Documents, except for (i) consents and filings
referred to or disclosed on Schedule 4.2 which consents and filings have been or
will be obtained or made on or prior to the Closing Date and will be in full
force and effect on such date, and (ii) consents, filings or notifications
which, individually or in the aggregate could not be expected to have a Material
Adverse Effect.
Section 4.3 Enforceable Obligations. This Agreement, the Notes and the
other Loan Documents have been duly executed and delivered on behalf of the
Borrower and/or Guarantor, as the case may be, and constitute the legal, valid
and binding obligations of the
33
Borrower and/or Guarantor, as the case may be, enforceable against the Borrower
and/or Guarantor, as the case may be, in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law) which if
determined adversely to either of them would have a Material Adverse Effect.
Section 4.4 No Legal Bar. The execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents and the consummation of the
transactions contemplated thereby, will not violate any Requirements of Law or
any Contractual Obligation of the Borrower or the Guarantor, subject to the
receipt of consents, filings and notifications which have not been obtained as
described in Section 4.2.
Section 4.5 No Litigation. Except as set forth on Schedule 4.5, no
litigation, investigation or proceeding of or before any arbitrator or
governmental authority is, to the knowledge of the Borrower or Guarantor, after
due inquiry, pending or, overtly threatened against the Borrower or Guarantor or
against any of their respective existing properties or revenues.
Section 4.6 Financial Condition. The Financial Statements previously
delivered to each Lender present fairly in all material respects, the financial
condition of the Borrower and Guarantor described therein as of the respective
dates thereof, and in conformity with GAAP (except that any unaudited Financial
Statements may not contain any or all of the footnotes required by GAAP and are
subject to year-end audit adjustments). There has been no material adverse
change in the assets, liabilities, business or financial condition of the
Borrower or Guarantor since the respective dates of the Financial Statements.
Except as disclosed on Schedule 4.6 hereto, there exist no equity or long-term
investments in or outstanding advances to any Person not reflected in the
Financial Statements. Except for trade payables arising in the ordinary course
of business, since the dates reflected in the Financial Statements, the Borrower
and Guarantor have no material Indebtedness other than as reflected in such
Financial Statements. The Financial Statements, including the related schedules
and notes thereto, have been prepared in conformity with GAAP consistently
applied throughout the periods involved (except that any unaudited Financial
Statements may not contain any or all of the footnotes required by GAAP and are
subject to year end audit adjustments).
Section 4.7 No Change. Except as disclosed in Schedule 4.7, since June 30,
1995, there has been no development or event which has had or could reasonably
be expected to have a Material Adverse Effect, and no dividends or other
distributions have been declared, paid or made upon the capital stock of the
Borrower or Guarantor nor has any of the capital stock of the Borrower or
Guarantor been redeemed, retired, purchased or otherwise acquired for value by
the Borrower or Guarantor.
Section 4.8 No Default. Except as disclosed in Schedule 4.8, neither the
Borrower nor the Guarantor is in default under or with respect to any of its
Contractual Obligations in
34
any respect which would have a Material Adverse Effect. To the knowledge of
Borrower and Guarantor no Default or Event of Default has occurred and is
continuing.
Section 4.9 Intellectual Property. Except as disclosed in Schedule 4.9, the
Borrower possesses or is licensed to use all patents, permits, trademarks, trade
names, copyrights, technology, know-how and processes necessary for the conduct
of its business as currently conducted, except for those the failure to possess
or license which could not be reasonably expected to have a Material Adverse
Effect, and all such licenses, patents, permits, trademarks, trade names, and
copyrights are listed on Exhibit attached hereto and made a part hereof. Except
as disclosed on Schedule 4.5, no claim has been asserted and is pending by any
Person challenging or questioning the use of any such property or rights or the
validity or effectiveness of any such property or rights, nor does Borrower or
Guarantor know of any valid basis for any such claim. To the best of Borrower's
and Guarantor's knowledge, the use of such property and rights by the Borrower
does not infringe on the rights of any Person.
Section 4.10 Compliance with Laws. Except as set forth on Schedule 4.10, to
the best of Borrower's and Guarantor's knowledge, Borrower and Guarantor are in
compliance in all material respects with all Requirements of Law to the extent
the failure to so comply would result in a Material Adverse Effect.
Section 4.11 Contractual Obligations. Neither Borrower nor Guarantor is a
party to or has any Contractual Obligation which has or is reasonably expected
to have a Material Adverse Effect.
Section 4.12 Taxes. Except as set forth on Schedule 4.12, the Borrower and
Guarantor have filed or caused to be filed all tax returns which, to the
knowledge of the Borrower and Guarantor, are required to be filed (except for
returns with respect to which the due date or extended due dates has not yet
occurred) and have paid, withheld, or made adequate provision for all taxes
shown to be due and payable on said returns or on any assessments made against
them or any of their property and all other taxes, fees or other charges imposed
on them or any of their property by any governmental authority (other than any
taxes, fees or other charges the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the Borrower
or Guarantor, as the case may be); no tax Lien has been filed, and, to the
knowledge of the Borrower or Guarantor, no claim is being asserted against
Borrower or Guarantor, with respect to any such tax, fee or other charge by any
governmental authority which if not paid when due or before the same becomes
delinquent would have a Material Adverse Effect.
Section 4.13 Margin Stock. Borrower is not engaged, principally or as one
of its important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "Margin Stock" within the respective meanings
of each of the quoted terms under Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. No part of the proceeds of any loans hereunder will be used for
"purchasing" or "carrying" Margin Stock as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of the Regulations
of such Board of Governors.
35
Section 4.14 ERISA. Schedule 4.14 contains a list of all Employee Benefit
Plans maintained by Borrower. Borrower and its ERISA Affiliates are in
compliance in all material respects with any applicable provisions of ERISA and
the regulations thereunder and the Code, with respect to all such Employee
Benefit Plans.
Section 4.15 Environmental Matters.
(a) Except as set forth on Schedule hereto:
(i) To the knowledge of Borrower and Guarantor , the properties and
facilities of the Borrower and Guarantor are not being used to make, store,
handle, treat, dispose, generate, or transport hazardous substances in
violation of any applicable law now in effect; (ii) to Borrower's and
Guarantor's knowledge, hazardous substances are not being made, stored,
handled, treated, disposed of, generated, or transported on or from the
properties and facilities of the Borrower and Guarantor, except in
accordance with applicable law now in effect; (iii) to Borrower's and
Guarantor's knowledge, the properties, facilities and operations of the
Borrower and Guarantor comply in all material respects with all applicable
Environmental Laws; (iv) to Borrower's and Guarantor's knowledge, none of
the properties, facilities or operations of the Borrower or Guarantor is
subject to any judicial or administrative proceedings alleging the
violation of any Environmental Laws; (v) to Borrower's and Guarantor's
knowledge, none of the properties, facilities or operations of the Borrower
or Guarantor is the subject of federal, state or local investigation
evaluating whether any remedial action is needed to respond to a release of
any hazardous or toxic waste, substance or constituent, any petroleum or
petroleum product (including, without limitation, crude oil or any fraction
thereof), or any other hazardous, illegal or unlawful substance into the
environment; (vi) neither the Borrower nor the Guarantor has filed, nor to
Borrower's and Guarantor's knowledge, is presently required to file any
notice under any federal, state or local law indicating past or present
treatment or disposal of a hazardous waste, hazardous substance or any
petroleum or petroleum product (including, without limitation, crude oil or
any fraction thereof), or reporting a spill or release of a hazardous or
toxic waste, substance or constituent, any petroleum or petroleum product
(including, without limitation, crude oil or any fraction thereof), or any
other substance into the environment; and (vii) neither the Borrower nor
Guarantor has received notice of any contingent liability in connection
with any release of any hazardous or toxic waste, substance or constituent,
any petroleum or petroleum product (including, without limitation, crude
oil or any fraction thereof), or any other substance into the environment,
which contingent liability (A) will more likely than not become liquidated,
(B) if it becomes liquidated, would not be adequately covered by insurance
or other indemnification rights, and (C) presently has a Material Adverse
Effect, or if liquidated would have a Material Adverse Effect.
Section 4.16 Investment Company Act. Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
36
Section 4.17 Capitalization. Borrower has no Subsidiaries, other than
Emerald, Xxxxxxxxx and Xxxxxxxxx Consumer Products, Inc. ("WCP"). WCP is a
wholly-owned Subsidiary of Xxxxxxxxx. The Guarantor owns One Hundred Percent
(100%) of the capital stock of Borrower.
Section 4.18 Brokerage. Except as set forth on Schedule, neither the
Borrower nor the Guarantor has dealt with any broker or finder in connection
with the making of the Loans. Borrower and Guarantor hereby indemnify the Agent
and each Lender and agree to hold them harmless from and against any claims for
finders' or brokerage fees or commissions of brokers or finders Borrower or
Guarantor have dealt with in connection therewith and agree to pay all expenses
reasonably incurred by the Agent and any Lender in connection with the defense
of any action or proceeding brought to collect any such fees or commissions.
Section 4.19 Place of Business. The Borrower maintains places of business
and owns Collateral only at the addresses specified in Exhibit hereto and
maintains its books of account and records, including all records concerning the
Collateral, only at the addresses specified in Exhibit B, except for Inventory
stored in Canada. The Borrower maintains its chief executive office at the
address specified in Exhibit B.
Section 4.20 General Collateral Representation.
(a) The Borrower has good and marketable title to any real property
purported to be owned by it and good title to the other Collateral
consisting of personal property, free from all Liens in favor of any
Person, other than the Agent and except for Permitted Liens; and has full
right and power to grant the Agent a security interest therein. Borrower
does not own any fee interest in any real property. All information
furnished to the Agent concerning the Collateral is complete, accurate and
correct in all material respects when furnished;
(b) No security agreement, Financing Statement, equivalent security or
Lien instrument or continuation statement covering all or any part of the
Collateral is on file or of record in any public office, except such as may
have been filed (i) by Borrower in favor of Agent for the benefit of
Lenders or any Lender pursuant to this Agreement, or (ii) in respect of the
items of Collateral subject to the Permitted Liens;
(c) The provisions of this Agreement are sufficient to create in favor
of Lenders or the Agent for the benefit of Lenders, as of the Closing Date,
a valid and continuing lien on, and security interest in, the types of the
Collateral hereunder in which a security interest may be created under
Article 9 of the UCC. Financing Statements on Form UCC-1 have been duly
executed on behalf of Borrower and the description of such Collateral set
forth therein is sufficient to perfect security interests in such
Collateral in which a security interest may be perfected by the filing of
Financing Statements under the UCC. When such Financing Statements are duly
filed in the filing offices listed on Schedule hereto, and the requisite
filing fees are paid, such filings will be sufficient to perfect security
interests in such of the Collateral described in the Financing Statements
as can be perfected by filing (other than
37
Equipment affixed to real property so as to become fixtures), which
perfected security interests will be prior to all other Liens in favor of
others and rights of others (except for Permitted Liens), enforceable as
such as against creditors of and purchasers from Borrower (other than
purchasers of Inventory in the ordinary course) and as against any owner of
the real property where any of the Equipment is located and as against any
purchaser of such real property and any present or future creditor
obtaining a Lien on such real property, except that (i) certain statutory
liens arising by operation of law may have priority over a security
interest perfected by a previously filed Financing Statement, (ii) under
certain circumstances described in the UCC, the right of the Agent or any
Lender to enforce a security interest in proceeds may be limited, and (iii)
Section 552 of the Bankruptcy Code limits the extent to which property
acquired by a debtor after the commencement of a case under the Bankruptcy
Code may be subject to a Lien perfected prior to the filing of such case.
All action necessary to protect and perfect a security interest in each
item of the Collateral has been duly taken, or in the case of Equipment
covered by certificates of title will be taken within ninety (90) days of
the Closing Date, or in the case of the Pledged Stock as set forth below;
(d) Upon delivery to and possession by Agent for the benefit of
Lenders of the Pledged Stock pursuant to the terms of the Pledge Agreement,
Agent, for the benefit of Lenders, shall possess a valid, first priority
security interest in such Pledged Stock in accordance with Article 9 of the
UCC; and
(e) No person now having possession or control of any of the
Collateral consisting of Inventory or Equipment has issued, in receipt
therefor, a negotiable xxxx of lading, warehouse receipt or other document
of title.
Section 4.21 Accounts. As to each and every Eligible Account classified
hereunder as an Eligible Account:
(a) it is a bona fide existing obligation, valid and enforceable
against the Debtor for a sum certain for sales of goods shipped or
delivered, or goods leased, or services rendered in the ordinary course of
business;
(b) all supporting documents, instruments, chattel paper and other
evidence of indebtedness, if any, delivered to the Agent are complete and
correct and valid and enforceable in accordance with their terms, and, to
the best knowledge of Borrower, all signatures and endorsements that appear
thereon are genuine, and all signatories and endorsers have full capacity
to contract;
(c) the Debtor is liable for and is obligated to make payment of the
amount expressed in the invoice pertaining to such Account according to its
terms;
(d) it will be subject to no discount, allowance or special terms of
payment without the prior approval of the Agent except prompt payment and
other discounts and allowances which are customary in the industry and
consistent with the past practice of Borrower;
38
(e) to the best knowledge of Borrower, it is subject to no dispute,
counterclaim, defense or offset, real or claimed;
(f) it is not subject to any prohibition or limitation upon
assignment; and
(g) the Borrower has full right and power to grant Lenders or the
Agent for the benefit of Lenders a security interest therein and the
security interest granted in such Account in Article 3 hereof, when
perfected, will be a valid first security interest which will inure to the
benefit of Lenders without further action, subject to Permitted Liens and
the provisions of Section 4.20(c).
The warranties set out herein shall be deemed to have been made with respect to
each and every Eligible Account now owned or hereafter acquired by the Borrower.
Section 4.22 Inventory. All Eligible Inventory (a) is and will be of good
and merchantable quality, free from defects, and (b) is not, nor will be, stored
with a bailee or warehouseman without the prior written consent of Agent, except
to the extent Borrower delivers to Agent a non-negotiable warehouse receipt
covering same.
Section 4.23 Disclosure. No representation or warranty made by the Borrower
or Guarantor in this Agreement or in any other document furnished or to be
furnished from time to time in connection herewith or therewith contains or will
contain any misrepresentation of a material fact or omits or will omit to state
any material fact necessary to make the statements herein or therein not
misleading.
Section 4.24 Solvency. After giving effect to the transactions contemplated
hereby, the Borrower will be Solvent.
Section 4.25 Ownership and Control. All outstanding shares of the
Borrower's capital stock have been duly authorized and validly issued, are fully
paid and nonassessable and are owned of record and beneficially by Guarantor,
subject only to the lien created by the Pledge Agreement. There are no
outstanding options, rights and warrants issued by the Borrower for the
acquisition of shares of the capital stock of the Borrower, nor any outstanding
securities or obligations convertible into such shares, nor any agreements by
the Borrower to issue or sell such shares. There are no options, sale
agreements, pledges, proxies, voting trusts, powers of attorney or any other
agreements or instruments binding upon any of Borrower's shareholders with
respect to beneficial or record ownership of or voting rights with respect to
shares of the capital stock of the Borrower (other than pursuant to the Pledge
Agreement in favor of the Agent for the benefit of Lenders).
Section 4.26 Undisclosed Liabilities. To the knowledge of Borrower and
Guarantor, neither the Borrower nor the Guarantor has any material obligation or
liability (whether accrued, absolute, contingent, unliquidated, or otherwise,
whether due or to become due) arising out of transactions entered into at or
prior to the date hereof, or any action or inaction at or prior to the date
hereof, except (a) liabilities reflected on the Financial Statements; (b)
liabilities incurred in the ordinary course of business since March 31, 1996
(none of which, to the knowledge of Borrower and Guarantor, are liabilities for
breach of contract,
39
breach of warranty, torts, infringements, claims or lawsuits); (c) liabilities
or obligations disclosed in the schedules hereto; (d) liabilities or obligations
incurred pursuant to the Loan Documents to which they are parties; (e) the
Xxxxxxxxx Acquisition Agreement and agreements entered into pursuant thereto;
(f) Seller Contingent Payments; (g) Additional Purchase Price; and (h) Emerald
Contingent Payments.
Section 4.27 Indemnity Agreements. Except as set forth on Schedule 4.27, or
as otherwise permitted or not prohibited hereby, no indemnity agreements exist
between the Borrower and any of its officers or directors.
Section 4.28 Operating Agreements. Borrower possesses or has the right to
use all licenses, customer quality ratings, regulatory approvals and permits,
and has entered into all supply agreements, site or equipment leases and similar
operating agreements necessary for the conduct of its business as currently
conducted, except where the failure to possess or to have the right to use any
such permit, license, approval or rating, or to have entered into any such
agreement, could not reasonably be expected to have a Material Adverse Effect.
Section 4.29 Reports with Governmental Bodies. Except where the failure to
do so would not have any Material Adverse Effect, Borrower and Guarantor have
duly and timely filed all material reports and other filings which are required
to be filed by them under any rules or regulations promulgated by any foreign,
federal, state, municipal or other government, or any department, commission,
board, bureau, agency, public authority, or instrumentality thereof.
Section 4.30 Employee Matters.
(a) On the date hereof and on the Closing Date, none of the employees
of Borrower is subject to any collective bargaining agreement; no petition
for certification or union license is pending with respect to any of the
employees of Borrower; to the best knowledge of Borrower, no union or
collective bargaining agreement unit has sought certification or
recognition with respect to any of the employees of Borrower; and there are
no strikes, work stoppages, unfair labor practice complaints or
controversies pending or, to the knowledge of Borrower, threatened in
writing against Borrower by any of its employees, other than employee
grievances arising out of the ordinary course of business, none of which in
the aggregate have or has had Material Adverse Effect.
(b) Neither Borrower nor, to the knowledge of Borrower, any key
employee of Borrower is subject to any employment agreement or
non-competition agreement with any former employer or any other Person,
which agreement would prohibit Borrower from using any information which
Borrower would not otherwise be prohibited from using under the terms of
such agreement.
Section 4.31 Survival of Representations and Warranties. The foregoing
representations and warranties are made by the Borrower and Guarantor with the
knowledge and intention that the Agent and Lenders will rely thereon, and shall
survive the execution and delivery of this Agreement and the making of all Loans
hereunder.
40
ARTICLE 5
AFFIRMATIVE COVENANTS
So long as any Note remains outstanding and unpaid or any other Obligation
is owing to the Agent or any Lender, the Borrower and Guarantor agree as
follows, except as otherwise expressly consented to in writing by a Majority of
Lenders pursuant to Section 10.8:
Section 5.1 Financial Statements.
(a) Year End Report. As soon as filed with the Securities and Exchange
Commission, but in no event later than one hundred five (105) days after
the end of each fiscal year of the Borrower and Guarantor, commencing with
the fiscal year ended June 30, 1996, Borrower and Guarantor shall deliver
to Agent copies of (i) the audited consolidated financial statements of
Borrower and its Subsidiaries (except the annual financial statements as at
June 30, 1996 shall relate solely to Borrower) and (ii) the audited
consolidated and unaudited consolidating financial statements of Guarantor
and its Subsidiaries, as at the end of such year, together with, in each
case, the related statements of income and retained earnings and of cash
flows for such year, containing in comparative form the figures for the
previous year. Such audited financial statements shall be accompanied by a
report without a "going concern" or like exception or qualification arising
out of the scope of the audit of independent certified public accountants
of nationally recognized standing reasonably acceptable to each Lender,
stating that such financial statements present fairly, in all material
respects, the respective financial positions of the Borrower and Guarantor
and results of operations and cash flow for the fiscal year then ended in
conformity with GAAP consistently applied in a manner consistent with prior
fiscal periods. In addition, Borrower and Guarantor shall furnish Agent
with a comparison of the fiscal year's results against the budgets
furnished to each Lender. Each Lender acknowledges the Guarantor's
employment of BDO Xxxxxxx as independent certified public accountants and
presently accepts their employment for purposes of this paragraph and
Section.
(b) Monthly Reports. No later than the fifteenth (15th) day of each
month in respect of the immediately preceding month, commencing with August
15, 1996, Borrower shall provide to Agent (i) a detailed aging report of
Accounts, aged by the due date of each invoice (and reflecting the actual
date of such invoice), and by total, (ii) a schedule describing all
Accounts, (iii) a report of any book overdraft, (iv) a list and description
of all Inventory, (v) the designation of Inventory by raw materials, work
in process and finished goods, and (vi) the listing of the costs of
Borrower's raw materials, work in process and finished goods. As soon as
available, but in any event not later than forty-five (45) days after the
end of each month, the Borrower and Guarantor shall each deliver to Agent
copies of their respective unaudited financial statements including a
balance sheet of Guarantor and Borrower, and their respective consolidated
Subsidiaries, if any, as at the end of such month and the related unaudited
consolidated statements of income and retained earnings and of cash flows
of Guarantor and the Borrower for such month and the portion of the fiscal
year through
41
the end of such month, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer of the
Guarantor as being fairly stated in all material respects when considered
in relation to the financial statements referred to in Section 5.1(a)
(subject to normal year-end audit adjustments), together with a comparison
of the month's results against the budgets furnished to each Lender.
(c) Daily Reports. If required by Agent after the occurrence and
during the continuance of an Event of Default, the Borrower shall deliver
to Agent, on a weekly basis or such shorter period as Agent may reasonably
request, copies of collection reports, sales journals and the Borrowing
Base Report. If requested by Agent after the occurrence and during the
continuance of an Event of Default, Borrower shall also provide Agent with
copies of invoices, original delivery receipts, customers purchase orders,
shipping instructions, bills of lading and other documentation pertaining
to shipping arrangements, or if Agent so directs any and all such
documentation shall be held by Borrower as custodian for Agent.
Agent shall promptly forward to each Lender a copy of all documents supplied to
Agent by Borrower or Guarantor pursuant to Section 5.1. All of such financial
statements shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods, except as approved by such accountants, as the case may be, and
disclosed therein.
Section 5.2 Certificates; Other Information.
(a) Auditor's Certificates. Concurrently with the delivery of the
financial statements referred to in Section 5.1(a), Borrower shall furnish
to Agent a certificate of the independent certified public accountants
reporting on such financial statements stating that in making their
examination thereof, no knowledge was obtained of any Default or Event of
Default, except as specified in such certificate.
(b) Additional Certificates. Within 45 days following the end of each
fiscal quarter of Borrower, the Borrower and Guarantor shall furnish to
Agent a certificate of a Responsible Officer of the Borrower and Guarantor
(i) stating that, to the best of such officer's knowledge, the Borrower and
Guarantor during such period have observed or performed all of their
covenants and other agreements and satisfied every condition contained in
this Agreement and in the Notes and the other Loan Documents to which they
are parties, to be observed, performed or satisfied by them, and that such
Responsible Officer has obtained no knowledge of any Default or Event of
Default, except as specified in such certificate, (ii) setting forth in
reasonable detail the calculations supporting and used to determine
Borrower's compliance as of the date of such financial statements, with the
financial covenants contained in Sections 6.5 through 6.9 of this
Agreement; (iii) setting forth in detail, with respect to the immediately
preceding quarter, all Restricted Payments under Section 6.1, if any, and
all transactions with Affiliates of the Borrower; and (iv) describing in
discussion form the variances which occurred between the budgeted results
and actual results, with a statement of the reasons for such variances.
42
(c) Budget Projections. Not later than the end of each fiscal year of
the Borrower and Guarantor, the Borrower shall deliver to Agent a copy of
the income statement budget, the cash flow budget and the projected balance
sheets for each of the Borrower and the Guarantor and their respective
Subsidiaries, if any, for the succeeding fiscal year, prepared by month,
and detailing the assumptions upon which such projections have been made,
such projections to be accompanied by a certificate of a Responsible
Officer of Borrower and Guarantor to the effect that such projections have
been prepared on the basis of sound financial planning practice and that
such Responsible Officer has no reason to believe they are incorrect or
misleading in any material respect.
(d) Warehouse and Lease Agreements. Borrower shall provide Agent with
copies of all agreements between Borrower and any warehouse or other
location at which Inventory may, from time to time, be kept and all leases
or similar agreements between Borrower and any Person, whether Borrower is
lessor or lessee thereunder, except in instances where Borrower has
previously delivered to Lender a warehouse receipt therefor. At Agent's or
any Lender's request, Borrower shall use its best efforts to obtain any
third party waivers or consents (such as, but not limited to, landlord's
waivers with respect to leases) necessary to allow any Lender or Agent for
the benefit of Lenders to create, perfect or foreclose upon any security
interest in any Collateral to which any Lender is entitled hereunder.
(e) Capital Expenditures. If required by Agent, Borrower shall provide
Agent, on the last day of each March, June, September and December, for the
calendar quarter most recently ended, a schedule of all Capital
Expenditures made by Borrower during such preceding quarter.
(f) Audit Reports. Within five (5) Business Days after receipt
thereof, Borrower and Guarantor shall furnish to Agent a copy of each
report, other than the reports referred to in subsection (a), including any
so-called "Management Letter" or similar reports, submitted to Borrower or
Guarantor in connection with any annual, interim or special audit of the
books of such Person.
(g) Reports to Security Holders and Securities Authorities. Within
five (5) Business Days after becoming available, Guarantor shall furnish to
each Agent copies of: all annual reports and other financial statements
sent by such Person to its security holders and all periodic reports on
Forms 10-KSB and 10-QSB filed by such Person with the Securities and
Exchange Commission or any governmental agency succeeding to any of its
functions.
(h) Request for ERISA Waiver. Borrower and Guarantor will furnish to
each Agent copies of any request submitted by either of them for a waiver
of the funding standards or any extension of the amortization periods
required by Sections 303 and 304 of ERISA or Section 412 of the IRC within
five (5) Business Days after any such request is submitted to the
Department of Labor or the Internal Revenue Service, as the case may be.
43
(i) Deposit Accounts. At the time it furnishes Agent with its year-end
financial statements and at any other time upon Agent's request, Borrower
shall furnish Agent a list of all deposit accounts of Borrower, containing
the name and address of the depository financial institution with respect
to Borrower's deposit accounts. Borrower shall also promptly but in no
event more than ten (10) Business Days after opening or closing a deposit
account notify Agent of each deposit account which from time to time is
opened or closed.
Borrower and Guarantor authorize Agent to communicate directly with their
Responsible Officers and with their respective accountants to the extent
provided in the next sentence. Borrower and Guarantor authorize their respective
accountants to disclose to each Lender, after notice to Borrower or Guarantor,
as the case may, and after an opportunity for Borrower or Guarantor to provide
the requested information, any and all financial statements, work papers and
other information of any kind that they may have with respect to such Persons
and their respective business, financial and other affairs, all of which
information, to the extent not in the public domain, shall be subject to the
provisions of Section 11.10. Upon the request of Agent, Borrower and Guarantor
will deliver a letter addressed to their respective accountants instructing them
to comply with the provisions of this Section.
Section 5.3 Payment of Obligations. Except as permitted by Section 8.8 with
respect to the Borrower, Borrower and Guarantor shall pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all of their obligations of whatever nature, except where (a) the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings, (b) reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or Guarantor, as the
case may be, and (c) the Borrower and Guarantor, as the case may be, shall have
posted any bond or other security required by applicable law against the payment
thereof.
Section 5.4 Conduct of Business and Maintenance of Existence. Borrower and
Guarantor shall continue to engage in business of the same general type as now
conducted by them and preserve, renew and keep in full force and effect their
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of their
businesses. Borrower and Guarantor shall comply with all Contractual Obligations
and Requirements of Law, except to the extent the failure to comply therewith
would not to have a Material Adverse Effect and except where the validity of any
such Contractual Obligation, Requirement of Law or the amount of any related
monetary claim is being contested in good faith by appropriate proceedings
timely instituted and diligently conducted if it has maintained adequate
reserves with respect thereto in accordance with GAAP.
Section 5.5 Debtor's Condition. Promptly upon:
(a) any Responsible Officer's learning thereof, Borrower shall inform
Agent, in writing, of any material delay in Borrower's performance of any
of its obligations to any Debtor and of any assertion of any material
claims, offsets or counterclaims by any Debtor and of any allowances,
credits and/or other monies
44
granted by Borrower to any Debtor to the extent the Accounts of such Debtor
represent in excess of One Hundred Thousand and 00/100 Dollars
($100,000.00); or
(b) any Responsible Officer's receipt or learning thereof, Borrower
shall furnish to and inform each Lender of all material adverse information
relating to the financial condition of any Debtor whose Accounts represent
in excess of One Hundred Thousand and 00/100 Dollars ($100,000.00) at the
time outstanding.
Section 5.6 Maintenance of Property; Insurance. Borrower and Guarantor
shall keep all property useful and necessary in their businesses in good working
order and condition, except for ordinary wear and tear and damage or loss to the
extent covered by insurance; maintain all workers' compensation insurance
required by law; maintain with insurance companies that are rated A8 or better
by A.M. Best Company, Inc. (or the equivalent thereof or otherwise approved by
Agent), insurance on all of their personal property having an insurable value in
amounts sufficient to insure One Hundred Percent (100%) of the actual
replacement costs thereof (subject to normal deductibles and/or self insured
retentions in an amount not in excess of the amounts in place at the Closing
Date) and against at least such risks as are usually insured against in the same
general area by companies engaged in the same or a similar business, or, in case
an Event of Default shall occur and be continuing as the Agent may specify from
time to time, with insurers in amounts reasonably acceptable to Agent. Borrower
shall furnish to Agent, upon written request of Agent, full information as to
the insurance carried. If either the Borrower or Guarantor fails to do so, Agent
may obtain such insurance and charge the cost thereof to the Borrower's account
and add it to the Obligations hereunder. Lenders agree that, if any loss should
occur, and no Event of Default has occurred hereunder, Guarantor or Borrower, as
the case may be, may apply such insurance proceeds to repair or replace the
Collateral as to which the loss occurred, provided that the Borrower and
Guarantor promptly execute and deliver to Agent such documents, instruments,
financing statements or other agreements as may be reasonably necessary to
perfect the security interest of the Agent for the benefit of Lenders in all
such property, or if not so applied or if a Default or an Event of Default has
occurred hereunder and is continuing, Borrower and Guarantor agree that, the
proceeds of all such insurance policies may be applied to the payment of all or
any part of the Obligations hereunder, as a Majority of Lenders may direct. The
Agent, for the benefit of Lenders, shall be named as loss payee or mortgagee on
such insurance policies to the extent that such policies insure the Collateral
and Borrower and Guarantor, as the case may be, shall furnish Agent and each
Lender insurance certificates to such effect. All policies shall provide for at
least thirty (30) days' written notice of cancellation to the Agent.
Section 5.7 Liability Insurance. Borrower shall, at all times, maintain in
full force and effect such liability insurance with respect to its activities
and business interruption and other insurance as may be reasonably required by a
Majority of Lenders, such insurance to be provided by insurer(s) acceptable to
Agent, and if requested by Agent, such insurance shall name the Agent, for the
benefit of Lenders as additional insureds.
Section 5.8 Inspection of Property; Books and Records. Borrower and
Guarantor shall maintain complete and accurate books of accounts and records in
which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all
45
dealings and transactions in relation to the Collateral and the operations of
the Borrower and Guarantor; and Borrower will grant to the Agent and its
representatives, upon reasonable notice, full and complete access to the
Collateral and all books of account, records, correspondence and other papers
relating to the Collateral upon notice at least one Business Day prior to such
inspection and conducted during normal business hours and Borrower and Guarantor
grant to Agent, its representatives the right to inspect, examine, verify and
make abstracts from the copies of their respective books of account, records,
correspondence and other papers, and to investigate during normal business hours
such other records, activities and business of the Borrower and Guarantor as
Agent may deem reasonably necessary at the time, provided, however (except in
the case of an Event of Default hereunder), such right of access, inspection or
investigation is exercised in a manner as to not unreasonably disrupt the
business of Borrower or Guarantor.
Section 5.9 Notices. Borrower and Guarantor shall give notice to Agent of:
(a) the occurrence of any Event of Default, together with a written
statement of a Responsible Officer of the Borrower and Guarantor setting
forth the details of the Default or Event of Default and any action taken
or contemplated to be taken with respect to the same, promptly following a
Responsible Officer of Borrower or Guarantor, as the case may be, learning
thereof;
(b) any (i) default or event of default under any Contractual
Obligation relating to any Indebtedness of the Borrower in excess of Twenty
Five Thousand and 00/100 Dollars ($25,000), and any (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or Guarantor and any governmental authority, which in either case,
if not cured or if adversely determined, as the case may be, would have a
Material Adverse Effect, promptly following a Responsible Officer of
Borrower or Guarantor, as the case may be, learning thereof;
(c) the commencement, existence or written threat of any action or
proceeding by or before any governmental or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic, against or affecting
the Borrower or Guarantor which if determined adversely to Borrower or
Guarantor could reasonably be expected to have a Material Adverse Effect,
promptly following a Responsible Officer of Borrower or Guarantor, as the
case may be, becoming aware of the commencement, existence or written
threat of any such proceeding;
(d) the following events, as soon as possible and in any event within
thirty (30) days after a Responsible Officer of the Borrower or Guarantor
knows or has reason to know thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Employee Benefit
Plan, or any withdrawal from, or the termination, reorganization (within
the meaning of Section 4241 of ERISA) or insolvency (within the meaning of
Section 4245 of ERISA) of any Multiemployer Plan, or (ii) the institution
of proceedings or the taking of any other action by the PBGC or the
Borrower or any Commonly Controlled Entity or any Multiemployer
46
Plan with respect to the withdrawal from, or the termination,
reorganization (within the meaning of Section 4241 of ERISA) or insolvency
(within the meaning of Section 4245 of ERISA) of, any Employee Benefit Plan
or Multiemployer Plan;
(e) at least fifteen (15) Business Days prior to any change of the
certified public accounting firm auditing Guarantor or Borrower, notice
that such change is to occur together with the name of the new certified
public accounting firm and an appropriate letter of the type described in
the last sentence of Section 5.1 addressed to such new accountants. Such
new accountants shall be one of the Big "6" accounting firms or another
independent, national certified public accounting firm reasonably
satisfactory to Agent; and
(f) any change in the business, operations, property or condition
(financial or otherwise) of the Borrower or Guarantor which could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of Borrower and Guarantor setting forth in reasonable detail
the occurrence referred to therein and stating what action the Borrower proposes
to take with respect thereto.
Section 5.10 Environmental Laws. Borrower shall:
(a) comply with all applicable Environmental Laws and obtain and
comply with and maintain any and all licenses, approvals, registrations or
permits required by Environmental Laws unless, in any case, the failure to
do so could not reasonably be expected to have a Material Adverse Effect;
(b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required by the
governmental authority having jurisdiction over Borrower under
Environmental Laws and promptly comply with all lawful orders and
directives of all such governmental authorities respecting applicable
Environmental Laws, except to the extent that the same are being contested
in good faith by appropriate proceedings or the failure to so comply could
not reasonably be expected to have a Material Adverse Effect; and
(c) defend, indemnify and hold harmless the Agent and Lenders, and
their respective employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expense of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of or noncompliance with any Environmental Laws applicable to any
real property owned, operated or leased by the Borrower or any of its
Subsidiaries, or any orders, requirements or demands of governmental
authorities related thereto, including, without limitation, reasonable
attorney's and consultant's fees, investigation and laboratory fees, court
costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the
party seeking indemnification therefor and provided any settlement is
effected with Borrower's prior consent, which shall not be unreasonably
withheld or delayed.
47
Section 5.11 Inventory. With respect to the Inventory, Borrower shall:
(a) sell or dispose of the Inventory only to buyers in the ordinary
course of business (which may include disposing of obsolete inventory in
the ordinary course of business and in accordance with standard industry
practices);
(b) promptly notify Agent of any change in location of any of the
Inventory and, prior to any such change, execute and deliver to the Agent
such Financing Statements satisfactory to Agent and a Majority of Lenders
as Agent or any Lender may reasonably request; and
(c) provide Agent with a report similar to the Borrowing Base Report
or such other form reasonably satisfactory to Agent and with such frequency
as reasonably determined by Agent, containing such information as Agent may
reasonably request regarding the Inventory.
Section 5.12 Equipment. Borrower shall:
(a) keep and maintain the Equipment in good operating condition and
repair excluding normal wear and tear and loss or damage by insured
casualty and shall make all replacements thereof as Borrower deems
reasonably necessary so that the value, utility and operating efficiency
thereof shall at all times be maintained and preserved in substantially the
same condition as on the Closing Date excluding normal wear and tear and
loss or damage by insured casualty, except to the extent items of Equipment
become obsolete, worn out or no longer useful in the ordinary course of
business, and not permit any such items to become a fixture to real estate
or accession to other personal property not constituting Collateral; and
(b) immediately on demand thereof by Agent after the occurrence of an
Event of Default, deliver to Agent any and all documents or other
instruments reasonably necessary to transfer title to or evidence of
ownership of any of the Equipment to Agent, as Secured Party hereunder
(including, without limitation, certificates of title and applications for
the title).
Section 5.13 Reclamation, Returns and Repossessions. With reasonable
promptness following a Responsible Officer of Borrower or Guarantor learning
thereof, report to Agent any material reclamation, return or repossession of
goods, any material claim or dispute asserted by any Debtor or other obligor,
and any other matters materially affecting the value and enforceability or
collectibility of any of the Collateral. In addition, the Borrower shall, at its
sole cost and expense (including attorney's fees), settle or contest by
appropriate proceedings any and all such material claims and disputes and
indemnify and protect the Agent and Lenders against any liability, loss or
expense arising therefrom or out of any such reclamation, return or repossession
of goods, provided, however, if Agent shall so elect, they shall have the right
after the occurrence of an Event of Default to settle, compromise, adjust or
litigate all claims or disputes directly with the Debtor or other obligor upon
such terms and conditions as it deems advisable and charge all costs and
expenses thereof (including reasonable attorney's fees) to the Borrower's
account and add them to the Obligations.
48
Section 5.14 Collateral. Borrower shall maintain the Collateral, as the
same is constituted from time to time, free and clear of all Liens, except
Permitted Liens; defend the Collateral against all adverse claims and demands of
all Persons at any time claiming the same or any interest therein and pay all
costs and expenses (including reasonable attorneys fees) incurred in connection
with such defense.
Section 5.15 Banking Services. Borrower shall maintain all primary
depository accounts, including without limitation, all operating, cash
management accounts and pension and employee arrangements with Provident for so
long as Provident shall remain Agent hereunder . Section 5.16 Further Documents.
Borrower shall, on or prior to the Closing Date, execute such documents and
instruments and take such other action as to enable Agent for the benefit of
Lenders:
(a) to properly file, register and record each document (including,
without limitation, Uniform Commercial Code Financing Statements and
applications for certificates of title) required or, in Agent's or Agent's
counsel's opinion, advisable to be filed, registered or recorded in order
to perfect a Lien on the Collateral in each office in each jurisdiction in
which such filings, registration and recordations are required; and
(b) to cause Agent's Lien to be noted on each document of ownership or
title as to which evidence of Agent's Lien is necessary or, in Agent's or
Agent's counsel's opinion, advisable to be shown in order to perfect
Agent's' Lien on the Collateral covered by such document.
In addition, Borrower shall promptly pay all necessary filing, subscription and
inscription fees and all recording and other similar fees, and all taxes and
other expenses related to any such filings, registrations or recordings.
After the Closing Date, at the request of the Agent, Borrower shall execute and
deliver such Financing Statements, documents and instruments, and perform all
other acts as the Agent deems reasonably necessary to carry out and perform the
intent and purpose of this Agreement, and pay, upon demand, all expenses
(including reasonable attorney's fees) incurred by the Agent in connection
therewith.
Section 5.17 Life Insurance. Guarantor shall have applied and paid for, and
once issued, shall maintain, term life insurance policies insuring the lives of
Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxx in the amount of One Million and 00/100
Dollars ($1,000,000.00) each, in each case naming the Agent, as beneficiary
thereof, and to be assigned to Agent, for the benefit of Lenders, as collateral
security hereunder.
Section 5.18 Employee Benefit Plans. Borrower will and will cause each of
its ERISA Affiliates to (a) comply in all material respects with all
requirements imposed by ERISA and the Code applicable from time to time to any
Employee Benefit Plans of Borrower or any ERISA Affiliate; (b) make full payment
when due of all amounts which
49
under the provisions of such Employee Benefit Plans or under applicable law, are
required to be paid as contributions thereto; (c) file on a timely basis all
reports, notices and other filings required by any governmental agency with
respect to any such Employee Benefit Plans; (d) furnish to all participants,
beneficiaries, and employees under any such Employee Benefit Plan, within the
periods prescribed by law, all reports, notices and other information to which
they are entitled under applicable law, and (e) take no action which would cause
any such Employee Benefit Plan to fail to meet in any material respect any
qualification requirement imposed by the Code.
Section 5.19 Other Information. Borrower shall furnish to Agent such other
financial and business information and reports in form and substance reasonably
satisfactory to Agent as and within a reasonable time after Agent may from time
to time reasonably request.
ARTICLE 6
NEGATIVE COVENANTS
The Borrower and Guarantor covenant and agree with the Agent and Lenders
and warrant that, as long as any of the Loans shall remain unpaid:
Section 6.1 Limitations on Restricted Payments. Without the prior written
consent of Agent, the Borrower shall not, at any time, enter into, participate
in, or make any Restricted Payment, except:
(a) management fees in the amount of One Hundred Twenty-Five Thousand
and 00/100 Dollars ($125,000) per calendar quarter payable to Guarantor in
arrears, provided that at the time of and after giving effect to the
payment of such management fee the following conditions are satisfied: (i)
no Default of Event of Default exists hereunder, and (ii) Borrower has
minimum excess borrowing availability under the Revolving Credit Commitment
plus cash of not less than $1.5 million;
(b) dividends for the purpose of paying income tax liabilities of the
consolidated group which includes the Borrower and Guarantor, but only to
the extent such liabilities are allocated to Borrower in a manner permitted
by the Code and the applicable regulations thereunder; and
(c) investments in the capital stock of Xxxxxxxxx pursuant to the
Xxxxxxxxx Acquisition Agreement and indirectly in the capital stock of
Xxxxxxxxx'x Subsidiaries pursuant to Borrower's acquisition of the capital
stock of Xxxxxxxxx.
Section 6.2 Transactions with Affiliates.
(a) Except as otherwise permitted by this Agreement, the Borrower
shall not, without first obtaining the written consent of Agent:
50
(i) permit the direct or indirect transfer, loan or advance,
distribution or payment of any of its funds, assets or property to any
director, officer, shareholder or employee of Borrower;
(ii) enter into or participate in any other transaction with any
Affiliate of the Borrower or Guarantor, including without limitation,
any purchase, sale, lease or exchange of property or the rendering of
any service, except for such transactions as are in the ordinary
course of business and are on such terms and conditions as are no less
favorable to Borrower than it could obtain in a comparable arms-length
transaction with a third party;
except, in respect of clauses (i) and (ii) above, the following
transactions are expressly permitted hereby:
(A) the payment of salaries and benefits to employees of
Borrower and its Subsidiaries and the reimbursement of reasonable
business expenses, all in the ordinary course of business of
Borrower and its Subsidiaries or to any of Borrower's respective
Affiliates or to any director, officer, shareholder, employee or
Affiliate of Guarantor; or
(B) Borrower's obligations and liabilities under the
Xxxxxxxxx Acquisition Agreement and under agreements entered into
by Borrower pursuant to the Xxxxxxxxx Acquisition Agreement; and
(C) the Additional Purchase Price, the Seller Contingent
Payments and the Emerald Contingent Payments.
(b) Any agreement between the Borrower and any of its Affiliates
otherwise permitted hereby shall provide that the Borrower's obligations
thereunder shall be subordinated to the obligations of the Borrower
hereunder on terms reasonably satisfactory to Agent; except for (i) the
employment agreements with Xxxxxxx Xxxxxx and Xxxxxx X. Xxxxx XX as
approved by Lenders, it being understood that the employment agreements in
effect on the Closing Date, without giving effect to any later amendment
thereof or supplement thereto, are acceptable to Agent; (ii) the Additional
Purchase Price, the Seller Contingent Payments and the Emerald Contingent
Payments; and (iii) the Xxxxxxxxx Acquisition Agreement and the agreements
entered into by Borrower pursuant thereto; and
(c) Borrower shall not, and shall use its best efforts to cause
Guarantor not to, commingle its assets and business functions with those of
Golden West, maintain separate accounting records from those of Golden
West, and take such action as may be reasonable from time to time to
separate its operations and corporate identity from those of Golden West.
Section 6.3 Limitations on Indebtedness. The Borrower and its Subsidiaries
will not at any time create, incur or assume, or become or be liable (directly
or indirectly) in respect of, any Indebtedness, other than:
51
(a) The Obligations incurred pursuant to this Agreement;
(b) Accounts payable, accrued expenses and similar obligations arising
out of transactions (other than borrowings) in the ordinary course of
business;
(c) Indebtedness of the Borrower and/or any of its Subsidiaries, not
to exceed One Hundred Thousand and 00/100 Dollars ($100,000.00) in the
aggregate, with respect to any purchase, lease, conditional sale or similar
transaction for which the seller, lessor or other party to the transaction
takes a purchase money security interest in the property which is the
subject matter of such transaction, provided that such property is acquired
(whether by purchase, lease, conditional sale or other similar transaction)
for use by the Borrower in the ordinary course of its business and,
provided, further, that such transaction will not cause the Borrower to
violate any other covenant of this Agreement; and
(d) Indebtedness listed on Schedule 6.3 as of the Closing Date.
Section 6.4 Ownership of Borrower. At all times after the date hereof,
Guarantor (subject to the Pledge Agreement) shall own and control, with the
power to vote, not less than One Hundred Percent (100%) of the issued and
outstanding shares in every class of the capital stock of the Borrower.
Section 6.5 Interest Coverage Ratio. On each Computation Date set forth
below, the Borrower shall not permit, for the relevant Reference Period the
Interest Coverage Ratio to be less than the minimum ratio specified below:
MINIMUM INTEREST
COMPUTATION DATE COVERAGE RATIO
---------------- ----------------
December 31, 1996 1.00
March 31, 1997 2.80
June 30, 1997 3.60
September 30, 1997 3.80
December 31, 1997 4.00
March 31, 1998 4.20
June 30, 1998 4.40
September 30, 1998 4.40
December 31, 1998 4.40
March 31, 1999 4.40
June 30, 1999 6.50
September 30, 1999 6.50
December 31, 1999 6.50
March 31, 2000 6.50
June 30, 2000 9.00
September 30, 2000 9.00
December 31, 2000 9.00
March 31, 2001 9.00
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June 30, 2001 9.00
September 30, 2001 9.00
December 31, 2001 9.00
March 31, 2002 9.00
June 30, 2002 9.00
Section 6.6 Maintenance of Net Worth. The Borrower shall not permit Net
Worth of the Borrower at each Computation Date to be less than the following
amounts at any computation date as specified below:
COMPUTATION DATE MINIMUM NET WORTH
---------------- -----------------
June 30, 1997 $20,000,000.00
June 30, 1998 24,000,000.00
On June 30 of each subsequent year, the Net Worth of the Borrower shall not
be less than the sum of (i) the minimum Net Worth requirement for the previous
Computation Date, plus (ii) an amount equal to Seventy-Five Percent (75%) of
Borrower's Net Income for the fiscal year then ended. If Net Income is a
negative number, the amount added under clause (ii) shall be zero.
Section 6.7 Debt Service Coverage Ratio. On each Computation Date set forth
below, the Borrower shall not permit, for the relevant Reference Period its Debt
Service Coverage Ratio to be less than the minimum ratio specified below:
COMPUTATION DATE RATIO
------------------ -----
December 31, 1996 ____
March 31, 1997 1.04
June 30, 1997 1.25
September 30, 1997 1.35
December 31, 1997 1.45
March 31, 1998 1.50
June 30, 1998 1.60
September 30, 1998 1.60
December 31, 1998 1.60
March 31, 1999 1.60
June 30, 1999 1.60
September 30, 1999 1.60
December 31, 1999 1.60
March 31, 2000 1.60
June 30, 2000 2.00
September 30, 2000 2.00
December 31, 2000 2.00
March 31, 2001 2.00
June 30, 2001 2.35
September 30, 2001 2.35
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December 31, 2001 2.35
March 31, 2002 2.35
June 30, 2002 2.35
Section 6.8 EBITDA. Borrower shall not permit EBITDA for the Reference
Period ending on each Computation Date set forth below to be less than the
dollar amount set forth below opposite such date.
COMPUTATION DATE AMOUNT
---------------- -----------
December 31, 1996 $ 1,400,000
March 31, 1997 6,700,000
June 30, 1997 11,500,000
September 30, 1997 12,000,000
December 31, 1997 12,000,000
March 31, 1998 13,000,000
June 30, 1998 13,500,000
September 30, 1998 13,500,000
December 31, 1998 13,500,000
March 31, 1999 13,500,000
June 30, 1999 15,000,000
September 30, 1999 15,000,000
December 31, 1999 15,000,000
March 31, 2000 15,000,000
June 30, 2000 16,300,000
September 30, 2000 16,300,000
December 31, 2000 16,300,000
March 31, 2001 16,300,000
June 30, 2001 17,500,000
September 30, 2001 17,500,000
December 31, 2001 17,500,000
March 31, 2002 17,500,000
June 30, 2002 18,500,000
Section 6.9 Fixed Charge Coverage. Borrower shall not permit its Fixed
Charge Coverage Ratio for the Reference Period ending on the dates set forth
below to be less than the amount set forth opposite such date.
COMPUTATION DATE RATIO
---------------- -----
December 31, 1996 0.40
March 31, 1997 0.90
June 30, 1997 1.00
September 30, 1997 1.03
December 31, 1997 1.05
March 31, 1998 1.05
June 30, 1998 1.05
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September 30, 1998 1.05
December 31, 1998 1.05
March 31, 1999 1.05
June 30, 1999 1.05
September 30, 1999 1.05
December 31, 1999 1.05
March 31, 2000 1.05
June 30, 2000 1.15
September 30, 2000 1.15
December 31, 2000 1.15
March 31, 2001 1.15
June 30, 2001 1.15
September 30, 2001 1.15
December 31, 2001 1.15
March 31, 2002 1.15
June 30, 2002 1.15
Section 6.10 Limitations on Operating Lease Expense. The aggregate amount
of Operating Lease Expense of the Borrower and its Subsidiaries, on a
consolidated basis, shall not exceed Eight Hundred Thousand and 00/100 Dollars
($800,000.00) for the fiscal year ending June 30, 1997 and for each subsequent
fiscal year shall not exceed an amount that is Ten Percent (10%) in excess of
the amount of Operating Lease Expense of Borrower and its Subsidiaries, on a
consolidated basis, permitted in the immediately preceding fiscal year.
Section 6.11 Limitations on Capital Expenditures. The Borrower and its
Subsidiaries, on a consolidated basis, shall not, without first obtaining the
written consent of a Majority of Lenders, make Capital Expenditures in any
fiscal year, in an aggregate amount greater than Seven Hundred Thousand and
00/100 Dollars ($700,000.00). To the extent all or any portion of such amount is
not used in any given fiscal year, Fifty Percent (50%) of such amount may be
carried forward to the immediately following fiscal year and used for capital
expenditures during such immediately following fiscal year.
Section 6.12 Limitation on Liens. The Borrower shall not create, incur,
assume or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except for Permitted Liens.
Section 6.13 Limitation on Guarantee Obligations. The Borrower shall not
create, incur, assume or suffer to exist any Guarantee Obligation with respect
to Borrower or its Subsidiaries, except for:
(a) guaranties of payment or performance issued to suppliers and
customers of Borrower and/or any of its Subsidiaries under agreements
entered into in the ordinary course of business by Borrower and/or any of
its Subsidiaries to supply Borrower and/or any of its Subsidiaries with
goods or services or to sell Inventory to customers;
55
(b) product warranties, return or replacement guaranties and similar
assurances made by Borrower and/or any of its Subsidiaries with respect to
products sold to customers in the ordinary course of business;
(c) indemnification provisions under this Agreement or any other Loan
Document to which Borrower and/or any of its Subsidiaries is a party;
(d) reimbursement obligations of Borrower and/or any of its
Subsidiaries under letters of credit which are permitted by subparagraph
(i) under the definition of "Permitted Liens" or otherwise approved by
Lenders hereunder;
(e) indemnification obligations under the Easy Gardener Acquisition
Agreement, the Xxxxxxxxx Acquisition Agreement and agreements to be entered
into by Borrower pursuant to the Xxxxxxxxx Acquisition Agreement and the
Emerald Acquisition Agreement;
(f) agreements with suppliers and customers with respect to insurance
and indemnification matters required of Borrower and/or any of its
Subsidiaries in the ordinary course of its business and made in accordance
with the past practices of the Borrower and/or any of its Subsidiaries;
(g) indemnification obligations under permitted Financing Leases and
operating leases permitted pursuant to Section 6.10;
(h) indemnification obligations contained in the employment agreements
of Borrower with Messrs. Xxxxxx X. Xxxxx XX and Xxxxxxx Xxxxxx;
(i) indemnification provisions of officers, directors, employees and
agents contained in Borrower's certificate of incorporation; and
(j) the indemnification obligations under the Termination Agreement by
and among FINOVA Capital Corporation, Borrower and Guarantor. .
Section 6.14 Limitation on Fundamental Changes. Neither the Borrower, its
Subsidiaries nor Guarantor shall enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve themselves (or suffer any
liquidation or dissolution), or make any material change in their business or
their present method of conducting business, except (a) pursuant to and as
contemplated by the Xxxxxxxxx Acquisition Agreement, (b) Guarantor may merge
with or consolidate into another corporation if the Guarantor is the surviving
corporation and the resulting corporation has a Net Worth not less than that of
the Guarantor immediately prior to such merger or consolidation, (c) mergers of
any Subsidiaries of Borrower with and into Borrower or another Subsidiary of
Borrower, provided such Subsidiary has executed and delivered a Subsidiary
Guaranty and Subsidiary Pledge Agreement to Agent, (d) the dissolution and
liquidation of any Subsidiary of Borrower, provided that its net assets, if any,
are distributed to Borrower or any other Subsidiary of
56
Borrower which has executed and delivered a Subsidiary Guaranty and Subsidiary
Pledge Agreement to Agent.
Section 6.15 Limitation on Sale of Assets. The Borrower shall not convey,
sell, lease, assign, transfer or otherwise dispose of any of its property,
business or assets (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired to any Person, except:
(a) tangible personal property which is obsolete, uneconomical or worn
out property, in the reasonable judgment of Borrower, and is disposed of in
the ordinary course of business;
(b) the sale or other disposition of any other property, including
Inventory, in the ordinary course of business and for fair market value;
(c) the sale or discount without recourse of Accounts arising in the
ordinary course of business in connection with the compromise or collection
thereof; and
(d) the sale of investments in the ordinary course of business.
Section 6.16 Limitation on Investments, Loans and Advances. Neither the
Borrower nor Guarantor shall make any advance, loan, extension of credit or
capital contribution to, or purchase any stock, bonds, notes, debentures or
other securities of or any assets constituting a business unit of, or make any
other investment in, any Person, except as otherwise expressly permitted by the
terms hereof, and except for:
(a) extensions of trade credit, accounts receivable and loans and
advances extended to employees, consultants and subcontractors in the
ordinary course of business, provided that in the case of employees, such
amounts in the case of Borrower shall not exceed $10,000 for any individual
or $20,000 in the aggregate at any time outstanding, except as set forth on
Schedule 6.16(a), and such amounts in the case of Guarantor shall not
exceed $750,000 in the aggregate at any time outstanding;
(b) investments by Guarantor in Borrower and in Golden West;
(c) investments in Cash Equivalents;
(d) investments by Borrower and/or Guarantor, directly and/or
indirectly, in Emerald, Xxxxxxxxx and/or any of Xxxxxxxxx'x Subsidiaries
and the making by Borrower and/or Guarantor, directly or indirectly, to
Borrower and/or any of Borrower's Subsidiaries of loans, advances,
extensions of credit (including pursuant to Finance Lease and/or operating
lease transactions with Borrower and/or any of Borrower's Subsidiaries) and
capital contributions to finance or fund the working capital requirements
and other corporate purposes of Borrower and/or any of its Subsidiaries;
and
57
(e) investments in, loans to, extensions of credit, advances and
capital contributions to another Person, and purchases of any assets
constituting a business unit of another Person, by Guarantor or any other
Subsidiary of Guarantor, so long as Guarantor shall not commingle any
business acquired thereby with those of Borrower and its Subsidiaries,
maintain separate accounting records from those of Borrower and its
Subsidiaries, and take such action as may be reasonable from time to time
to separate the operations and corporate identity of any business acquired
from those of Borrower and its Subsidiaries.
Section 6.17 Limitation on Optional Payments and Modifications of Debt
Instruments. The Borrower shall not:
(a) make any optional payment or prepayment on any Indebtedness (other
than the Obligations under this Agreement); or
(b) amend, modify or change or consent or agree to any amendment,
modification or change to any of the terms relating to the payment or
prepayment or principal of or interest on, any such Indebtedness (unless
the amendment, modification or change would extend the maturity or reduce
the amount of payments of principal thereof prior to the maturity of the
Indebtedness created by this Agreement or would reduce the rate or extend
the date for payment of interest thereon).
Section 6.18 Limitation on Creation or Acquisition of Subsidiaries. Except
as permitted by Section 6.16, neither Borrower nor Guarantor will create, make
any capital contributions to or acquire any Subsidiary or transfer any assets to
any Subsidiary without the prior written consent of Agent.
Section 6.19 Corporate Documents. Neither Borrower nor Guarantor shall make
any material change, amendment or modification to Borrower's or Guarantor's
articles of incorporation or by-laws.
Section 6.20 Dividends and Similar Transactions. Without the prior written
consent of a Majority of Lenders, except as otherwise expressly permitted by
this Agreement, the Borrower shall not declare or pay any dividends or make any
other payments on its capital stock, issue, redeem, repurchase or retire any of
its capital stock, grant or issue any warrant, right or option pertaining
thereto or other security convertible into any of the foregoing, or make any
distribution to its stockholders, other than dividends payable solely in the
common stock of Borrower.
Section 6.21 Change of Locations; Collateral. The Borrower shall not (i)
change its chief executive office or principal place of business, (ii) remove
the books and records or the Collateral from the locations set forth in Exhibit
B, except for removal of (A) Inventory upon its sale in the ordinary course of
business, (B) disposition of assets permitted by Section 6.15, and (C) Equipment
in the ordinary course of business; or (iii) keep any of such books and records
at any other office(s) or location(s) unless (A) Borrower gives Agent written
notice thereof and of the new location of said books and records at least
fifteen (15) days prior thereto, and (B) such other office or location is within
the continental United States.
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ARTICLE 7
CONDITIONS PRECEDENT
Section 7.1 Conditions Precedent to Initial Loan. The obligation of the
Lenders to make the initial Loans to Borrower under this Agreement on the
Closing Date is subject to the satisfaction of the following conditions
precedent (in form and substance as is reasonably satisfactory to Agent, in its
sole discretion):
(a) Certified Copies of Charter Documents. Agent shall have received
from the Borrower and Guarantor copies, certified by a duly authorized
officer of the Borrower and Guarantor to be true and complete on and as of
the Closing Date, of each of the charter or other organization documents
and by-laws of the Borrower and Guarantor each as in effect on such date of
certification (together with any amendments thereto);
(b) Proof of Appropriate Action. Agent shall have received from the
Borrower and Guarantor copies, certified by a duly authorized officer of
the Borrower and Guarantor to be true and complete on and as of the Closing
Date, of the records of all action taken by the Borrower and Guarantor to
authorize the execution and delivery of this Agreement and any other
agreements entered into on the Closing Date and to which they are or are to
become a party as contemplated or required by this Agreement, and their
performance of all of their agreements and obligations under each of such
documents;
(c) Incumbency Certificates. Agent shall have received from each of
the Borrower and Guarantor an incumbency certificate, dated the Closing
Date, signed by a duly authorized officer of the Borrower and Guarantor and
giving the name and bearing a specimen signature of each individual who
shall be authorized (i) to sign, in the name and on behalf of the Borrower
and Guarantor this Agreement and each of the other Loan Documents to which
such person is or is to become a party on the Closing Date, and (ii) to
give notices and to take other action on behalf of the Borrower and
Guarantor under the Loan Documents;
(d) Representations and Warranties. Each of the representations and
warranties made by and on behalf of the Borrower and Guarantor to Lenders
in this Agreement and in the other Loan Documents shall be true and correct
when made, shall, for all purposes of this Agreement, be deemed to be
repeated on and as of the Closing Date, and shall be true and correct in
all material respects on and as of such date, except to the extent such
representation or warranty expressly relates to an earlier date;
(e) Loan Documents, Etc. Each of the Notes and the other Loan
Documents shall have been duly and properly authorized, executed and
delivered to Agent, as the case may be, by the respective party or parties
thereto and shall be in full force and effect on and as of the Closing
Date;
59
(f) Legality of Transactions. No change in applicable law shall have
occurred as a consequence of which it shall have become and continue to be
unlawful (i) for the Agent or any Lender to perform any of its agreements
or obligations under this Agreement, the Notes, or under any of the other
Loan Documents, or (ii) for the Borrower or Guarantor to perform any of
their material agreements or obligations under this Agreement, the Notes,
or under any of the other Loan Documents;
(g) Perfection of Security Interests. Agent shall have received all
Uniform Commercial Code Financing Statements required or, in Agent's
opinion, advisable to be filed in order to create, in favor of the Agent
for the benefit of Lenders, a perfected Lien on the Collateral with respect
to which a Lien can be perfected by means of filing Uniform Commercial Code
Financing Statements (or for the filing of an application for certificate
of title); said Financing Statements shall have been properly filed in each
office in each jurisdiction in which such filings are required or, in the
opinion of Agent, advisable; Agent shall have received confirmation from
its local counsel or local counsel to Borrower that all such filings and
recordations have been made, and that all necessary filing, subscription
and inscription fees and all recording and other similar fees, and all
taxes and other expenses related to such filings and recordings have been
paid or provided for in full by or on behalf of Borrower;
(h) Priority. Agent shall have received evidence reasonably
satisfactory to Lenders that Agent's Liens for the benefit of Lenders are
first and prior, and there are no other superior, equal, or inferior Liens
except the Permitted Liens;
(i) Insurance. Agent shall have received evidence that the items of
tangible Collateral having an insurable value are fully insured in such
amounts, against such risks, and with such insurers as may be reasonably
satisfactory to Agent, with loss payable to Agent for the benefit of the
Lenders, together with certificates evidencing such insurance as required
hereby;
(j) Audit. Provident shall have completed its audit of the business
operations, facilities and books and records of Borrower and Guarantor,
including but not limited to, review of (i) all material agreements,
contracts and commitments of Borrower and Guarantor, including, but not
limited to, the Xxxxxxxxx Acquisition Agreement; (ii) all insurance
policies and programs of Borrower and Guarantor; (iii) the pension and
employee benefit plans of Borrower and Guarantor; (iv) all tax returns,
filings and audit information relating to Borrower and Guarantor; (v)
accounts receivable and inventory; and (vi) information regarding any
pending or threatened litigation, claims or actions against Borrower or
Guarantor, which audit shall be reasonably satisfactory to Agent;
(k) Performance, Etc. Borrower and Guarantor shall have duly and
properly performed, complied with and observed, in all material respects,
each of their respective covenants, agreements and obligations contained in
each of the Loan Documents. No event shall have occurred on or prior to the
Closing Date, and no condition shall exist on the Closing Date, which
constitutes a Default or an Event of Default;
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(l) Legal Opinions. Agent shall have received a written legal opinion
of counsel to Borrower and Guarantor, addressed to Agent, dated the Closing
Date, in substantially the form attached hereto as Exhibit L;
(m) Consents. Agent shall have received from a Responsible Officer of
Borrower and Guarantor all consents, if any, necessary for the completion
of the transactions contemplated by each of the Loan Documents, and all
instruments and documents incidental thereto shall be in full force and
effect except as otherwise disclosed in Section 4.2;
(n) Availability Under Revolving Credit Commitment. The amount
available under the Revolving Credit Commitment and Cash Equivalents as of
the Closing Date shall be no less than Four Million and 00/100 Dollars
($4,000,000.00);
(o) Financial Statements and Projections. Agent shall have received
the audited statements of the Borrower for 1994 and 1995, unaudited
statements for the period from July 1, 1995 to the end of the most recent
month completed prior to the Closing Date, projections of the Borrower's
operations for the entire term of the Loans, and such other financial
information regarding Borrower's operations as Agent may reasonably
require;
(p) Broker. If the services of a broker have been utilized by the
Borrower to arrange the Loans, each Lender shall have received evidence
that any fee due such broker has been paid or will be paid at Closing;
(q) Environmental Assessment. Agent shall have received a copy of the
Phase I investigation report of Xxxxxxxxx'x facility in Paris, Kentucky,
together with a reliance letter from the engineering firm conducting such
investigation addressed to Agent and for the benefit of each Lender, and
the scope and results of such investigation shall reasonably be
satisfactory to Agent. All costs associated with compliance with
Environmental Laws as indicated by such investigation, shall be the sole
responsibility of Borrower;
(r) Xxxxxxxxx Acquisition. Borrower shall be prepared to close the
Xxxxxxxxx Acquisition and in connection therewith, (i) Guarantor shall have
received or have binding commitments to receive, contingent only upon the
making of the Loans contemplated hereby, an additional $4,900,000 in equity
for Borrower, on terms and conditions reasonably satisfactory to Agent,
(ii) Guarantor shall issue to the Xxxxxxxxx Stockholders stock of Guarantor
having a value on the Closing Date of not greater than $3,000,000 in the
aggregate, and (iii) Xxxxxxxxx'x balance sheet shall reflect cash or Cash
Equivalents of at least $2,000,000.00. Borrower shall cause Xxxxxxxxx to
enter into a Subsidiary Guaranty substantially in the form of Exhibit O
hereto;
(s) Provident and Lender Fees and Expenses. Provident shall receive
the underwriting fee separately agreed to in its commitment letter and
reimbursement of all of its costs and expenses related hereto (including
the reasonable fees and expenses
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of its counsel). Each Lender shall have received a closing fee in the
amount of 1% of its total Credit Commitment for the Loans;
(t) Purchase and Sale Agreement. Lenders shall have received a copy of
the Xxxxxxxxx Acquisition Agreement executed by the parties thereto;
(u) References. Agent shall have received customer, vendor and credit
reference checks, tax lien, litigation and judgment searches on the
Borrower and Guarantor, and the senior management of the Borrower and
Guarantor;
(v) Warrants. Each Lender shall have received a Warrant from Guarantor
in the amount of its Participation Percentage of 400,000 shares of the
capital stock of Guarantor; and
(w) Other Information. Agent shall have received such other
information concerning the Borrower, the Xxxxxxxxx Acquisition and the
transactions contemplated hereby as Agent may reasonably require.
Section 7.2 Conditions Precedent to All Loans. The obligation of each
Lender to make any Loan (including the initial Loans on the Closing Date) to
Borrower under this Agreement is subject to the satisfaction of the following
conditions precedent (in form, substance and action as is satisfactory to Agent,
in its sole discretion):
(a) Representations and Warranties. The representations and warranties
made by Borrower and Guarantor in this Agreement or the other Loan
Documents, or which are contained in any certificate, document or financial
or other statement of Borrower or Guarantor furnished at any time under or
in connection with this Agreement or the other Loan Documents shall be
correct in all material respects on and as of the date requested for the
making of such Loan as if made on and as of such date, except to the extent
such representation or warranty expressly relates to an earlier date;
(b) No Default. No Default or Event Default shall have occurred and be
continuing on such date or after giving effect to the Loan to be made on
such date; and
(c) Interest Rate Not Usurious. The interest rates applicable to the
Loans (before giving effect to any savings clause) will not exceed the
maximum rate permitted by applicable law.
ARTICLE 8
EVENTS OF DEFAULT
"Events of Default" shall mean the occurrence or existence of any one or
more of the following:
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Section 8.1 Payments. Failure by the Borrower to pay any Obligation within
three (3) Business Days of when due and payable or declared due and payable, as
the case may be, except for the payment due upon the maturity of any Note for
which no grace period shall be applicable.
Section 8.2 Representations and Warranties. Any representation or warranty
made or deemed made by the Borrower or Guarantor in this Agreement, any other
Loan Document or in any certificate, document or financial or other statement
furnished at any time in connection herewith or therewith shall prove to have
been untrue in any material respect on the date when made or deemed to have been
made.
Section 8.3 Certain Covenants. Borrower shall fail to comply with the
covenants set forth in Sections 5.6, 5.7, 5.9(a), 5.11(a) or 5.17 or any one of
the Sections of Article 6.
Section 8.4 Registration of Warrant Stock. Guarantor shall fail to have
filed a registration statement with the SEC for the registration of the shares
of stock of Guarantor underlying the Warrants on or before January 31, 1997.
Section 8.5 Additional Covenants. Default by the Borrower or Guarantor in
the observance or performance of any other covenant or agreement contained
herein or in any Loan Document to be observed or performed by Borrower or
Guarantor, as the case may be, and continuance of such default unremedied for a
period of twenty (20) days (except where this Agreement or the Notes require
that such default be cured within a shorter period).
Section 8.6 Effectiveness of Security Documents. On or after the date of
the execution and delivery thereof, if for any reason any Security Document
shall cease to be in full force and effect (other than by operation of the terms
thereof) or any of the Liens intended to be created by any Security Document
ceases to be or is not a valid and perfected Lien in the Collateral having the
priority contemplated thereby (other than by reason of acts or omissions of
Agent or any Lender, except where Borrower, thereafter, fails to cooperate with
Agent or any such Lender in good faith and except for Permitted Liens), or if
any party to any Security Document (other than the Agent or any Lender) shall
assert in writing that any such document or agreement has ceased to be in full
force and effect, other than by payment in full of the obligations secured
thereby.
Section 8.7 Destruction of Collateral. Any material damage to or loss,
theft or destruction of any of the tangible Collateral which is uninsured or
underinsured in an amount equal to or greater than Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00).
Section 8.8 Cross-Default to Other Indebtedness. The Borrower shall default
in any payment of principal of or interest on any of its Indebtedness (other
than any such default in respect of the Notes) or in the payment of any
Guarantee Obligation relating to Indebtedness, beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created or default in the observance or performance of
any other agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or
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condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice or the passage of time or both, if required,
such Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; provided, however, that such event shall not be
considered an Event of Default if the amount of Indebtedness or such Guarantee
Obligation in default, when combined with all other amounts of Indebtedness or
Guarantee Obligations described by this Section, does not exceed Two Hundred
Fifty Thousand and 00/100 Dollars ($250,000.00).
Section 8.9 Commencement of Bankruptcy or Reorganization Proceeding.
(a) The Borrower or Guarantor or any Subsidiary of Guarantor shall
commence a case, proceeding or other action (i) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, wind-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (ii) seeking appointment
of a receiver, trustee, custodian or other similar official for it or for
all or any substantial part of its assets; or
(b) There shall be commenced against the Borrower or Guarantor or any
Subsidiary of Guarantor any such case, proceeding or other action which
results in the entry of an order for relief or any such adjudication or
appointment or remains undismissed, undischarged or unbonded for a period
of sixty (60) days; or
(c) There shall be commenced against the Borrower or Guarantor or any
Subsidiary of Guarantor any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within sixty (60)
days from the entry thereof; or
(d) Either the Borrower or Guarantor or any Subsidiary of Guarantor
shall, except as expressly permitted hereby, suspend the operation of its
business other than by reason of force majeure or take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth above in clauses (a), (b) or (c) above; or
(e) Either the Borrower or Guarantor or any Subsidiary of Guarantor
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due.
Section 8.10 Default by Guarantor. Guarantor shall be in default in the
performance or observance of any of its covenants or agreements contained in any
Loan Document to which it is a party, including, without limitation, the Pledge
Agreement, or demand is made
64
on such Guarantor under the terms of the Guaranty Agreement by reason of the
occurrence of an Event of Default.
Section 8.11 Material Judgments. One or more judgments or decrees shall be
entered against the Borrower involving in the aggregate a liability (not paid or
covered by insurance) of One Hundred Thousand and 00/100 Dollars ($100,000.00)
or more and all such judgments or decrees shall not have been vacated,
satisfied, discharged or bonded pending appeal within sixty (60) days from the
entry thereof.
Section 8.12 ERISA. If any of the following events shall occur:
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Employee Benefit Plan
if, as a result of such termination, the Borrower or any such member could
be required to make a contribution to such Employee Benefit Plan, or could
reasonably expect to incur a liability or obligation to such Employee
Benefit Plan, that would result in, or would be reasonable likely to result
in, a Material Adverse Effect;
(b) a contribution failure occurs with respect to any Employee Benefit
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; or
(c) the occurrence of any event that could reasonably be expected to
result in the assessment of withdrawal liability against the Borrower or
any member of its Controlled Group by a Multiemployer Plan that would be
reasonably likely to result in a Material Adverse Effect.
Section 8.13 Material Adverse Change. There shall occur a change in the
condition or affairs (financial or otherwise) of the Borrower or Guarantor
(whether as a result of a single event or series of events or conditions) which
the Lenders determine, in good faith, even in the absence of any Default or
Event of Default, (a) will, or does, materially adversely impair the Collateral
or the Net Worth, determined on a consolidated basis of the Borrower or
Guarantor, (b) will, or does, materially reduce the likelihood that the Borrower
or Guarantor can pay the Obligations in full, or (c) will, or does, materially
increase the risk that the Obligations will not be paid in full if the Agent is
required to delay the acceleration of the maturity of the Obligations.
ARTICLE 9
REMEDIES, COLLECTION OF COLLATERAL, ETC.
Section 9.1 Remedies. Upon the occurrence of an Event of Default described
in Article which has not been waived in accordance with Section 10.8, Lenders
may:
(a) declare the Obligations of the Borrower immediately due and
payable, without presentment, notice, protest or demand of any kind for the
payment of all or any part of the Obligations (all of which are expressly
waived by the Borrower) and
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exercise or cause Agent to exercise all of their respective rights and
remedies against the Borrower and any Collateral provided herein, in any of
the other Loan Documents, or in any other agreement among the Borrower,
Guarantor and the Agent and any Lender, and
(b) exercise or cause Agent to exercise all rights granted to a
secured party under the other Loan Documents or otherwise available to
Lenders or Agent, on behalf of Lenders, at law or in equity, including
without limitation, the Uniform Commercial Code.
Upon the occurrence of an Event of Default, or in the event of non-payment of
any of the Loans when due, a Majority of Lenders may cause Agent to take
possession of the Collateral, or any part thereof, and the Borrower and
Guarantor hereby grant the Agent and each Lender authority to enter upon any
premises on which the Collateral may be situated, and remove the Collateral from
such premises or use such premises, together with the materials, supplies, books
and records of the Borrower and Guarantor, to maintain possession and/or the
condition of the Collateral and to prepare the Collateral for sale. The Borrower
and Guarantor shall, upon demand by a Majority of Lenders, assemble the
Collateral and make it available at a place designated by Agent or a Majority of
Lenders which is reasonably convenient to both parties. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Agent or a Majority of Lenders will give the
Borrower and Guarantor reasonable notice of the time and place of any public
sale thereof or of the time after which any private sales or other intended
disposition thereof is to be made. The requirement of reasonable notice shall be
met if such notice is mailed, postage prepaid, to the address of the Borrower
and Guarantor set forth on the signature page hereof or to such other address
designated pursuant to Section 11.2 hereof at least ten (10) days prior to the
time of such sale or disposition. If Borrower fails to make any payment or
perform any act required to be made or performed hereunder or under any Loan
Document by it (including, without limitation, maintaining insurance required
pursuant to Section 5.6) with the consent of a Majority of Lenders, Agent, upon
contemporaneous notice to Borrower and without waiving or releasing any
obligation or default, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of Borrower and may take all such action with respect thereto as, in
Agent's judgment, may be necessary or appropriate therefor.
Section 9.2 Application of Proceeds. The Agent, or any Lender receiving
such proceeds, shall apply the proceeds of any disposition of the Collateral to
the payment of the Obligations in accordance with the provisions of Section 2.11
hereof.
Section 9.3 Set-off; Pro Rata Sharing. Each Lender shall have the right (to
be exercised, however, only with the consent of a Majority of Lenders), upon
notice to the Borrower or Guarantor, to set-off and apply against the payment of
the Obligations in such order and manner as such Lender may determine, subject,
however, to the provisions of Section 10.11, whether matured or unmatured, any
amount owing from such Lender to the Borrower or Guarantor at, or at any time
after, the happening of any Event of Default, and such right of set-off may be
exercised by such Lender against the Borrower or Guarantor or against any
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors,
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receiver, custodian or execution, judgment or attachment creditor of the
Borrower or Guarantor, or against anyone else claiming through or against the
Borrower or Guarantor or such trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receivers, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of setoff shall
not have been exercised by such Lender prior to the making, filing or issuance,
or service upon such Lender of, or of notice of, any such petition, assignment
for the benefit of creditors, appointment or application for the appointment of
a receiver, or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the Borrower and Guarantor after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
Section 9.4 Rights Cumulative; Waiver. The rights, options and remedies of
the Agent on behalf of Lenders or any Lender shall be cumulative and no failure
or delay by the Agent on behalf of Lenders or any Lender in exercising any
right, option or remedy shall be deemed a waiver thereof or of any other right,
option or remedy, or waiver of any Event of Default hereunder, nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder. Neither Agent nor any Lender shall be deemed to have waived any of
the Agent's or any Lender's rights hereunder or under any other agreement,
instrument or paper signed by the Borrower or Guarantor unless such waiver shall
be in writing and signed by each Lender in accordance with the provisions of
Section 10.8 hereof.
Section 9.5 Collections on Accounts. Unless a Majority of Lenders requests
otherwise, all Debtors on the Collateral shall be notified that all payments be
directed to a lock box with Provident or such other account as designated by a
Majority of Lenders. All collections on the Accounts made by the Borrower or
Guarantor, shall be deemed the property of the Lenders, shall be held in trust
for the Lenders and shall not be commingled with the Borrower's or Guarantor's
other funds or be deposited in any bank account of the Borrower or Guarantor, as
the case may be, used in any manner except to pay the Obligations. The Borrower
or Guarantor, as the case may be, shall immediately deposit all collections on
the Accounts in the Agent Deposit Account, over which Agent for the benefit of
Lenders shall have the sole power of withdrawal. On a daily basis, the Agent
will apply all or part of the collected balance of the Agent Deposit Account
against the Obligations, the amount, order and method of such application to be
in accordance with Section 2.11 hereof, but without any prepayment premium
pursuant to Section 2.9. If no Default or Event of Default shall have occurred
and be continuing, any part of the collected balance in the Agent Deposit
Account which the Agent does not apply to the Obligations shall be paid over to
the Borrower's Disbursement Account to the extent permitted under Section 2.11.
The crediting of items deposited in the Agent Deposit Account to the reduction
of the Obligations shall be conditioned upon final payment of the item and if
any item is not so paid, the amount of any credit given for it may be charged to
the Obligations or to any other deposit account of the Borrower, whether or not
the item is returned.
Section 9.6 Notification of Debtors; Grant of Powers. The Agent on behalf
of the Lenders, may or, if directed by a Majority of Lenders, shall have the
right at any time after the occurrence and during the continuance of an Event of
Default to notify Debtors of its security interest in the Accounts and to
require payments to be made directly to Agent or
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Lenders at such address or in such manner as the Agent may deem appropriate.
Upon request of Agent or a Majority of Lenders at any time after the occurrence
and during the continuance of an Event of Default, the Borrower will so notify
the account Debtors and will indicate on all xxxxxxxx to the account Debtors
that the Accounts are payable to Agent, for the benefit of Lenders. To
facilitate direct collection, the Borrower hereby appoints the Agent on behalf
of the Lenders, Lenders and any officer or employee of the Agent or any Lender
as the Agent may from time to time designate, as attorney-in-fact for the
Borrower, after the occurrence and during the continuance of an Event of
Default, to (a) receive and open of all mail addressed to the Borrower and take
therefrom any payments on or proceeds of Accounts, and forward all mail not
containing payments to Borrower, (b) take over the Borrower's post office boxes
or make other arrangements, in which the Borrower shall cooperate, to receive
the Borrower's mail, including notifying the post office authorities to change
the address for delivery of mail addressed to the Borrower to such address as
the Agent shall designate, (c) endorse the name of the Borrower in favor of the
Agent on behalf of the Lenders, or Lenders upon any and all checks, drafts,
money orders, notes, acceptances or other evidences or payment or Collateral
that may come into the Agent's possession, (d) sign and endorse the name of the
Borrower on any invoice or xxxx of lading relating to any of the Accounts, on
verifications of Accounts sent to any Debtor, to drafts against Debtors, to
assignments of Accounts and to notices to Debtors, and (e) do all acts and
things reasonably necessary to carry out this Agreement, including signing the
name of the Borrower on any instruments required by law in connection with the
transactions contemplated hereby and on Financing Statements as permitted by the
Uniform Commercial Code. The Borrower hereby ratifies and approves all acts of
such attorneys-in-fact, and neither the Agent nor any other such
attorney-in-fact shall be liable for any acts of commission or omission, or for
any error of judgment or mistake of fact or law, except for willful misconduct.
This power, being coupled with an interest, is irrevocable so long as any of the
Obligations remain unsatisfied.
Section 9.7 Disclaimer of Liability. Neither Agent nor any Lender shall,
under any circumstances, be liable for any error or omission or delay of any
kind occurring in the settlement, collection or payment of any Accounts or any
instruments received in payment thereof or for any damage resulting therefrom,
unless caused by the Agent's or Lender's gross negligence or willful and
malicious acts. The Agent may after the occurrence and during the continuance of
an Event of Default, without notice to or consent from the Borrower or
Guarantor, xxx upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any of the
Accounts or any securities, instruments or insurance applicable thereto and/or
release the obligor thereon. The Agent is authorized after the occurrence and
during the continuance of an Event of Default to accept the return of the goods
represented by any of the Accounts, without notice to or consent by the Borrower
or Guarantor, or without discharging or in any way affecting the Obligations
hereunder. The Agent and Lenders shall not be liable for or prejudiced by any
loss, depreciation or other damage to Accounts or other Collateral unless caused
by the Agent's or any Lender's willful and malicious act, and the Agent and
Lenders shall have no duty to take any action to preserve or collect any Account
or other Collateral.
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ARTICLE 10
AGENCY PROVISIONS
The Borrower, Guarantor, Agent and Lenders agree as follows:
Section 10.1 Appointment of the Agent. Each of the Lenders hereby appoints
Provident to serve as collateral and administrative Agent, under this Agreement
and the other Loan Documents, and in such capacity, to administer this
Agreement, and the other Loan Documents.
Section 10.2 Authority. Each of the Lenders hereby irrevocably authorizes
the Agent to take such action on such Lender's behalf under this Agreement and
the other Loan Documents and to exercise such powers and to perform such duties
hereunder and thereunder as are delegated to or required of the Agent by the
terms hereof or thereof, together with such powers as are reasonably incidental
thereto. The Agent will promptly notify each of the Lenders as soon as it
becomes aware of any Default or Event of Default or any failure by the Borrower
to make any payment in respect of any of the Notes, provided, however, that
Agent shall not be deemed to have knowledge of any item until such time as
Agent's officers responsible for administration of the Loans shall receive
written notice thereof or have actual knowledge thereof. If any Lender becomes
aware of any Default or Event of Default by Borrower, it shall promptly notify
Agent thereof provided, however, that Lenders shall not be deemed to have
knowledge of any item until such time as Lenders' officers responsible for
administration of the Loans shall receive written notice thereof or have actual
knowledge of such event.
Section 10.3 Acceptance of Appointment. The Agent hereby accepts its
appointment as Agent for each of the Lenders under this Agreement and the other
Loan Documents, but only on the terms set forth in this Agreement, including the
following:
(a) Agent makes no representation as to the value, validity or
enforceability of this Agreement or of any of the other Loan Documents or
as to the correctness of any statement contained in this Agreement or in
any of the other Loan Documents;
(b) Agent may exercise its powers and perform its duties under this
Agreement and the other Loan Documents either directly or through its
agents or attorneys;
(c) Agent shall be entitled to obtain from counsel selected by it with
reasonable care advice with respect to legal matters pertaining to this
Agreement, or any of the other Loan Documents and shall not be liable for
any action taken, omitted to be taken or suffered in good faith in
accordance with the advice of such counsel;
(d) Agent shall not be required to use its own funds in the
performance of any of its duties or in the exercise of any of its rights or
powers, and Agent shall not be obligated to take any action which, in its
reasonable judgment, would involve it in
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any expense or liability unless it shall have been furnished security or
indemnity in an amount and in form and substance satisfactory to it;
(e) Agent, in performing its duties and functions under this Agreement
and the other Loan Documents on behalf of the Lenders, will exercise the
same care which it normally exercises in making and handling loans in which
it alone is interested, but does not assume further responsibility; and
(f) The Agent shall not be removed, replaced or succeeded without its
consent except for its gross negligence or willful misconduct, any breach
by Agent of its obligations under Sections or , the failure of the Agent to
perform its other obligations under the Loan Documents on a recurring
basis, or as may be expressly otherwise provided herein, or the Agent
becomes subject to any insolvency proceeding or receivership.
Section 10.4 Application of Moneys. All moneys realized by the Agent under
the Loan Documents shall be held by Agent to apply in accordance with Section
2.11 hereof.
Section 10.5 Reliance by the Agent. Agent shall be entitled to rely on any
notice, consent, certificate, affidavit, letter, telegram, telecopy, facsimile
or teletype message, statement, order, instrument or other document believed by
it to be genuine and correct and to have been signed or sent by the proper
person or persons. Agent shall deem and treat the payee of any Note as the
absolute owner thereof for all purposes hereof until such time as it receives
actual notice of an assignment permitted hereunder of such payee's interest,
together with the written agreement of the assignee in form and substance
satisfactory to Agent that such assignee is bound by this Agreement as a
"Lender" hereunder.
Section 10.6 Exculpatory Provisions. Neither Agent nor any of its
shareholders, directors, officers, employees or agents shall be liable in any
manner to any of the Lenders for any action taken, omitted to be taken or
suffered in good faith by it or them under any of the Loan Documents or in
connection therewith, or be responsible for the consequences of any oversight or
error of judgment, except for losses due to gross negligence or willful
misconduct of such Agent, shareholder, director, officer, employee or agent.
Without limiting the generality of the foregoing sentence of this Section 10.6,
under no circumstances shall the Agent be subject to any liability to any Lender
on account of any action taken or omitted to be taken by such Agent in
compliance with the direction of the Majority of Lenders or all of the Lenders,
as the case may be as provided for hereunder.
Agent shall not be responsible in any manner to any of the Lenders for the
due execution, effectiveness, genuineness, validity or enforceability,
perfection or recording of this Agreement, any of the Notes, any of the other
Loan Documents or for any certificate, report or other document used under or in
connection with this Agreement or any of the other Loan Documents, or for the
truth or accuracy of any recitals, statements, warranties or representations
contained herein or in any certificate, report or other document at any time
hereafter furnished or purporting to have been furnished to it by or on behalf
of Borrower, or any other Person, or be under any obligation to any of the
Lenders to ascertain or inquire as to the performance or observance by Borrower,
or any other Person of any of the covenants,
70
agreements or conditions set forth in this Agreement, the Notes or any of the
other Loan Documents or as to the use of any moneys lent hereunder or
thereunder.
Agent shall not be obligated to take any action or refrain from taking any
action under any Loan Document that might, in its judgment, involve it in any
expense or liability until it shall have been indemnified to its satisfaction by
or received an agreement to indemnify from each Person which such Agent
reasonably believes may be an intended recipient of such distribution. If a
court of competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
Section 10.7 Action by the Agent. Except as otherwise expressly provided
under the Agreement or in any other of the Loan Documents, Agent will take such
action, assert such rights and pursue such remedies under this Agreement and the
other Loan Documents as the Majority of Lenders or all of the Lenders, as the
case may be as provided for hereunder, shall direct. Except as otherwise
expressly provided in any of the Loan Documents, Agent will not (and shall not
be obligated to) take any action, assert any rights or pursue any remedies under
this Agreement or any of the other Loan Documents in violation or contravention
of any express direction or instruction of the Majority of Lenders or all of the
Lenders, as the case may be, as provided for hereunder. Agent may refuse (and
shall not be obligated) to take any action, assert any rights or pursue any
remedies under this Agreement or any of the other Loan Documents without the
express written direction and instruction of the Majority of Lenders or all of
the Lenders, as the case may be, as provided for hereunder. In the event Agent
fails, within a commercially reasonable time, to take such action, assert such
rights, or pursue such remedies in the manner in which it is directed to take
such action, the Majority of Lenders or all of the Lenders, as the case may be,
as provided for hereunder, shall have the right to take such action, to assert
such rights, or pursue such remedies on behalf of all of the Lenders unless the
terms hereof otherwise require the consent of all the Lenders to the taking of
such actions. All notices and other material information required to be
delivered by Borrower to Agent hereunder shall be delivered to each Lender
within a reasonable time (and in any event not more than five (5) days) after
Agent's receipt of same by Agent. No Lender (other than the Agent, acting in its
capacity as Agent) shall be entitled to take any enforcement action of any kind
under any of the Loan Documents, except as expressly provided in this Agreement.
Action that may be taken by Majority of Lenders or all of the Lenders, as the
case may be as provided for hereunder may be taken pursuant to a vote at a
meeting (which may be held by telephone conference call) of all of the Lenders,
or pursuant to the written consent of such Lenders.
Section 10.8 Amendments, Waivers and Consents. Any provision of this
Agreement, the Notes or the other Loan Documents may be amended or waived upon
the consent of the Majority of Lenders, and after such consent, Agent, on behalf
of the Lenders, may execute and deliver to Borrower a written instrument waiving
or amending such provision; provided, however, that neither this Agreement, the
Notes, nor any of the other Loan Documents may be amended, waived or a variation
therefrom consented to or a forbearance to act with respect thereto agreed upon,
without the written consent of the Agent and all of Lenders which effect
71
(i) an increase in the Revolving Credit Commitment or the maximum principal
amount of the Term Loans; (ii) a change in any Lender's Credit Commitment; (iii)
a reduction in the interest rates or reduction of the principal set forth in the
Notes; (iv) the extension of the maturity date on the Notes; (v) a change in the
payment schedule or amount of any interest or principal; (vi) a change in this
paragraph, the definition of Majority of Lenders or any provision of this
Agreement which requires consent or action of all the Lenders for action
thereunder; (vii) a change in the obligations and liabilities of Agent; (viii) a
change which increases the obligations of any Lender; or (ix) a change in any
fees or charges hereunder; and provided further that Agent may release or
compromise any Collateral and the proceeds thereof having a value not greater
than ten percent (10%) of the total book value of all Collateral, either in a
single transaction or in a series of related transactions, with the consent of
Lenders owning a total of at lease eighty percent (80%) of the Commitments of
all Lenders, but in no event, however, will Agent, acting under the authority
granted to it in this Section 10.8, release or compromise Collateral or the
proceeds thereof having a total book value in excess of thirty percent (30%) of
the book value of all Collateral, as determined by Agent, during any one
calendar year period.
Notwithstanding anything to the contrary contained herein, Agent may, at
its sole discretion, release or compromise Collateral and the proceeds thereof
to the extent otherwise permitted by this Agreement.
Section 10.9 Indemnification. Each Lender agrees to indemnify Agent (to the
extent Agent is not promptly reimbursed by Borrower), in accordance with its Pro
Rata Share from and against any and all liabilities, obligations, losses,
damages, penalties, interests, actions, judgments and suits of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against Agent
relating to or arising out of this Agreement or any of the other Loan Documents
or relating to any action taken or omitted by such Agent under this Agreement or
any of the other Loan Documents, provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, interest,
actions, judgments or suits resulting from Agent's own gross negligence or
willful misconduct.
Section 10.10 Reimbursement of the Agent. Each Lender further agrees to
reimburse Agent, in accordance with its Pro Rata Share, for any reasonable
out-of-pocket costs or expenses incurred by Agent in connection with its duties
under this Agreement (including, but not limited to, reasonable fees and
disbursements of counsel, travel and living expenses away from home of employees
or agents of the Agent and compensation of agents or of experts employed by the
Agent to render services for the Lenders hereunder), but only to the extent such
fees, disbursements, expenses and compensation have not been reimbursed to the
Agent by Borrower after commercially reasonable attempt by Agent to collect such
amounts from Borrower, Guarantor or any guarantor of the Obligations (which
attempts need not include the commencement of any judicial proceeding). If any
such sums are reimbursed to the Agent by Borrower after one or more of the
Lenders have reimbursed the Agent for such sums, the Agent will refund such sums
ratably to the Lenders who contributed such sums.
Section 10.11 Sharing of Funds Received. Each Lender agrees with Agent and
each of the other Lenders that if such Lender shall receive from Borrower or any
other Person or Persons, whether by payment received otherwise than in
accordance with the terms of the
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Loan Documents, exercise of the right of set-off, counterclaim, cross-claim,
enforcement of any claim, or proceedings against Borrower or any other Person or
Persons, proof of claim in bankruptcy, reorganization, liquidation, receivership
or other similar proceedings, or otherwise, and shall retain and apply to the
payment of any of the Obligations owing to such Lender any amount in excess of
its Pro Rata Share of the payments received by all of the Lenders and the Agent
in respect of all of the Obligations, such Lender will promptly make such
dispositions and arrangements with the other Lenders and the Agent with respect
to such excess, either by way of distribution, pro tanto assignment of claim,
subrogation or otherwise, as shall result in each of the Lenders receiving in
respect of the Obligations owing to it, its Pro Rata Share of such payments.
Section 10.12 Dealing with Lenders. Agent may at all times deal solely with
the several Lenders for all purposes of this Agreement and the protection,
enforcement and collection of the Notes, including without limitation the
acceptance and reliance upon any certificate, consent or other document executed
on behalf of one or more of the Lenders and the division of payments pursuant to
this Article 10 hereof. The Agent shall not have a fiduciary relationship in
respect of any Lender by reason of this Agreement. The Agent shall have no
implied duties to the Lenders, or any obligation to the Lenders to take any
action hereunder except any action specifically provided by this Agreement to be
taken by the Agent.
Section 10.13 Agent as Lender. Provident, and any successor agent, shall
have, in its capacity as a Lender under the Loan Documents, the same obligations
and the same rights, remedies, powers and privileges under this Agreement and
the other Loan Documents as it would have were it not also an Agent.
Section 10.14 Duties Not to be Increased. The duties and liabilities of
Agent under this Agreement and the other Loan Documents shall not be increased
or otherwise changed without its express prior written consent. The Agent shall
have no duty to provide information to the Lenders except as expressly set forth
herein.
Section 10.15 Lender Credit Decisions. Each Lender acknowledges that it
has, independently of and without reliance upon Agent or any of the other
Lenders, made its own credit analysis and decision to enter into this Agreement
and the other Loan Documents to which it is a party. Each Lender also
acknowledges that it will, independently of and without reliance upon Agent or
any of the other Lenders, continue to make its own credit decisions in taking or
not taking action under this Agreement or any of the other Loan Documents and in
determining the compliance or lack thereof by Borrower and any other Person with
any provision of any Loan Document or other document or agreement.
Section 10.16 Resignation or Removal of Agent. Provident and any successor
Agent may resign as such at any time by giving thirty (30) days' prior written
notice of resignation to each Lender and the Borrower, such resignation to be
effective on the date which is specified in such notice. Upon any such
resignation by Provident as Agent, or in the event the office of Agent shall
thereafter become vacant for any other reason, the Majority of Lenders shall
appoint a successor Agent, by an instrument in writing signed by such Lenders
and delivered to such successor Agent and the Borrower whereupon, such successor
Agent
73
shall succeed to all of the rights and obligations of the retiring Agent as if
originally named. The retiring Agent shall duly assign, transfer and deliver to
such successor Agent all moneys at the time held by the retiring or removed
Agent hereunder after deducting therefrom its expenses for which it is entitled
to be reimbursed. Upon such succession of any such successor Agent, the retiring
Agent shall be discharged from its duties and obligations hereunder, except for
its gross negligence or willful misconduct arising prior to its retirement or
removal hereunder. After any Agent's resignation, the provisions of this Section
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
Section 10.17 Assignment of Notes; Participation.
(a) Each Lender may, with concurrent notice to Agent and the Borrower,
but without the consent of the Borrower or any other Lenders, assign to one
or more banks or other financial institutions all or a portion of its
rights and obligations under this Agreement and the Notes; provided that
(i) for each such assignment, the parties thereto shall execute and deliver
to an Assignment and Assumption Agreement, in the form of Exhibit hereto,
together with any Notes subject to such assignment, (ii) no such assignment
shall be for less than Five Million and 00/100 Dollars ($5,000,000.00) of
the aggregate of the Lender's Credit Commitment, unless such assignment is
to a then-current holder of a Note, and (iii) no such assignee is the
Borrower, Guarantor or any holder of the Seller Debt or any Affiliate of
any of the foregoing. Upon such execution and delivery of such Assignment
and Assumption Agreement to Agent, from and after the date specified as the
effective date in such Agreement (the "Acceptance Date"), (x) the assignee
thereunder shall be a party hereto, and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such agreement,
such assignee shall have the rights and obligations of a Lender hereunder
and (y) the assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such agreement,
relinquish its rights (other than any rights it may have pursuant to
Section which will survive) and be released from its obligations under this
Agreement (and, in the case of an assignment covering all or the remaining
portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) Each Lender may sell participations of up to Forty-Nine Percent
(49%) of its rights and obligations under the Loan Documents to one or more
banks or other entities (including, without limitation, up to such portion
of its Credit Commitment, the Loans owing to it, the Note held by it);
provided, however, that (i) such Lenders' obligations under the Loan
Documents (including, without limitation, its Credit Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for
all purposes of the Loan Documents, (iv) the participating banks or other
entities shall be entitled to the cost protection provisions of Section
2.14 and 11.5 hereof, but a participant shall not be entitled to receive
pursuant to such provisions an amount larger than its share of the amount
to which the Lender granting such participation would have been entitled,
(v) the Borrower, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under the Loan Documents, and (vi) no such transfer
shall include the transfer of any of such
74
Lender's rights to grant consents or approve amendments or modifications to
the Loan Documents except with respect to those items requiring the action
of or consent by all of the Lenders or affecting the rights and obligations
of Agent. It is understood and agreed that, subject to the provisions of
Section each Lender may share any and all information received by it from
or on behalf of the Borrower pursuant to this Agreement or any of the other
Loan Documents with any participant or prospective participant of such
Lender.
(c) In the event of an assignment under Section 10.17, Borrower shall,
upon surrender of the assigning Lender's Notes, issue new Notes to reflect
the new Credit Commitments of the assigning Lender and its assignee.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Amendments and Waivers. Except as otherwise provided herein,
the Borrower, Guarantor and Agent may amend this Agreement, the Notes, or the
other Loan Documents to which they are parties, and Agent may waive future
compliance by the Borrower or Guarantor with any provision of this Agreement,
the Notes, or such other Loan Documents, but no such amendment or waiver shall
be effective unless in a written instrument executed by an authorized officer of
Agent, Borrower and Guarantor.
Section 11.2 Notices. All notices, consents, requests and demands to or
upon the respective parties hereto shall be in writing and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered by hand, or three (3) days after deposited in the mail, postage
prepaid, or, in the case of telex, telegraphic or telecopy notice, when sent,
addressed to such address set forth on the signature pages hereof. Notices of
changes of address shall be given in the same manner.
Section 11.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Borrower, the Guarantor, the Agent, the Lenders,
and their respective successors and assigns, except that neither Agent, the
Borrower, nor the Guarantor may assign or transfer any of their rights or
obligations under this Agreement or the Notes without the prior written consent
of the Lenders. If the Agent or any Lender shall transfer any or all of its
respective rights under this Agreement, and the transferee assumes such
obligations hereunder, then the Agent or such Lender subject to the provisions
of Section 11.10, as the case may be, shall be relieved and released from its
obligations hereunder.
Section 11.4 Expenses; Indemnity.
(a) Borrower shall reimburse the Agent and each Lender for all
reasonable costs and expenses incurred by the Agent in connection with the
preparation of this Agreement and the making of the Loans hereunder,
including the reasonable fees and expenses of the Agent's counsel, and for
all UCC search, filing, recording and other costs connected with the
perfection of the security interest in the Collateral (excluding
75
any stamp, excise, or mortgage tax, levy or other taxes payable in
connection with the consummation of the transactions contemplated hereby).
(b) Borrower shall also reimburse the Agent, upon demand by Agent at
any time and as often as the occasion therefor may reasonably require, for
all reasonable costs and expenses which shall at any time be incurred or
sustained by Agent or any Lender as a consequence of, on account of, in
relation to or any way in connection with the perfection and continuation
of the rights of Agent in connection with the Loans, as well as the
preparation, negotiation, execution, or delivery of any amendment or
modification of any of the Loan Documents or as a consequence of, on
account of, in relation to or any way in connection with the granting by
Agent of any consents, approvals or waivers under any of the Loan Documents
including, but not limited to, reasonable attorneys' fees and
disbursements.
(c) Borrower shall absolutely and unconditionally indemnify and hold
harmless Agent and each Lender against any and all claims, demands, suits,
actions, causes of action, damages, losses, settlement payments,
obligations, costs, expenses and all other liabilities whatsoever which
shall at any time or times be incurred or sustained by Agent or any Lender
or by any of their shareholders, directors, officers, employees,
subsidiaries, Affiliates or agents on account of, or in relation to, or in
any way in connection with, any of the arrangements or transactions
contemplated by, associated with or ancillary to this Agreement or any of
the other Loan Documents, whether or not all or any of the transactions
contemplated by, associated with or ancillary to this Agreement, or any of
such Loan Documents are ultimately consummated; provided, that Borrower
shall have no obligation hereunder to Agent or any Lender arising from (i)
the gross negligence willful misconduct of the Agent or any Lender or (ii)
any legal proceeding commenced against Agent or any Lender by any other
Lender or any assignee thereof.
(d) Borrower agrees that any sums expended by Agent or any Lender for
which Agent or any Lender is entitled to be reimbursed shall be immediately
due and payable upon demand by Agent or any Lender, and shall bear interest
at the interest rate applicable to Term Notes I and after the occurrence of
an Event of Default hereunder, the Default Rate applicable to Term Notes I
from the date Agent or any such Lender incurred such expense until the date
such payment is made in full to Agent or such Lender.
Section 11.5 Collection Costs. All reasonable costs and expenses incurred
by the Agent to obtain, enforce or preserve the security interests granted by
this Agreement and to collect the Obligations, all reasonable costs to maintain
and preserve the Collateral and reasonable attorneys' fees and legal expenses
incurred in obtaining or enforcing payment of any of the Obligations or
foreclosing the Agent's security interest in any of the Collateral, whether
through judicial proceedings or otherwise, or in enforcing or protecting its
rights and interests under this Agreement or under any other instrument or
document delivered pursuant hereto, or in protecting the rights of any holder or
holders with respect thereto, or in defending or prosecuting any actions or
proceedings arising out of or relating to the Agent's transactions with the
Borrower and Guarantor, shall be paid by the Borrower to the Agent,
76
upon demand, or, at the Agent's charged to the Borrower's account and added to
the Obligations, and the Agent or Lender may take judgment against the Borrower
for all such costs, expense and fees in addition to all other amounts due from
the Borrower hereunder.
Section 11.6 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
Section 11.7 Consent to Jurisdiction. The Borrower and Guarantor hereby
absolutely and irrevocably consent and submit to the jurisdiction of the courts
of the State of Ohio and of any federal court located in the said state in
connection with any actions or proceedings brought against the Borrower or
Guarantor by the Agent or any Lender arising out of or relating to this
Agreement, the Notes or any other Loan Documents. The Borrower and Guarantor
hereby waive and shall not assert in any such action or proceeding, in each
case, to the fullest extent permitted by applicable law, any claim that (a) the
Borrower or Guarantor is not personally subject to the jurisdiction of any such
court, (b) the Borrower or Guarantor is immune from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to it or its property, (c) any
such suit, action or proceeding is brought in an inconvenient forum, (d) the
venue of any such suit, action or proceeding is improper, or (e) this Agreement,
the Notes or any Loan Documents may not be enforced in or by any such court. In
any such action or proceeding, the Borrower and Guarantor hereby absolutely and
irrevocably waive personal service of any summons, complaint, declaration or
other process and hereby absolutely and irrevocably agree that the service
thereof may be made by certified, registered or first-class mail directed to the
Borrower and Guarantor at the address specified on the signature pages hereof or
such other address of which Agent or Lenders shall have been first notified
pursuant to Section 11.2. The Borrower and Guarantor hereby agree that they will
appear or answer any such summons, complaint, declaration or other process so
served upon them within thirty (30) days after receipt of the same. Any action
brought by the Borrower or Guarantor in connection with this Agreement or the
transactions contemplated hereby shall be brought in a court of general
jurisdiction sitting in Xxxxxxxx County, Ohio. Anything hereinbefore to the
contrary notwithstanding, the Agent or any Lender hereof may xxx the Borrower or
Guarantor in the courts of any other country, state of the United States or
place where the Borrower or Guarantor or any of the property or assets may be
found or in any other appropriate jurisdictions.
Section 11.8 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT
FOR THE LENDERS TO EXTEND CREDIT TO THE BORROWER AND GUARANTOR, AND AFTER HAVING
THE OPPORTUNITY TO CONSULT COUNSEL, THE BORROWER AND GUARANTOR HEREBY EXPRESSLY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS
AGREEMENT OR ARISING IN ANY WAY FROM THE OBLIGATIONS.
Section 11.9 Other Waivers. The Borrower and Guarantor waive notice of
nonpayment, demand, notice of demand, presentment, protest and notice of protest
with respect to the Obligations, or notice of acceptance hereof, notice of Loans
made, credit
77
extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.
Section 11.10 Confidentiality. Each Lender and the Agent agrees (on behalf
of itself and each of its Affiliates) to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of this nature and in accordance with safe and sound
practices, any non-public information supplied to it by either Borrower or
Guarantor or any of their respective Subsidiaries pursuant to this Agreement
which is identified by either Borrower or Guarantor as being confidential at the
time the same is delivered to the Lenders or the Agent, provided that nothing
herein shall limit the disclosure of any such information (i) to the extent
required by statute, rule, regulation or judicial process, (ii) to counsel for
any of the Lenders or the Agent, (iii) to regulatory personnel, auditors or
accountants, (iv) to the Agent or any other Lender, (v) in connection with any
litigation to which any one or more of the Lenders or the Agent is a party, (vi)
to a Subsidiary or Affiliate of such Lender as provided in cause (a) above or
(vii) to any assignee or participant (or prospective assignee or participant),
so long as such prospective assignee or participant agrees to maintain the
confidentiality of the information to the same extent as Lenders and Agent.
[Remainder of page intentionally left blank. Signature page follows.]
78
IN WITNESS WHEREOF, the parties have duly executed this Agreement by their
duly authorized officers as of the date first above written.
BORROWER:
EASY GARDENER ACQUISITION CORP.
Notices to be sent to:
BY: /s/ Xxxxxxx X. Xxxxxxx
Easy Gardener Acquisition Corp. -----------------------------
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000 Xxxxxxx X. Xxxxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 Vice President
Attn: Xxxxxx Xxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy of notices to:
Xxxxxx Xxxxxxxxxx LLP
23rd Floor
000 Xxxxxxxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
79
Notices to be sent to: GUARANTOR:
U. S. Home & Garden, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000 X.X. HOME & GARDEN, INC.
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx BY: /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Phone: (000) 000-0000 Xxxxxxx X. Xxxxxxx,
Facsimile:(000) 000-0000 Chief Operating Officer
With a copy of notices to:
Xxxxxx Xxxxxxxxxx LLP
23rd Floor
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
80
Notices to be sent to: LENDERS:
THE PROVIDENT BANK
The Provident Bank
One East Fourth Street
Seventh Floor BY: /s/ Xxxx Xxxxx
-----------------------
Xxxxxxxxxx, Xxxx 00000 Xxxx Xxxxx
Phone: (000) 000-0000 Vice President
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxx
CREDIT COMMITMENTS:
With a copy of notices to: 37.254902%
Xxxxxxx, Muething & Klekamp Revolving Credit Commitment:
1800 Provident Tower $4,843,137.26
Xxxxxxxxxx, Xxxx 00000
Phone: (000) 000-0000 Term Loan I Commitment:
Facsimile: (000) 000-0000 $8,568,627.45
Attn: J. Xxxxx Xxxxxxxxx
Term Loan II Commitment:
Payments to be sent to: $ 838,235.29
The Provident Bank
ABA# 000000000
Credit Loan Desk
Ref: Easy Gardener
Attn: Xxxx Xxxxx
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LASALLE NATIONAL BANK
Notices to be sent to:
BY: /s/ Xxxxxxx X. Xxxxxx
LaSalle National Bank -----------------------
000 Xxxxx XxXxxxx Xx.
Xxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000 CREDIT COMMITMENTS:
Facsimile: (000) 000-0000 29.411765%
Attn: Xxxxxxx X. Xxxxxx
Revolving Credit Commitment:
With a copy of notices to: $3,823,529.41
Term Loan I Commitment:
$6,764,705.88
Payments to be sent to:
Term Loan II Commitment:
LaSalle National Bank $ 661,764.71
ABA#
Credit ___________
Ref: ________________
Attn: ____________
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Notices to be sent to: ANTARES LEVERAGE CAPITAL CORP.
Antares Leverage Capital Corp.
000 Xxxxx Xxxxxx Xxxxx BY: /s/ Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000 -----------------------
Phone: (000) 000-0000
Facsimile: (000) 000-0000 CREDIT COMMITMENTS:
Attn: Xxxxx Xxxxx and Xxxx Xxxxxx 33.333333%
With a copy of notices to: Revolving Credit Commitment:
$4,333,333.33
Schwartz, Cooper, Xxxxxxxxxxx & Xxxxxx,
Chartered Term Loan I Commitment:
Suite 2700 $7,666,666.67
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Term Loan II Commitment:
Phone: (000) 000-0000 $ 750,000.00
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
Payments to be sent to:
Bank of America Illinois, Chicago, Ill.
---------------------------------------
ABA# 000000000
---------------------------------------
Credit: Antares Leverage Capital
---------------------------------------
Ref: Easy Xxxxxxx
---------------------------------------
Attn: Xxx Luchashy 000-000-0000
---------------------------------------
83
Notices to be sent to: AGENT:
The Provident Bank THE PROVIDENT BANK, AS AGENT
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000 BY: /s/ Xxxx Xxxxx
-----------------------
Phone: (000) 000-0000 Xxxx Xxxxx
Facsimile: (000) 000-0000 Vice President
Attn: Xxxx Xxxxx
With a copy of notices to:
Xxxxxxx, Muething & Xxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: J. Xxxxx Xxxxxxxxx
