<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 33-80701
AAF-MCQUAY INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 41-0404230
- ---------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
215 Central Avenue, Louisville, Kentucky 40208
- ---------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (502) 637-0011
-------------
Not Applicable
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,497 shares of Common Stock,
par value $100.00 per share, were outstanding as of November 5, 1999.
1
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INDEX
AAF-MCQUAY INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - Financial Information.............................................. 3
Item 1. Financial Statements (unaudited)................................... 3
Condensed Consolidated Balance Sheets as of -
September 30, 1999 and June 30, 1999............................... 3
Consolidated Statements of Operations -
Three months ended September 30, 1999 and
September 30, 1998................................................. 4
Condensed Consolidated Statements of Cash Flows -
Three months ended September 30, 1999 and September 30, 1998....... 5
Consolidated Statements of Comprehensive Income -
Three months ended September 30, 1999 and
September 30, 1998................................................. 6
Notes to the Consolidated Financial Statements..................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 11
Item 7A Quantitative and Qualitative Disclosure About Market Risk 14
PART II - Other Information.................................................. 15
Item 1. Legal Proceedings.................................................. 15
Item 6. Exhibits and Reports on Form 8-K................................... 15
Signatures......................................................... 16
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AAF-MCQUAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................. $ 12,078 $ 9,168
Accounts receivable........................................................ 234,302 227,844
Inventories................................................................ 113,651 118,163
Other current assets....................................................... 5,462 6,754
------- -------
Total current assets................................................ 365,493 361,929
Property, plant and equipment, net.................................................. 140,265 145,086
Cost in excess of net assets acquired and other identifiable intangibles, net....... 226,748 228,906
Other assets and deferred charges................................................... 19,662 19,274
------- -------
Total assets........................................................ $752,168 $755,195
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term borrowings...................................................... $ 97,947 $ 87,602
Current maturities of long-term debt....................................... 7,263 14,495
Accounts payable, trade.................................................... 107,620 115,986
Accrued warranty........................................................... 18,281 18,604
Other accrued liabilities.................................................. 92,293 83,208
------- -------
Total current liabilities........................................... 323,404 319,895
Long-term debt. 163,449 164,322
Deferred income taxes............................................................... 34,842 34,676
Other liabilities................................................................... 42,736 49,874
------- -------
Total liabilities................................................... 564,431 568,767
Stockholder's equity:
Preferred stock ($1 par value; 1,000 shares authorized, none issued)....... -- --
Common stock ($100 par value; 8,000 shares authorized, 2,497 shares
issued and outstanding)............................................ 250 250
Additional paid-in capital................................................. 179,915 179,915
Retained earnings.......................................................... 17,279 17,762
Accumulated other comprehensive income (loss).............................. (9,707) (11,499)
------- --------
Total stockholder's equity.......................................... 187,737 186,428
------- -------
Total liabilities and stockholder's equity.......................................... $ 752,168 $ 755,195
========= =========
</TABLE>
See Notes To Consolidated Financial Statements
3
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AAF-MCQUAY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------
September 30, September 30,
1999 1998
----------------- -----------------
<S> <C> <C>
Net Sales $ 225,127 $ 251,400
Cost of Sales 165,153 183,865
----------------- -----------------
Gross Profit 59,974 67,535
Operating Expenses:
Selling, general and administrative 49,868 55,839
Restructuring 178 751
Amortization of intangible assets 2,829 2,902
----------------- -----------------
52,875 59,492
----------------- -----------------
Income from operations 7,099 8,043
Interest expense, net 5,873 6,506
Other (income) expense, net 2,082 (4,812)
----------------- -----------------
Income (loss) before income taxes (856) 6,349
Minority interest (earnings) loss 64 (10)
Provision for income taxes (437) 1,529
----------------- -----------------
Net income (loss) $ (483) $ 4,830
================= =================
</TABLE>
See Notes To Consolidated Financial Statements
4
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AAF-MCQUAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------
September 30, September 30,
1999 1998
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (483) $ 4,830
Adjustments to reconcile to cash from
Operating activities:
Depreciation and amortization 7,709 6,858
Foreign currency transaction (gains) losses 453 (259)
Changes in operating assets and liabilities (3,690) (13,060)
----------------- -----------------
Net cash from operating activities 3,989 (1,631)
Cash flows from investing activities:
Capital expenditures, net (2,278) (5,241)
----------------- -----------------
Net cash from investing activities (2,278) (5,241)
Cash flows from financing activities:
Net borrowing (repayments) under short-term
borrowing arrangements 10,345 18,333
Payments on long-term-term debt (38,106) (13,886)
Proceeds from issuance of long-term debt 30,000 -
Payment of debt issuance costs (1,244) -
----------------- -----------------
Net cash from financing activities 995 4,447
Effect of exchange rate changes on cash 204 110
----------------- -----------------
Net increase (decrease) in cash and cash equivalents 2,910 (2,315)
Cash and cash equivalents at beginning of period 9,168 9,697
----------------- -----------------
Cash and cash equivalents at end of period $ 12,078 $ 7,382
================= =================
</TABLE>
See Notes To Consolidated Financial Statements
5
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AAF-MCQUAY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
September 30, September 30,
1999 1998
--------------- ----------------
<S> <C> <C>
Net income (loss)..................................... $(483) $ 4,830
Other comprehensive income:...........................
Foreign currency translation adjustments............ 1,792 3,396
----- -----
Comprehensive income.................................. $1,309 $ 8,226
====== =======
</TABLE>
See Notes To Consolidated Financial Statements
6
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and all of its wholly-owned subsidiaries. All inter-company transactions have
been eliminated. The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim reporting and with the instructions to Form 10-Q and Article 10 of
Regulation S-K. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K (the "Annual Report") for the year ended
June 30, 1999. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. The accompanying financial statements reflect the statements of
operations for the three months ended September 30, 1999 and 1998, the balance
sheets at September 30, 1999 and June 30, 1999, and the consolidated statements
of cash flows for the three months ended September 30, 1999 and 1998.
The operating results for the three months ended September 30, 1999 are not
necessarily indicative of the operating results that may be expected for the
full year ending June 30, 2000. The Company's period end is the Saturday closest
to September 30. For clarity in presentation all periods presented herein are
shown to end on the last calendar day of the month. Certain reclassifications of
amounts in the consolidated financial statements have been made to reflect
comparability.
During the first quarter of fiscal year 1999, the Company made a change
in accounting estimate related to its warranty provision and increased its
warranty provision by $2.5 million due to activity related to new product
introductions and discontinued product lines.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------------- ----------
(dollars in thousands)
<S> <C> <C>
FIFO Cost:
Raw Materials........................... $ 39,427 $ 39,838
Work-in-process......................... 25,812 25,884
Finished goods.......................... 48,235 51,063
------------ ----------
113,474 116,815
LIFO adjustment......................... 177 1,348
============ ==========
$ 113,651 $ 118,163
============ ==========
</TABLE>
3. NET OTHER (INCOME)EXPENSE
During the first quarter of fiscal year 2000, the Company had expense of
$2.1 million compared to $4.8 million of income in the first quarter of fiscal
year 1999. In the first quarter of fiscal year 2000, the Company accrued a $1.3
million loss related to the sale of the commercial air conditioning and
refrigeration operation in France in October 1999. Additionally, in conjunction
with the Company's refinancing, discussed in Note 5, the Company wrote off
certain unamortized income and debt issuance costs resulting in a charge of
$318,000 in the first quarter of fiscal year 2000. In the first quarter of
fiscal year 1999 the Company recognized $2.9 million in other income as a result
of favorable developments in the IRS audit and the tax indemnification
settlement with former shareholders of the Company. The Company also recorded a
$1.5 million gain related to the termination of a pension plan in Canada. The
remaining components of other income and expenses resulted from foreign currency
and equity affiliate transactions.
4. PROVISION FOR INCOME TAXES
The tax provisions for the first quarters ended September 30, 1999 and
1998 are based on the estimated effective tax rates applicable for the full
years, and after giving effect to significant unusual items related
specifically to the interim periods. The difference between the Company's
reported tax provision, for the first quarters ended September 30, 1999 and
1998, and the tax provision computed based on U.S.
7
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statutory rates is primarily attributable to nondeductible goodwill amortization
and unbenefitted foreign losses. Additionally, the Company's effective tax rate
for the first quarter ended September 30, 1998 reflects the effect of the
indemnification settlement agreement and the IRS settlement which was recognized
as income for financial reporting purposes but is not taxable for income tax
purposes.
5. DEBT AND FINANCIAL INSTRUMENTS
On September 30, 1999, as further discussed in the Company's Form 10K,
the Company entered into a new bank credit agreement. As a result of the bank
credit agreement refinancing that took place, the Company wrote off certain
unamortized debt issuance costs associated with the previous credit
agreement. In addition, the balance of the unamortized income from early
termination of the swap was eliminated. These actions resulted in net charge
to other (income) expense of $318,000 for the current quarter.
The Company secures pricing on a portion of its copper and aluminum
requirements through forward contracts executed with certain suppliers. At
September 30, 1999, contracts for 5.7 million pounds of copper at an average
price of $0.71 per pound and 1.4 million pounds of aluminum at an average price
of $0.68 per pound were in place. These contracts have various expiration dates
through June 30, 2000.
6. RESTRUCTURING
As described in Note 10 of the Annual Report, the Company implemented
several restructuring plans throughout fiscal year 1999 in both the Commercial
Air Conditioning and Refrigeration and Filtration Products groups. Through
September 30, 1999, the Company has spent $3.4 million of the $5.2 million
restructuring reserve recorded in fiscal year 1999 primarily for severance
arrangements. The Company continues to implement actions in accordance with the
restructuring plan.
7. CONTINGENCIES
ENVIRONMENTAL MATTERS - The Company is subject to potential liability under
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (CERCLA), and other federal, state and local statutes and
regulations governing the discharge of pollutants into the environment and the
handling and disposal of hazardous substances and waste. These statutes and
regulations, among other things, impose potential liability on the Company for
the cost of remediation of contamination arising from the Company's past and
present operations and from former operations of other entities at sites later
acquired and now owned by the Company. Many of the Company's facilities have
operated for many years, and substances which are or might be considered
hazardous were generated, used, and disposed of at some locations, both on- and
off-site. Therefore, it is possible that environmental liabilities in addition
to those described in note 14 of the Annual Report may arise in the future. The
Company records liabilities if, in management's judgment, environmental
assessments or remedial efforts are probable and the costs can be reasonably
estimated. These accrued liabilities are not discounted. Such estimates are
adjusted if necessary based upon the completion of a formal study or the
Company's commitment to a formal plan of action.
LITIGATION - The Company is involved in various lawsuits in the ordinary
course of business. These lawsuits primarily involve claims for damages arising
out of the use of the Company's products. The Company is also involved in
litigation and administrative proceedings involving employment matters and
commercial disputes. Some of these lawsuits include claims for punitive as well
as compensatory damages. The Company is insured for product liability claims for
amounts in excess of established deductibles and accrues for the estimated
liability on a case-by-case basis up to the limits of the deductibles. All other
claims and lawsuits are also handled on a case-by-case basis.
8
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8. BUSINESS SEGMENTS INFORMATION
The Company serves the global commercial heating, ventilation, air
conditioning and refrigeration ("HVAC&R") industry with two industry segments:
Commercial Air Conditioning and Refrigeration, the manufacture, sale and
distribution of heating, ventilating, air conditioning, industrial refrigeration
and freezing equipment products, and Filtration Products, the manufacture and
sale of air filtration products and systems. Information relating to operations
in each industry segment is as follows as of and for the three months ended
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
CLASSIFIED BY INDUSTRY: SEPTEMBER 30,
--------------------------------
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net Sales:
Commercial Air Conditioning and Refrigeration. $147,900 $ 166,756
Filtration Products............................. 77,737 88,444
Eliminations.................................... (510) (3,800)
-------- ---------
Total................................... $225,127 $ 251,400
======== =========
Operating Income (Loss):
Commercial Air Conditioning and Refrigeration... $ 2,173 $ 3,819
Filtration Products ............................ 5,302 4,499
Corporate (376) (275)
-------- ---------
Total................................... $ 7,099 $ 8,043
======== =========
Depreciation/Amortization:
Commercial Air Conditioning and Refrigeration. $ 5,198 $ 4,210
Filtration Products............................. 2,497 2,620
Corporate 14 28
-------- ---------
Total................................... $ 7,709 $ 6,858
======== =========
Capital Expenditures:
Commercial Air Conditioning and Refrigeration. $ 1,443 $ 4,637
Filtration Products............................. 835 604
-------- ---------
Total................................... $ 2,278 $ 5,241
======== ========
</TABLE>
The Company estimates corporate expenses and determines fixed allocations
of these expenses for each business segment at the beginning of the fiscal year.
Any over or under allocation of actual expenses incurred results in income or
expense reported at the corporate level. The $0.38 and $0.28 million noted above
represent the under allocation of expenses for the three month period ended
September 30, 1999 and 1998, respectively. A reconciliation of segment profit to
the Company's earnings before taxes for each quarter is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
--------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Operating Income from Business Segments $ 7,475 $ 8,318
Over allocation of corporate expenses (376) (275)
Interest expense, net 5,873 6,506
Other (income) expense 2,082 (4,812)
------- --------
Income (loss) before income taxes $ (856) $6,349
======== ======
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES for the first quarter of fiscal year 2000 were $225.1 million.
This represents a decrease of $26.3 million, or 10.5%, from $251.4 million for
the first quarter of fiscal year 1999. The Company estimates that approximately
$17.3 million, or 65.9%, of the decrease is attributable to having one less week
of sales in the first quarter of fiscal year 2000 as compared to the first
quarter of fiscal year 1999. The first quarter of fiscal year 2000 reflects a 13
week period as compared to a 14 week period for the first quarter of fiscal year
1999.
COMMERCIAL AIR CONDITIONING AND REFRIGERATION GROUP net sales decreased
$18.9 million, or 11.3%, to $147.9 million in the first quarter of fiscal
year 2000 as compared to the first quarter in fiscal year 1999. The Company
estimates that approximately $11.4 million, or 60.3%, of the decrease is
attributable to one less week of sales in the first quarter of fiscal 2000 as
compared to the first quarter of fiscal 1999. The remaining decrease of $7.5
million is primarily attributable to decreased sales in the chiller products
and terminal air conditioning systems business units. Chiller product net
sales decreased 16.9% in the first quarter of fiscal year 2000 compared to
the first quarter of fiscal year 1999 as a result of the restructuring of the
chiller business unit. Terminal air conditioning products net sales decreased
16.0% in the first quarter of fiscal 2000 as compared to the first quarter of
fiscal year 1999 as a result of the product rationalization in North America
and a related market reaction as a result of the changes in product
offerings. The sales decreases in the chiller products and terminal air
conditioning products business units were partially offset by increased sales
in the service and parts business units as a result of strong demand for
replacement parts, and increased sales from the operations in Italy and Dubai.
Backlog for the Commercial Air Conditioning and Refrigeration Group was
$135.0 million at September 30, 1999 as compared to $125.5 and $133.7 million at
September 30, 1998 and June 30, 1999, respectively.
FILTRATION PRODUCTS GROUP net sales were $77.7 million in the first
quarter of fiscal year 2000, a decrease of $10.7 million, or 12.1%, from
$88.4 million in the first quarter of fiscal year 1999. The Company estimates
that approximately $6.0 million, or 55.8%, of the decrease is attributable to
one less week of sales in the first quarter of fiscal 2000 as compared to
fiscal 1999. The remaining decrease of $4.7 million is attributable to slow
MFAS sales in the United States due to soft market conditions and a decrease
in air pollution control sales in Europe.
GROSS PROFIT was $60.0 million or 26.6% of sales for the first quarter of
fiscal year 2000 versus $67.5 million or 26.9% of sales for the first quarter of
fiscal year 1999. In the Commercial Air Conditioning and Refrigeration Group,
gross profit as a percentage of sales was 24.5% in the first quarter of fiscal
year 2000 as compared to 25.4% of sales in the first quarter of fiscal year
1999. This decrease in gross margin resulted primarily from lower margin sales
of chiller and air handling products. The Filtration Products Group's gross
profit as a percentage of sales increased in the first quarter from 28.4% in
fiscal year 1999 to 30.5% in the first quarter of fiscal year 2000. This
increase resulted from improved manufacturing performance.
OPERATING EXPENSES were $52.9 million or 23.5% of sales for the first
quarter of fiscal year 2000 as compared to $59.5 million or 23.7% of sales
for the first quarter of fiscal year 1999. The Company estimates that
approximately $4.1 million, or 61%, of the decrease is attributable to one
less week of operating expenses in the first quarter of fiscal 2000 as
compared to the first quarter of fiscal 1999. The remaining decrease of $2.5
million is primarily attributable to a reduction in warranty expense offset
by an increase in depreciation expense related to the new Enterprise Resource
Planning systems.
INCOME FROM OPERATIONS for the first quarter of fiscal years 2000 and 1999
was $7.1 and $8.0 million, respectively. As a percentage of sales, income from
operations remained flat at 3.2% of sales for both of the first quarters of
fiscal years 2000 and 1999. The Commercial Air Conditioning and Refrigeration
Group had a decrease in income from operations from $3.8 million, or 2.3% of
sales, to $2.2 million, or 1.5% of sales, for the first quarter of fiscal year
2000 as compared to the first quarter of fiscal year 1999, respectively. The
10
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Filtration Products segment had an increase in income from operations from $4.5
million, or 5.1% of sales, to $5.3 million, or 6.8% of sales, for the first
quarter of fiscal year 1999 as compared to the first quarter of fiscal year
2000.
NET INTEREST EXPENSE was $5.9 million in the first quarter of fiscal year
2000 as compared to $6.5 million for the first quarter of fiscal year 1999. This
decrease is primarily attributable to having one less week of activity in the
first quarter of fiscal year 2000 as compared to the first quarter of fiscal
year 1999.
NET OTHER (INCOME) EXPENSE for the first quarter of fiscal year 2000 was
expense of $2.1 million compared to income of $4.8 million in the first
quarter of fiscal year 1999. See Note 3 to the unaudited consolidated
financial statements for further discussion.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs are provided by cash generated from operating
activities and supplemented when necessary by short-term credit facilities.
During the first quarter of fiscal year 2000, funds generated by operating
activities were $4.0 million as compared to funds used by operating activities
of $1.6 million in the prior fiscal year for the comparable period. During the
first quarter of fiscal year 2000, cash used in investing activities was $2.3
million, which represents a $2.9 million reduction from the prior year first
quarter. The reduction in capital spending stems from recent completion of the
information technology enhancement project. On September 30, 1999, the Company
refinanced its Bank Credit Agreement with a New Term Loan of $30 million and a
new Revolving Credit Facility of $90 million ("New Bank Credit Agreement"). The
New Bank Credit Agreement has a three-year term, was used to retire all
obligations under the previous Bank Agreement and is designed to provide added
flexibility and borrowing availability. The New Bank Credit Agreement also
provides favorable interest rates and other fees compared to the previous Bank
Credit Agreement. At the closing date for the New Bank Credit Agreement and at
the end of the first quarter, remaining borrowing availability under the new
Revolving Credit portion of the New Bank Credit Agreement was $32 million. Total
net payments on long term debt for the first quarter were $8.1 million which is
a result of new borrowing under the New Term Loan of $30.0 million, repayment of
the balance on the previous Bank Term Loan of $37.3 million and other long term
debt payments of $0.8 million. Cash of $10.3 million was provided by net
borrowing under short term borrowing arrangements for long term debt repayment
and working capital requirements during the period.
A short-term credit facility provided to a subsidiary of the Company is
supported by a letter of credit from OYL which expires on September 30, 2000. In
addition, the Company has secured certain domestic letter of credit facilities
totaling $13.5 million that are supported by a letter of credit from OYL which
expires on March 21, 2000. Each of these support arrangements may be extended
for additional time periods with the consent of OYL and the banks providing the
facilities.
On an ongoing basis the Company strives to evaluate its various
businesses and product lines with the objective to enhance shareholder value.
Consistent with this strategy, the Company intends to pursue global business
opportunities that are synergistic with the Company's core businesses or exit
low value added or non-synergistic operations. In October 1999, the Company
sold the commercial air conditioning and refrigeration operation in France
with the proceeds used to reduce debt. The Company does not believe that the
sale of the commercial air conditioning and refrigeration operation in France
will have a material effect on the Company's future financial results.
Management believes, based upon current levels of operations and forecasted
earnings, that cash flow from operations, together with borrowings under the New
Bank Credit Agreement and other short-term credit facilities, will be adequate
to make payments of principal and interest on debt, to permit anticipated
capital expenditures and to fund working capital requirements and other cash
needs. Nevertheless, the Company will remain leveraged to a significant extent
and its debt service obligations will continue to be substantial. If the
Company's sources of funds were to fail to satisfy the Company's requirements,
the
11
<PAGE>
Company may need to refinance its existing debt or obtain additional financing.
There is no assurance that any such new financing alternatives would be
available, and, in any case, such new financing (if available) would be expected
to be more costly and burdensome than the debt agreements currently in place.
YEAR 2000
The Company established a formal Year 2000 program during fiscal year
ending June 30, 1998, which began with a worldwide assessment and development
of a central data base containing an inventory of the risk elements
associated with the Year 2000 issue for each of the Company's operations. The
Company also appointed an overall project coordinator and established an
executive review process. Prior to establishing a formal Year 2000 management
process, the Company had already decided to replace substantially all of its
old systems with new state-of-the-art Enterprise Resource Planning (ERP)
systems. The Company estimates expenditures for the new systems have
aggregated approximately $27.0 million through project completion at month-end
September 1999. Expenditures for additional remedial actions beyond those
required to install new systems are managed by the individual business units
and recognized in operating expenses. The Company's management believes that
modernizing its information systems is critical for the Company's stable and
efficient growth, and it is the basis of the Company's strategy for resolving
its Year 2000 issues.
During May 1998, the Company began its review of the products it
manufactures and sells, and the Company believes that its products, including
the control systems provided by the Company, are Year 2000 compliant. The
Company has also identified third parties upon whom the Company is dependent for
products or services, and commenced actions during fiscal year ending June 30,
1998, to ensure those products and services are compliant and will not be
interrupted as a result of Year 2000.
The scheduled Year 2000 activities and current status are summarized in the
chart below:
<TABLE>
<CAPTION>
------------------------------------ ------------------ ----------------- -----------------
ACTIVITY STATUS STARTING ENDING
------------------------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C>
Assessment and inventory Complete September 1997 January 1998
------------------------------------ ------------------ ----------------- -----------------
Coordinator and Executive review Complete February 1998 May 1998
process
------------------------------------ ------------------ ----------------- -----------------
Industrial Refrigeration ERP Complete January 1997 April 1998
------------------------------------ ------------------ ----------------- -----------------
Filtration Products ERP Complete April 1997 July 1999
------------------------------------ ------------------ ----------------- -----------------
Commercial Air Conditioning ERP Complete September 1997 September 1999
------------------------------------ ------------------ ----------------- -----------------
Product compliance Complete May 1998 March 1999
------------------------------------ ------------------ ----------------- -----------------
Materials suppliers Complete* June 1998 October 1999
------------------------------------ ------------------ ----------------- -----------------
Other IT issues including third Complete* September 1998 October 1999
parties
------------------------------------ ------------------ ----------------- -----------------
Equipment and facilities Complete* September 1998 October 1999
------------------------------------ ------------------ ----------------- -----------------
</TABLE>
* Complete indicates that the key components are complete, with minor
follow-up tasks still in process.
The final Year 2000 activities are currently on schedule. The Company has
successfully implemented the scheduled ERP projects and systems upgrades.
Failure by the Company's third party suppliers and/or service providers to
produce or deliver critical components or to transport services could cause
disruption in the Company's ability to manufacture and/or deliver timely its
products to its customers, which could result in increased expenses, reduced
billings and potential litigation. The precise costs associated with such risks
are difficult to predict at this time. The Company currently is developing its
Business Continuity and Contingency Plans, for each of its businesses, in the
event that internal, external, or systemic failures occur on or about January 1,
2000.
12
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The Company believes the Year 2000 activities are adequate to address the
Year 2000 risks faced by the Company; however, there can be no assurance that
the Year 2000 procedures and activities, even if completed, will be adequate to
address the Company's Year 2000 risk.
EURO CONVERSION
Management has initiated an internal analysis of and planning for the
effect the Euro will have on the operating and financial condition of the
Company. The Euro is not expected to have a material effect on the Company's
operating results or competitive position. The Company's financial systems are
Euro compliant and opportunities will continue to be investigated for
European-wide system infrastructures.
FORWARD-LOOKING STATEMENTS
When used in this report by management of the Company, from time to time,
the words "believes," "anticipates," and "expects" and similar expressions are
intended to identify forward-looking statements that involve certain risks and
uncertainties. A variety of factors could cause actual results to differ
materially from those anticipated in the Company's forward-looking statements,
some of which include risk factors previously discussed in this and other SEC
reports filed by the Company. These risk factors include, but are not limited
to, general economic conditions, environmental laws and regulations, the
weakening Asian markets, unforeseen competitive pressures, warranty expenses,
market acceptance of new products, unseasonably cool spring or summer weather, a
slow down in the chiller market, the inability to meet debt covenants,
unforeseen difficulties in maintaining mutually beneficial relationships with
strategic initiatives partners, the Year 2000 issue, and the results of
restructuring activities. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date thereof. The
Company undertakes no obligation to publicly release the results of any events
or circumstances after the date hereof to reflect the occurrence of
unanticipated events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in the reported market risks since the
end of the most recent fiscal year. See Note 5 to the Consolidated Financial
Statements (unaudited) for disclosures of additional financial instruments that
have been entered into by the Company since the end of the most recent fiscal
year.
13
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 5. OTHER EVENTS
On November 5, 1999, the Company announced the retirement, effective
December 31, 1999, of Joseph B. Hunter as President and Chief Executive
Officer. Mr. Hunter will continue to serve on the Company's Board of
Directors. The Company also announced the appointment of Mr. Ho Nyuk Choy as
President and Chief Executive Officer, effective November 1, 1999. Prior to
such appointment, Mr. Ho held and continues to hold the position of Group
Managing Director of the Company's parent company, OYL Industries Berhad, a
member of the Hong Leong Group Malaysia.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) EXHIBITS
NUMBER DESCRIPTION
------ -----------
<S> <C>
Exhibit 10.16 Revolving Credit,
Term Loan and Security
Agreement dated September
30, 1999 with PNC Bank,
N.A.
Exhibit 10.17 First Amendment to Revolving Credit,
Term Loan and Security Agreement dated
October 25, 1999, with PNC Bank, N.A.
Exhibit 10.18 Second Amendment to Revolving Credit,
Term Loan and Security Agreement
dated November 12, 1999, with PNC
Bank, N.A.
Exhibit 27 Financial Data Schedule (filed herewith)
Exhibit 99.1 Press Release dated November 16, 1999
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the period.
</TABLE>
14
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AAF-MCQUAY INC.
DATE NOVEMBER 12, 1999 By: /s/ BRUCE D. KRUEGER
-------------------- ------------------------
Bruce D. Krueger
Vice President of Finance and Controller
Principal Accounting Officer and
Principal Financial Officer
15
<PAGE>
Exhibit Index
NUMBER DESCRIPTION
- ------ -----------
Exhibit 10.16 Revolving Credit,
Term Loan and Security
Agreement dated September
30, 1999 with PNC Bank,
N.A.
Exhibit 10.17 First Amendment to Revolving Credit,
Term Loan and Security Agreement dated
October 25, 1999, with PNC Bank, N.A.
Exhibit 10.18 Second Amendment to Revolving Credit,
Term Loan and Security Agreement
dated November 12, 1999, with PNC
Bank, N.A.
Exhibit 27 Financial Data Schedule (filed herewith)
16
<PAGE>
Exhibit 10.16
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
This REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (this
"Agreement") dated September 30, 1999, among AAF-MCQUAY INC., a corporation
organized under the laws of the State of Delaware ("Borrower"); the financial
institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender"); and PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC"), as collateral and
administrative agent for Lenders (PNC, together with its successors and assigns
in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower, Lenders and Agent hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1 ACCOUNTING TERMS. As used in this Agreement, any Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 or elsewhere in
this Agreement to the extent not defined, shall have the respective meanings
given to them under GAAP; provided, however, whenever such accounting terms are
used for the purposes of determining compliance with financial covenants in this
Agreement, such accounting terms shall be defined in accordance with GAAP as
applied in preparation of the audited financial statements of Borrower for the
Fiscal Year ended June 30, 1999.
1.2 GENERAL TERMS. For purposes of this Agreement the following terms
shall have the following meanings (terms defined in the singular to have the
same meaning when used in the plural, and vice versa):
"AAF International" shall mean AAF-McQuay International Inc., a
Delaware corporation and a wholly-owned Subsidiary of Borrower.
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
"Additional Collateral" shall mean and include all property or
interests in property of Borrower in which Borrower hereafter grants to Agent a
Lien as security for the payment or performance of any of the Obligations.
"Advances" shall mean and include the Revolving Advances, Letters of
Credit, the Term Loan and each other advance made by Agent or Lenders pursuant
to the terms of this Agreement or any of the Other Documents to or for the
benefit of Borrower.
<PAGE>
"Advance Rates" shall have the meaning set forth in Section 2.1(a)
hereof.
"Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above.
"Agent" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Agreement" shall mean this Revolving Credit, Term Loan and Security
Agreement.
"Alabama Property" shall mean the real property of Borrower located at
7106 Alabama Highway in Scottsboro, Alabama.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal
to the higher of (i) the Base Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 0.50%.
"Applicable Facility Fee" shall mean a percentage equal to 0.375%;
provided that, commencing October 1, 2000, the Applicable Facility Fee shall be
increased or (if no Default or Event of Default exists) decreased, based on the
Fixed Charge Coverage Ratio, as follows:
<TABLE>
<CAPTION>
Fixed Charge Coverage Ratio Applicable Facility Fee
-------------------------------------------------------------------------------
<S> <C>
Greater than 1.00:1.00 and less than 1.10:100 0.500%
-------------------------------------------------------------------------------
Greater than or equal to 1.10:1.00 and less than 0.375%
1.25:1.00
-------------------------------------------------------------------------------
Greater than or equal to 1.25:1.00 0.250%
-------------------------------------------------------------------------------
</TABLE>
The Applicable Facility Fee shall be subject to reduction or increase, as
applicable and as set forth in the table above, on a quarterly basis according
to the performance of Borrower as measured by the Fixed Charge Coverage Ratio
for the immediately preceding four (4) Fiscal Quarters of Borrower. Except as
set forth in the last sentence hereof, any such increase or reduction in the
Applicable Facility Fee provided for herein shall be effective three (3)
Business Days after receipt by Agent of the applicable financial statements and
corresponding Compliance Certificate. If the financial statements and the
Compliance Certificate of Borrower setting forth the Fixed Charge Coverage Ratio
are not received by Agent by the date required pursuant to Section 9.8 hereof,
the Applicable Facility Fee shall be determined as if the Fixed Charge Coverage
Ratio was greater than 1.00:1.00 and less than 1.10:1.00 until such time as such
financial statements and Compliance Certificate are received and any Event of
Default resulting from a failure timely to deliver such financial statements or
Compliance Certificate is waived in writing by Agent and Lenders. For the final
Fiscal Quarter of any Fiscal Year of Borrower, Borrower may provide the
unaudited financial statements of Borrower, subject only to year-end
adjustments, for the purpose of determining the Applicable Facility Fee;
provided, however, that if, upon delivery of the annual audited financial
statements required to be submitted by Borrower to Agent pursuant to Section 9.7
hereof, Borrower has not met the criteria for reduction of the Applicable
Facility Fee pursuant to the terms hereinabove for the final Fiscal Quarter of
- 2 -
<PAGE>
Borrower then ended, then (a) such Applicable Facility Fee reduction shall be
terminated and, effective on the first day of the month following receipt by
Agent of such audited financial statements, the Applicable Facility Fee shall be
the Applicable Facility Fee that would have been in effect if such reduction had
not been implemented based upon the unaudited financial statements of Borrower
for the final Fiscal Quarter of the Fiscal Year of Borrower then ended, and (b)
Borrower shall pay to Agent, for the benefit of the Lenders, on the first day of
the month following receipt by Agent of such audited financial statements, an
amount equal to the difference between the amount that would have been paid
under Section 3.3 hereof using the Applicable Facility Fee determined based upon
such audited financial statements and the amount actually paid under Section 3.3
hereof during the period in which the reduction of the Applicable Facility Fee
was in effect based upon the unaudited financial statements for the final Fiscal
Quarter of the Fiscal Year of Borrower then ended.
"Applicable Law" shall mean all laws, rules and regulations applicable
to the Person, conduct, transaction, covenant, Loan Document or Material
Contract in question, including all applicable common law and equitable
principles; all provisions of all applicable state, federal and foreign
constitutions, statutes, rules, regulations and orders of Governmental Bodies;
and all orders, judgments and decrees of all courts and arbitrators.
"Applicable Margin" shall mean a percentage equal to 2.25% with respect
to Revolving Advances that are Eurodollar Rate Loans, 0.00% with respect to
Revolving Advances that are Domestic Rate Loans, 2.50% with respect to any
portion of the Term Loan made or outstanding as Eurodollar Rate Loans, and 0.25%
with respect to any portion of the Term Loan made or outstanding as Domestic
Rate Loans; provided that, commencing October 1, 2000, the Applicable Margin
shall be increased or (if no Default or Event of Default exists) decreased,
based on the Fixed Charge Coverage Ratio, as follows:
<TABLE>
<CAPTION>
Applicable Margin For
- -------------------------------------------------------------------------------------------------
Fixed Charge Revolving Revolving Portion of Term Portion of Term
Coverage Ratio Advances that are Advances that are Loan made or Loan made or
made or made or outstanding outstanding as outstanding as
outstanding as as Eurodollar Rate Domestic Rate Eurodollar Rate
Domestic Rate Loans Loans Loans
Loans
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater than 0.25% 2.50% 0.50% 2.75%
1.00:1.00 and less
than 1.10:100
- -------------------------------------------------------------------------------------------------
Greater than or 0.00% 2.25% 0.25% 2.50%
equal to 1.10:1.00
and less than
1.25:1.00
- -------------------------------------------------------------------------------------------------
Greater than or 0.00% 2.00% 0.00% 2.25%
equal to 1.25:1.00
- -------------------------------------------------------------------------------------------------
</TABLE>
- 3 -
<PAGE>
The Applicable Margin shall be subject to reduction or increase, as applicable
and as set forth in the table above, on a quarterly basis according to the
performance of Borrower as measured by the Fixed Charge Coverage Ratio for the
immediately preceding four (4) Fiscal Quarters of Borrower. Except as set forth
in the last sentence hereof, any such increase or reduction in the Applicable
Margin provided for herein shall be effective three (3) Business Days after
receipt by Agent of the applicable financial statements and corresponding
Compliance Certificate. If the financial statements and the Compliance
Certificate of Borrower setting forth the Fixed Charge Coverage Ratio are not
received by Agent by the date required pursuant to Section 9.8 hereof, the
Applicable Margin shall be determined as if the Fixed Charge Coverage Ratio was
greater than 1.00:1.00 and less than 1.10:1.00 until such time as such financial
statements and Compliance Certificate are received and any Event of Default
resulting from a failure timely to deliver such financial statements or
Compliance Certificate is waived in writing by Agent and Lenders; provided,
however, that nothing herein shall be deemed to prevent Agent and Lenders from
charging interest at the Default Rate for so long as an Event of Default exists.
For the final Fiscal Quarter of any Fiscal Year of Borrower, Borrower may
provide the unaudited financial statements of Borrower, subject only to year-end
adjustments, for the purpose of determining the Applicable Margin; provided,
however, that if, upon delivery of the annual audited financial statements
required to be submitted by Borrower to Agent pursuant to Section 9.7 hereof,
Borrower has not met the criteria for reduction of the Applicable Margin
pursuant to the terms hereinabove for the final Fiscal Quarter of the Fiscal
Year of Borrower then ended, then (a) such Applicable Margin reduction shall be
terminated and, effective on the first day of the month following receipt by
Agent of such audited financial statements, the Applicable Margin shall be the
Applicable Margin that would have been in effect if such reduction had not been
implemented based upon the unaudited financial statements of Borrower for the
final Fiscal Quarter of the Fiscal Year of Borrower then ended, and (b) Borrower
shall pay to Agent, for the benefit of the Lenders, on the first day of the
month following receipt by Agent of such audited financial statements, an amount
equal to the difference between the amount of interest that would have been paid
on the principal amount of the Obligations using the Applicable Margin
determined based upon such audited financial statements and the amount of
interest actually paid during the period in which the reduction of the
Applicable Margin was in effect based upon the unaudited financial statements
for the final Fiscal Quarter of the Fiscal Year of Borrower then ended.
"Approved Charges" shall mean up to $2,000,000 of charges incurred by
Borrower in any Fiscal Year in connection with Borrower's non-cash stock option
plan.
"Approved Computer Expenditures" shall mean an amount equal to the
lesser of (a) the amount of expenses actually incurred by Borrower in connection
with its installment of an Oracle-based ERP System after October 1, 1999 and
before October 1, 2000, or (b) $2,000,000.
"Approved Letter of Credit Purposes" shall mean (i) with respect to
documentary Letters of Credit, Letters of Credit issued to support Borrower's
purchase of Inventory or Equipment in Borrower's Ordinary Course of Business and
(ii) with respect to standby Letters of Credit, Letters of Credit issued to
support (a) Borrower's obtaining of performance bonds, (b) Borrower's obtaining
of insurance policies, and (c) working capital financing needs of Borrower's
Subsidiaries and Affiliates, in each case in Borrower's Ordinary Course of
Business.
"Asset Sale" meaning shall have the meaning ascribed to such term in
the Public Notes Indenture as in effect on the date hereof.
- 4 -
<PAGE>
"Asset Sale Reserve" shall mean, on any date of determination thereof,
an amount equal to the aggregate of all Net Asset Sale Proceeds received by
Borrower or any of its Subsidiaries from any Asset Sale that is concluded during
the period from the Closing Date to the date of determination, minus the sum of
(i) any Net Asset Sale Proceeds used to permanently repay Advances outstanding
under the Term Loan; (ii) any Net Asset Sale Proceeds from an Asset Sale that
are invested or committed to be invested and, within two hundred seventy (270)
days after such Asset Sale, applied to acquire, construct or reinvest in
properties and assets to be used in the business of Borrower and its
Subsidiaries as determined by Borrower; and (iii) any other Net Asset Sale
Proceeds from an Asset Sale concluded less than one hundred eighty (180) days
before such date of determination, to the extent that such Net Asset Sale
Proceeds have not been used as described in either clause (i) or (ii) above and
have not been used in a manner prohibited by the Public Notes Indenture.
"Base Rate" shall mean the base commercial lending rate of PNC as
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
"Blocked Account" shall have the meaning ascribed to it in Section
4.15(h) hereof.
"Borrower" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all permitted successors and assigns of such
Person.
"Borrower's Account" shall have the meaning set forth in Section 2.7.
"Borrowing Base Certificate" shall mean a certificate from the
President, chief financial officer or treasurer of Borrower to Agent by which
such officer shall certify to Agent the Formula Amount and calculation thereof
as of the date of the certificate, such certificate to be in form and substance
satisfactory to Agent.
"Business Day" shall mean with respect to Eurodollar Rate Loans, any
day on which commercial banks are open for domestic and international business,
including dealings in Dollar deposits in London, England and New York, New York,
and with respect to all other matters, any day other than a day on which
commercial banks in New York, New York are authorized or required by law to
close.
"Capital Expenditures" shall mean expenditures made or liabilities
incurred by Borrower for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto that have a useful life of more
than one year, including the total principal portion of Capitalized Lease
Obligations, and which, in accordance with GAAP, would be classified as capital
expenditures.
"Capitalized Lease Obligation" shall mean any Indebtedness of Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
- 5 -
<PAGE>
"Cash Equivalent Investments" shall mean Investments constituting (a)
obligations issued or guaranteed by the United States of America or any agency
thereof, (b) commercial paper with maturities of not more than one hundred
eighty (180) days and a published rating of not less than A-1 or P-1 (or the
equivalent rating), (c) certificates of time deposit and bankers' acceptances
having maturities of not more than one hundred eighty (180) days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, or (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
"Cash Taxes" shall mean, for any period, the actual federal, state and
local taxes of Borrower based on income or business activity, paid in cash
during such period.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq.
"Change of Control" shall mean (a) one hundred percent (100%) of the
Equity Interests of Borrower is no longer owned and controlled by Holdings, (b)
sixty percent (60%) or more of the common stock of Parent is no longer owned or
controlled by OYL, or (c) any merger, consolidation or sale of substantially all
of the property or assets of Borrower or Holdings; provided, that the sale by
Holdings of any shares of the capital stock of Borrower shall be deemed a sale
of substantially all of Holding's assets.
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, Liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, Borrower or any of its Affiliates.
"Closing Date" shall mean September 30, 1999, or such other date as may
be agreed to in writing by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986.
"Collateral" shall mean and include all of the following types or items
of property or interests in property of Borrower:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
- 6 -
<PAGE>
(e) all Real Property;
(f) all Pledged Stock;
(g) all of Borrower's right, title and interest in and to (i) its
respective goods and other property including all merchandise returned or
rejected by Customers, relating to or securing any of the Receivables; (ii) all
of Borrower's rights as a consignor, a consignee, an unpaid vendor, mechanic,
artisan, or other lienholders, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional amounts due to
Borrower from any Customer relating to the Receivables; (iv) other property,
including warranty claims, relating to any goods securing this Agreement; (v)
all of Borrower's contract rights, rights of payment which have been earned
under a contract right, instruments, documents, chattel paper, warehouse
receipts, deposit accounts, money, securities and investment property; (vi) if
and when obtained by Borrower, all real and personal property of third parties
in which Borrower has been granted a Lien or security interest as security for
the payment or enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which Borrower has
expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and Borrower;
(h) all of Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by Borrower or in which it has an interest), computer programs,
tapes, disks and documents relating to (a), (b), (c), (d), (e), (f) or (g); and
(i) all proceeds and products of (a), (b), (c), (d), (e), (f), (g)
and (h) in whatever form, including: cash, deposit accounts (whether or not
comprised solely of proceeds), certificates of deposit, insurance proceeds
(including hazard, flood and credit insurance), negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and tort claim
proceeds.
"Collateral Assignment of Contract Rights" shall mean that certain
Assignment of Sums Due and to Become Due and Collateral Assignment of Rights
Under Sale Documents to be executed by Borrower in favor of Agent and consented
to by Faulkner on or before the Closing Date and by which Borrower shall
collaterally assign and grant a Lien to Agent, for its benefit and the ratable
benefit of Lenders, as security for the Obligations, upon all of Borrower's
right, title and interest in and to the Louisville Sales Contract.
"Commitment Percentage" shall mean, on any date for any Lender, the
percentage set forth opposite such Lender's name on the signature pages hereof
or on the signature page of any Commitment Transfer Supplement by which it
became a Lender, as modified from time to time pursuant to the terms of this
Agreement or to give effect to any applicable Commitment Transfer Supplement
executed by such Lender and by which it shall transfer a portion of its
commitments hereunder to a Purchasing Lender.
"Commitment Transfer Supplement" shall mean a document in the form of
Exhibit B hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Compliance Certificate" shall mean a compliance certificate, in the
form attached hereto as Exhibit C, to be signed by the chief financial officer
or treasurer of Borrower, which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists,
- 7 -
<PAGE>
or if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrower with respect to such default.
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on Borrower's
business, including all consents required by Applicable Law.
"Consigned Inventory" shall mean Inventory of Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.
"Consolidated Net Worth" shall mean, on any date of determination
thereof, the amount that would be shown on a consolidated balance sheet of
Borrower on such date as shareholders' equity.
"Consolidated Total Assets" shall have the meaning ascribed to such
term in the Public Notes Indenture as in effect on the date hereof.
"Consolidated Total Assets Formula Amount" shall mean, on any date of
determination thereof, an amount equal to the sum of (a) $42,000,000 plus (b)
five percent (5%) of Borrower's Consolidated Total Assets on such date.
"Contingent Liability" shall mean any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection or in such Person's
Ordinary Course of Business), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any limitation set
forth therein) be deemed to be the outstanding principal amount (or maximum
principal amount, if larger) of the Indebtedness or other liability guaranteed
thereby.
"Control of a Person" or "control of a Person" shall mean the power,
direct or indirect, (x) to vote 5% or more of the Equity Interests having
ordinary voting power for the election of directors of such Person or the
individuals performing similar functions for any such Person, or (y) to direct
or cause the direction of the management and policies of such Person whether by
contract or otherwise.
"Contract Rate" shall mean, as applicable, the Revolving Interest Rate
or the Term Loan Rate.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.
"Currency Agreement" shall mean any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement to which Borrower is a party.
- 8 -
<PAGE>
"Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower pursuant
to which Borrower is to deliver any personal property or perform any services.
"Debt Payments" shall mean, for any period, the sum of (a) the total
cash interest expense of Borrower for such period, plus (b) the aggregate of all
scheduled principal payments on Indebtedness of Borrower, including Capitalized
Lease Obligations, during such period which, in accordance with GAAP, would be
classified as long-term debt.
"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
"Defaulting Lender" shall have the meaning set forth in Section 2.15(a)
hereof.
"Depository Accounts" shall have the meaning set forth in Section
4.15(h) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Dollar Equivalent" shall mean, with respect to any monetary amount in
a currency other than Dollars, at any time for the determination thereof, the
amount of Dollars obtained by converting such foreign currency involved in such
computation and into Dollars at the spot rate for the purchase of Dollars with
the applicable foreign currency as quoted by Agent at approximately 11:00 a.m.
on the day of determination thereof specified herein or, if the day of
determination thereof is not otherwise specified herein, on the date two
applicable Business Days prior to such determination.
"Domestic Rate Loan" shall mean any Advance that bears interest based
upon the Alternate Base Rate.
"Earnings Before Interest and Taxes" shall mean for any period the sum
of (i) net income (or loss) of Borrower for such period (excluding extraordinary
gains), plus (ii) all interest expense of Borrower for such period, plus (iii)
all charges against income of Borrower for such period for federal, state and
local taxes.
"EBITDA" shall mean for any period, the sum, for Borrower, of (i)
Earnings Before Interest and Taxes for such period, plus (ii) depreciation
expenses for such period, plus (iii) amortization expenses for such period.
"Eligible Inventory" shall mean and include, with respect to Borrower,
all Inventory of Borrower (excluding work-in-process and packaging materials),
which is not, in Agent's opinion, obsolete, slow moving or unmerchantable and
which Agent, in its Permitted Discretion, shall not deem to be ineligible for
lending purposes, based on such considerations as Agent may from time to time
deem to be appropriate, including whether the Inventory is subject to a
perfected, first priority security interest in favor of Agent, whether the
Inventory is subject to any other Lien that is not a Permitted Encumbrance, and
whether the Inventory conforms to all standards imposed by any Governmental Body
that has regulatory authority over such goods
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<PAGE>
or the use or sale thereof. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if it does not meet all standards imposed
by any Governmental Body; is in transit, is located outside the continental
United States or at a location that is not otherwise in compliance with this
Agreement, or constitutes Consigned Inventory; is the subject of an Intellectual
Property Claim; is subject to a License or other agreement that limits,
conditions or restricts Borrower's or Agent's right to sell or otherwise dispose
of such Inventory, unless Agent is a party to a Licensor/Agent Agreement with
the Licensor under such License Agreement; is situated at a location not owned
by Borrower unless the owner or occupier of such location has executed in favor
of Agent a Lien Waiver Agreement.
"Eligible Receivables" shall mean and include with respect to Borrower,
each Receivable of Borrower arising in Borrower's Ordinary Course of Business
and which Agent, in its Permitted Discretion, shall deem to be an Eligible
Receivable, based on such considerations as Agent may from time to time deem
appropriate. A Receivable shall not be deemed eligible unless such Receivable is
subject to Agent's first priority perfected security interest and no other Lien
(other than Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence satisfactory to Agent. In addition, no Receivable shall be
an Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower;
(b) it is due or unpaid either (i) more than seventy-five (75) days
after the original due date or (ii) one hundred thirty-five (135) days after the
original invoice date;
(c) fifty percent (50%) or more of the Receivables from such Customer
are not deemed Eligible Receivables hereunder. Such percentage may, in Agent's
Permitted Discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is
filed against it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside Canada or the continental United
States of America, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its Permitted Discretion;
(g) the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;
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<PAGE>
(h) Agent believes, in its Permitted Discretion, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless Borrower assigns
its right to payment of such Receivable to Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C.
Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes
or ordinances;
(j) the goods giving rise to such Receivable have not been shipped and
delivered to and accepted by the Customer or the services giving rise to such
Receivable have not been performed by Borrower and accepted by the Customer or
the Receivable otherwise does not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit determined by
Agent, in its Permitted Discretion, to the extent such Receivable exceeds such
limit;
(l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim, to the extent of such offset, deduction, defense,
dispute or counterclaim; the Customer is also a creditor or supplier of
Borrower, to the extent of the amount owed to such creditor or supplier by
Borrower; or the Receivable is contingent in any respect or for any reason;
(m) Borrower has made any agreement with any Customer for any deduction
therefrom, except for discounts or allowances made in Borrower's Ordinary Course
of Business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;
(n) shipment of the merchandise or the rendition of services has not
been completed in accordance with the agreements between Borrower and the
Customer;
(o) any return, rejection or repossession of the merchandise has
occurred;
(p) such Receivable is not payable to Borrower; or
(q) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Environmental Agreement" shall mean that certain Agreement Regarding
Environmental Matters dated on or about the Closing Date by Borrower in favor of
Agent and Lenders pursuant to which Borrower shall, among other things,
indemnify Agent and Lenders from liabilities arising under Environmental Laws.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances, including CERCLA and RCRA, and the rules, regulations, policies,
guidelines, interpretations, decisions, orders and directives of any
Governmental Body with respect thereto.
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<PAGE>
"Equipment" shall mean and include, as to Borrower, all of Borrower's
goods (other than Inventory) whether now owned or hereafter acquired and
wherever located, including all equipment, machinery, apparatus, motor vehicles,
fittings, furniture, furnishings, fixtures, parts and accessories, and all
replacements and substitutions therefor or accessions thereto.
"Equity Interest" shall mean the interest of (i) a shareholder in a
corporation, (ii) a partner (whether general or limited) in a partnership
(whether general, limited or limited liability), (iii) a member in a limited
liability company, or (iv) any other Person having any other form of equity
security or ownership interest.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"Euro" shall mean the currency of the participating countries of the
European Union (Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, and Spain, which are 11 of the 15 member
countries of the European Union that established fixed conversion rates between
their existing sovereign currencies, now called Legacy Currencies, and the Euro)
that adopted a single currency in accordance with the Maastricht Treaty.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum determined
by PNC by dividing (the resulting quotient rounded upwards, if necessary, to the
nearest 1/100th of 1% per annum) (i) the rate of interest determined by PNC in
accordance with its usual procedures (which determination shall be conclusive
absent manifest error) to be the eurodollar rate two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such
Eurodollar Rate Loan and having a borrowing date and a maturity comparable to
such Interest Period by (ii) a number equal to 1.00 minus the Reserve
Percentage.
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Event of Default" shall mean the occurrence of any of the events set
forth in Section 10 hereof.
"Faulkner" shall mean Faulkner Hinton & Associations, Inc., a Kentucky
corporation.
"Federal Funds Rate" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three (3) Federal funds brokers of recognized
standing selected by PNC.
"Fee Letter" shall mean that certain letter agreement dated the date
hereof between Borrower and Agent.
"Fiscal Quarter " shall mean one of the four fiscal quarters of
Borrower and its Subsidiaries for accounting and tax purposes, each of which is
a thirteen (13) week period, except, in the case of any Fiscal Year of
fifty-three (53) weeks, the fourteen (14) week period occurring at the end
thereof.
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<PAGE>
"Fiscal Year" shall mean the fiscal year of Borrower and its
Subsidiaries for accounting and tax purposes, which is the period of fifty-two
(52) (or, if applicable fifty-three (53)) consecutive weeks ending on the
Saturday closest to June 30 of each year; and references to a Fiscal Year with a
number corresponding to a calendar year (e.g., "Fiscal Year 1999") refer to the
Fiscal Year ending on the Saturday closest to June 30 in that year.
"Fixed Asset Collateral" shall have the meaning ascribed to it in
Section 4.11(a).
"Fixed Charge Coverage Ratio" shall mean for Borrower, with respect to
any fiscal period, the ratio of Borrower's (a) EBITDA (excluding Approved
Charges) minus Unfunded Capital Expenditures (excluding Approved Computer
Expenditures) minus Cash Taxes, to (b) Debt Payments, in each case calculated
for the fiscal period in question.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" shall mean and include, as to Borrower, all of
Borrower's general intangibles, whether now owned or hereafter acquired,
including all choses in action, causes of action, corporate or other business
records, inventions, designs, patents, patent applications, equipment
formulations, manufacturing procedures, quality control procedures, trademarks,
service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to Borrower to secure payment of any of the
Receivables by a Customer, all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state or
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" shall mean each Person who may at any time guarantee
payment or performance of the whole or any part of the Obligations, and
"Guarantors" means collectively all such Persons.
"Guarantor Security Documents" shall mean any and all documents,
instruments, pledges, powers of attorney, consents, and all other writings
heretofore, now or hereafter executed by any Guarantor and delivered to Agent as
security for the Obligations or any Guarantor's obligations under a Guaranty.
"Guaranty" shall mean any guaranty of the Obligations of Borrower
executed by a Guarantor in favor of Agent for its benefit and the ratable
benefit of Lenders.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act (49 U.S.C. Sections 1801, et seq.), RCRA, or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
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<PAGE>
"Hazardous Wastes" shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable federal,
state and local laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Holdings" shall mean AAF-McQuay Group Inc., a Delaware corporation.
"IDB Bonds" shall mean, collectively, (i) the $1,920,000 The Industrial
Development Board of the City of Scottsboro (Alabama) Industrial Development
Refunding Revenue Bonds, Series 1999 (AAF-McQuay Inc. Project), (ii) the
$1,000,000 City of Plymouth, Minnesota Industrial Development Revenue Bonds
(McQuay-Perfex Project) Series 1977, (iii) $3,300,000 City of Plymouth,
Minnesota Industrial Development Revenue Bonds (McQuay-Perfex Project) Series
1979, (iv) the $2,500,000 City of Columbia, Missouri Industrial Revenue Bonds,
Series July 12, 1979 (American Air Filter Company, Inc. Project), (v) $4,000,000
City of Fayetteville, Arkansas Industrial Development Revenue Bonds (American
Air Filter Project), Series 1978, and (vi) the $2,500,000 loan to Borrower from
the New York State Urban Development Corporation.
"IDB Documents" shall mean, collectively, the indentures and other
documents evidencing or securing the IDB Bonds.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Intellectual Property" shall mean property constituting under any
Applicable Law a patent, patent application, copyright, trademark, service mark,
tradename, mask work, trade secret or license or other right to use any of the
foregoing.
"Intellectual Property Claim" shall mean the assertion by any Person of
a claim (whether asserted in writing, by action, suit or proceeding or
otherwise) that Borrower's ownership, use, marketing, sale or distribution of
any Inventory, Equipment, Intellectual Property or other property or asset is
violative of any ownership of or right to use any Intellectual Property of such
Person.
"Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.16(a).
"Interest Rate Agreement" shall mean any forward contracts, future
contracts, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate change agreement or other similar agreement
or arrangement designed to protect Borrower against fluctuations in interest
rates.
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<PAGE>
"Inventory" shall mean and include, as to Borrower, all of Borrower's
now owned or hereafter acquired goods, merchandise and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Investment" shall mean, with respect to any Person, (a) any loan or
advance made by such Person to any other Person (excluding deposits with
financial institutions available for withdrawal upon demand, prepaid expenses,
accounts receivable, commissions, travel and similar advances to officers and
employees and similar items made or incurred in Borrower's Ordinary Course of
Business), (b) any Contingent Liability of such Person, and (c) any Equity
Interest or similar interest held by such Person in any other Person. The amount
of any Investment shall be the original principal or capital amount thereof
minus all returns of principal or equity thereon (and without adjustment by
reason of the financial condition of such Person) and shall, if made by the
transfer or exchange of property other than cash, be deemed to have been made in
the original principal or capital amount equal to the fair market value of such
property.
"Issue Date" shall mean February 15, 1996.
"Issuer" shall mean any Person who issues a Letter of Credit and/or
accepts a draft pursuant to the terms hereof.
"Kentucky Reserve" shall mean an amount (which may not be less than
zero (0)) equal to the remainder of $1,500,000 minus the amount of proceeds from
the Louisville Sale received by Agent and applied to the Term Loan.
"LC Outstandings" shall mean, on any date of determination thereof, an
amount (in Dollars) equal to the sum of (i) all amounts then due and payable by
Borrower to the Issuer of any Letter of Credit, whether by reason of the
issuance of such Letter of Credit or any payment by the Issuer thereunder, plus
(ii) the aggregate undrawn amount of all Letters of Credit then outstanding or
to be issued by an Issuer pursuant to a Letter of Credit Application theretofore
submitted to such Issuer.
"Lender" and "Lenders" shall have the meaning ascribed to such term in
the preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Letter of Credit Application" shall have the meaning ascribed to it in
Section 2.9(a).
"Letter of Credit Fees" shall have the meaning set forth in Section
3.2.
"Letters of Credit" shall have the meaning set forth in Section 2.8.
"License Agreement" shall mean any agreement between Borrower and a
Licensor pursuant to which Borrower is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of Borrower.
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<PAGE>
"Licensor" shall mean any Person from whom Borrower obtains the right
to use (whether on an exclusive or non-exclusive basis) any Intellectual
Property in connection with Borrower's manufacture, marketing, sale or other
distribution of any Inventory.
"Licensor/Agent Agreement" shall mean an agreement between Agent and a
Licensor, in form and content satisfactory to Agent, by which Agent is given the
unqualified right, vis-a-vis such Licensor, to enforce Agent's Liens with
respect to and to dispose of Borrower's Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of Borrower's default
under Borrower's License Agreement with such Licensor.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or preference, priority or other security agreement or preferential
arrangement held or asserted in respect of any asset of any kind or nature
whatsoever, including any conditional sale or other title retention agreement,
any lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement under the UCC
or comparable law of any jurisdiction.
"Lien Perfection Documents" shall mean all instruments, agreements,
filings and recordings necessary or, in Agent's reasonable determination,
desirable to perfect, maintain or continue the perfection of, or achieve or
maintain the first priority status of, any Lien granted to Agent pursuant to any
of the Loan Documents by Borrower or Guarantor, including UCC-1 financing
statements, pledges, assignments, hypothecations, registrations of pledge,
control agreements, notifications, bailment agreements, landlord or mortgagee
waivers, processor waivers, intercreditor agreements, subordination agreements,
chattel mortgage filings or similar instruments, agreements or documents.
"Lien Waiver Agreement" shall mean an agreement which is executed in
favor of Agent by a Person who owns or occupies premises at which any Collateral
may be located from time to time and by which such Person shall waive any Lien
that such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises.
"Limited Liens" shall mean Liens upon any asset of Borrower or a
Subsidiary of Borrower that is not permitted to exist under any provision of the
Public Notes Indenture as in effect on the date hereof except Section 4.10(l)
thereof.
"Loan Documents" shall mean this Agreement and all of the Other
Documents.
"Louisville Property" shall mean the real property and improvements
thereon owned by Borrower and located at 215 Central Avenue, Louisville,
Kentucky 40208.
"Louisville Sale" shall mean the sale by Borrower of the Louisville
Property to Faulkner pursuant to the Louisville Sale Contract.
"Louisville Sale Contract" shall mean that certain Contract for the
Purchase and Sale of Real Estate between Borrower and Faulkner, dated March 2,
1999.
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<PAGE>
"Material Adverse Effect" shall mean a material adverse effect upon (a)
the condition, operations, assets, business or prospects of the applicable
Person or Persons, taken as a whole, (b) Borrower's or any Guarantor's ability
to pay the Obligations in accordance with the terms thereof, (c) the value of
the Collateral, or Agent's Liens on the Collateral or the priority of any such
Lien or (d) the practical realization of the benefits of Agent's and each
Lender's rights and remedies under this Agreement and the Other Documents.
"Material Contract" shall mean an agreement to which Borrower or a
Guarantor is a party (other than the Loan Documents) (i) which is deemed a
material contract as provided in Section (b)(10) of Item 601 of Regulation S-K
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, or (ii) for which breach, termination, cancellation, nonperformance or
failure to renew could reasonably be expected to have a Material Adverse Effect,
including the Public Notes Indenture.
"Maximum Revolving A Amount" shall mean, on any date, the least of (a)
the Revolving Credit A Cap, (b) the remainder of the Working Capital Formula
Amount on such date minus all Working Capital Indebtedness on such date, or (c)
the remainder of the Consolidated Total Asset Formula Amount on such date minus
the amount of Indebtedness (other than the Obligations) secured by, or
purportedly secured by, Limited Liens on such date.
"Maximum Revolving Amount" shall mean the sum of the Maximum Revolving
A Amount and the Maximum Revolving B Amount.
"Maximum Revolving B Amount" shall mean, on any date, the lesser of (a)
the Revolving Credit B Cap or (b) the remainder of the Working Capital Formula
Amount on such date minus the sum of (i) all Working Capital Indebtedness on
such date plus the Revolving Credit A Cap.
"Monthly Advances" shall have the meaning set forth in Section 3.1
hereof.
"Money Borrowed" shall mean, as applied to any Person, (i) Indebtedness
arising from the lending of money by any other Person to such Person; (ii)
Indebtedness, whether or not in any such case arising from the lending of money
by another Person to such Person, (A) which is represented by notes payable or
drafts accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments, or (C)
upon which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for property; (iii)
Indebtedness that constitutes a Capitalized Lease Obligation; (iv) reimbursement
obligations with respect to letters of credit or guaranties of letters of
credit; and (v) Indebtedness of such Person under any guaranty of obligations
that would constitute Indebtedness for Money Borrowed under clauses (i) through
(iv) hereof, if owed directly by such Person.
"Mortgage" shall mean a mortgage, deed of trust or similar document
with respect to any Real Property securing any or all of the Obligations.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Net Amount" shall mean, with reference to Eligible Receivables, the
face amount of such Eligible Receivables on any date, less any and all returns,
rebates, discounts (which may, at Agent's option, be calculated on shortest
terms), credits, allowances or Charges (including sales, excise or other taxes)
at any
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<PAGE>
time issued, owing, claimed by Customers, granted, outstanding or payable in
connection with, or any interest accrued on the amount of, such Eligible
Receivables at such date.
"Net Asset Sale Proceeds" shall have the meaning ascribed to such term
in the Public Notes Indenture as in effect on the date hereof.
"Net Income" shall mean, as applied to any Person, the net income (or
net loss) of such Person for the period in question after giving effect to
deduction of or provision for all operating expenses, all taxes and reserves
(including reserves for deferred taxes) and all other proper deductions, all
determined in accordance with GAAP.
"New York Property" shall mean the real property of Borrower located at
4900 Technology Parkway in Auburn, New York.
"New York Reserve" shall mean at all times prior to Borrower's
satisfaction of the requirement set forth in Section 6.15(a) hereof an amount
equal to $2,500,000.
"Notes" shall mean collectively, the Term Notes and the Revolving
Credit Notes.
"Obligations" shall mean and include the following, in each case,
whether now in existence or hereafter arising and howsoever the same may be
evidenced, (i) the principal of, and interest and premium, if any, on the
Advances; (ii) all Indebtedness and other obligations of Borrower to any Lender
under any Interest Rate Agreement, currency or equity swap, future, option, or
other similar agreement or arrangement entered into with the consent of the
Agent; (iii) all obligations of Borrower with respect to Letters of Credit; (iv)
all other Indebtedness, covenants and duties now or at any time or times
hereafter owing by Borrower to Agent or any Lender arising under or pursuant to
this Agreement or any of the other Loan Documents, whether evidenced by any note
or other writing, whether arising from any extension of credit, opening of a
letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect, absolute or contingent, due or to become due,
primary or secondary, or joint or several, including all interest, charges,
expenses, fees or other sums chargeable to Borrower or any Guarantor hereunder
or under any of the other Loan Documents; and (v) in the case of PNC and its
Affiliates, any indebtedness, liabilities, obligations, covenants and duties
arising in connection with any banking or related transactions, services or
functions provided to Borrower or Guarantor in connection with any conduct of
Borrower's or Guarantor's business (excluding extensions of credit giving rise
to any Indebtedness for Money Borrowed not related to this Agreement or any
other Loan Documents).
"Ordinary Course of Business" shall mean, with respect to any Person,
the ordinary course of such Person's business as conducted on the Closing Date.
"Organization Documents" shall mean, with respect to any Person, its
charter, certificate or articles of incorporation, bylaws, articles of
organization, operating agreement, members' agreement, partnership agreement,
voting trust or similar agreement or instrument governing the formation or
operation of such Person.
"Other Documents" shall mean the Notes, the Lien Perfection Documents,
each Interest Rate Agreement, each Guaranty, each Mortgage, the Guarantor
Security Documents, the Trademark Security Agreement, the Patent Security
Agreement, the Pledge Agreement, the Environmental Agreement, the
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<PAGE>
Collateral Assignment of Contract Rights, each Lien Waiver Agreement, each
Licensor/Agent Agreement, and any and all other agreements, instruments and
documents, including guaranties, pledges, powers of attorney, consents, and all
other writings heretofore, now or hereafter executed by Borrower or any
Guarantor and/or delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"Out-of-Formula Condition" shall have the meaning set forth in Section
2.1(c) hereof.
"Out-of-Formula Loan" shall mean a Revolving Advance made when an
Out-of-Formula Condition exists or the amount of any Revolving Advance which,
when funded, results in an Out-of-Formula Condition.
"OYL" shall mean O.Y.L. Industries Berhad, a corporation organized
under the laws of Malaysia.
"Parent" shall mean a corporation or other entity owning, directly or
indirectly at least one hundred percent (100%) of the shares of stock or other
Equity Interests having ordinary voting power to elect the directors of
Borrower.
"Participant" shall have the meaning set forth in Section 15.3(b).
"Patent Security Agreement" shall mean the Patent Security Agreement to
be executed by Borrower in favor of Agent on or before the Closing Date and by
which Borrower shall collaterally assign and grant a Lien to Agent, for its
benefit and for the ratable benefit of Lenders, as security for the Obligations,
upon all of Borrower's right, title and interest in and to all of its patents.
"Payment Office" shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrower and to each Lender to be the
Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Contingent Liability" shall mean Contingent Liabilities
arising from endorsements for collection or deposit in Borrower's Ordinary
Course of Business; Contingent Liabilities arising from Interest Rate Agreements
and Currency Contracts entered into in Borrower's Ordinary Course of Business
pursuant to this Agreement or with Agent's prior written consent; Contingent
Liabilities of Borrower existing as of the Closing Date, including extensions
and renewals thereof that do not increase the amount of such Contingent
Liabilities as of the date of such extension or renewal; Contingent Liabilities
incurred in Borrower's Ordinary Course of Business with respect to surety bonds,
appeal bonds, performance bonds and other similar obligations; Contingent
Liabilities arising under indemnity agreements to title insurers to cause such
title insurers to issue to Agent title insurance policies; Contingent
Liabilities with respect to customary indemnification obligations in favor of
purchasers in connection with dispositions of Equipment permitted under Section
4.3 hereof; and other Contingent Liabilities not to exceed $2,000,000 in the
aggregate at any time.
"Permitted Currency" shall mean U.S. Dollars ($), Japanese Yen (Y),
Pound Sterling (pound), the Euro, and such other currencies of major
industrialized nations as shall be designated by Borrower and acceptable to
Agent.
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"Permitted Discretion" shall mean Agent's reasonable and good faith
judgment based upon any factor which Agent believes in good faith could (a)
adversely affect the value of any Collateral, the enforceability or priority of
Agent's Liens or the amount that Lenders would be likely to receive upon a
liquidation of the Collateral; (b) suggest that any report of Collateral or
financial information is incomplete, inaccurate or misleading in any material
respect; (c) reasonably be expected to create a Default or Event of Default or
increase the likelihood of an insolvency or bankruptcy proceeding or (d)
adversely affect the ability of Borrower or Guarantors to repay the Obligations
when due. In exercising such judgment with respect to matters relating to the
determination of Eligible Inventory and Eligible Receivables, changes in advance
rates or the imposition, increase or reduction of reserves, Agent may reasonably
take into account factors included in the definitions of Eligible Inventory and
Eligible Receivables, as well as changes in concentration of risk of
Receivables, changes in collection history and dilution, changes in demand for
and pricing of Inventory, and other changes that may tend to increase the credit
risk of lending to Borrower on the security of Inventory or Receivables. The
burden of establishing lack of good faith shall be on Borrower.
"Permitted Dispositions" shall mean each of the following: (i) the
Louisville Sale and (ii) the sale by Borrower of assets used in its service
operation in New York, provided that the fair market value of such assets do not
exceed, in aggregate, $1,500,000.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for the
benefit of Agent and Lenders; (b) Liens for Charges not delinquent or being
Properly Contested, but only if the Lien shall have no effect on the priority of
the Liens in favor of Agent or the value of the assets in which Agent has such a
Lien and a stay of enforcement of any such Lien shall be in effect; (c) Liens
disclosed in the financial statements referred to in Section 5.5, the existence
of which Agent has consented to in writing; (d) deposits or pledges to secure
obligations under worker's compensation, social security or similar laws, or
under unemployment insurance; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in Borrower's Ordinary Course of Business; (f) judgment Liens that have
been stayed or bonded and mechanics', workers', materialmen's or other like
Liens arising in Borrower's Ordinary Course of Business with respect to
obligations which are not due or which are being Properly Contested; (g) Liens
securing Permitted Purchase Money Indebtedness; and (h) Liens disclosed on
Schedule 1.2.
"Permitted Investments" shall mean Investments permitted under Section
7.4 hereof.
"Permitted Purchase Money Indebtedness" shall mean Purchase Money
Indebtedness of Borrower which is incurred after the date of this Agreement and
which is secured by no Lien or only by a Purchase Money Lien, provided the
aggregate amount of Purchase Money Indebtedness outstanding at any time may not
exceed $2,000,000. For the purposes of this definition, the principal amount of
any Purchase Money Indebtedness consisting of capitalized leases shall be
computed as a Capitalized Lease Obligation.
"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA, maintained for employees of Borrower or any member of the
Controlled Group or any such Plan to which Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
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"Pledge Agreement" shall mean the Stock Pledge Agreement to be executed
on or before the Closing Date by Borrower in favor of Agent and pursuant to
which Borrower has pledged to Agent, for its benefit and the ratable benefit of
Lenders, all of the Pledged Stock as security for the Obligations.
"Pledged Foreign Stock" shall mean sixty percent (60%) of the Equity
Interests of AAF-McQuay Canada Inc., a corporation organized under the laws of
Canada, and sixty-five percent (65%) of the Equity Interests of J&E Hall
Limited, a corporation organized under the laws of the United Kingdom.
"Pledged Stock" shall mean all of the following which are owned by
Borrower: (i) all of the issued and outstanding Equity Interests of any
Subsidiary of Borrower (other than AAF International) that is organized under
the laws of any state of the United States or the District of Columbia, (ii)
sixty-five percent (65%) of the issued and outstanding Equity Interests of AAF
International, and (iii) all Pledged Foreign Stock.
"Properly Contested" shall mean in the case of any Indebtedness of
Borrower or any Guarantor (including any Charges) that is not paid as and when
due or payable by reason of Borrower's or any Guarantor's bona fide dispute
concerning its liability to pay same or concerning the amount thereof, (i) such
Indebtedness is being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (ii) Borrower or
Guarantor has established appropriate reserves as shall be required in
conformity with GAAP; (iii) the non-payment of such Indebtedness will not have a
Material Adverse Effect and will not result in a forfeiture of any assets of
Borrower or Guarantor; (iv) no Lien is imposed upon any of Borrower's or any
Guarantor's assets with respect to such Indebtedness unless such Lien is at all
times junior and subordinate in priority to the Liens in favor of Agent (except
only with respect to property taxes that have priority as a matter of applicable
state law) and enforcement of such Lien is stayed during the period prior to the
final resolution or disposition of such dispute; (v) if the Indebtedness results
from, or is determined by the entry, rendition or issuance against Borrower or
any Guarantor or any of its assets, of a judgment, writ, order or decree,
execution on such judgment, writ, order or decree is stayed pending a timely
appeal or other judicial review; and (vi) if such contest is abandoned, settled
or determined adversely (in whole or in part) to Borrower or Guarantor, Borrower
or Guarantor forthwith pays such Indebtedness and all penalties, interest and
other amounts due in connection therewith.
"Public Notes" shall mean those certain 8 7/8% Senior Notes Due 2003
issued by Borrower on February 15, 1996 in the original principal amount of
$125,000,000, which were issued pursuant to the Public Notes Indenture.
"Public Notes Documents" shall mean the Public Notes Indenture, the
Public Notes and any and all other agreements, instruments and documents
executed in respect of the transactions contemplated by the Public Notes
Indenture.
"Public Notes Indenture" means the Indenture dated as of February 14,
1996, between Borrower and IBJ Schroder Bank & Trust company, as trustee,
executed and delivered in connection with the public offering of the Public
Notes pursuant to an effective registration under the Securities Act of 1933.
"Purchase Money Indebtedness" shall mean and include (i) Indebtedness
(other than the Obligations) of Borrower for the payment of all or any part of
the purchase price of any Equipment, (ii) any Indebtedness (other than the
Obligations) of Borrower incurred at the time of or within ten (10) days prior
to or after the acquisition of any Equipment for the purpose of financing all or
any part of the purchase price thereof
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(whether by means of a loan agreement, capitalized lease or otherwise), and
(iii) any renewals, extensions or refinancings (but not any increases in the
principal amounts) thereof outstanding at the time.
"Purchase Money Lien" shall mean a Lien upon Equipment which secures
Purchase Money Indebtedness, but only if such Lien shall at all times be
confined solely to the Equipment acquired through the incurrence of such
Purchase Money Indebtedness and such Lien constitutes a purchase money security
interest under the UCC.
"Purchasing Lender" shall mean a Lender or a U.S. based Affiliate of a
Lender; a commercial bank organized under the laws of the United States or any
state and having total assets in excess of $5,000,000,000 or an asset-based
lending Affiliate of any such bank; or any other financial institution that is
acceptable to Agent and Lenders and that in the ordinary course of its business
extends credit of the type evidenced by the Notes and has total assets in excess
of $1,000,000,000.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et seq.
"Real Property" shall mean all of Borrower's right, title and interest
in and to the owned and leased premises identified on Schedule 4.19 hereto.
"Receivables" shall mean and include all of Borrower's accounts,
contract rights, instruments (including those evidencing Indebtedness owed to
Borrower by any of its Affiliates), documents, chattel paper, drafts,
acceptances, general intangibles relating to accounts, and all other forms of
obligations owing to Borrower arising out of or in connection with the sale or
lease of Inventory or other goods or the rendition of services, all guarantees
and other security therefor, whether secured or unsecured, now existing or
hereafter created, and whether or not specifically sold or assigned to Agent
hereunder.
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.
"Reportable Event" shall mean a reportable event described in Section
4043(c) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least sixty-six and
two-thirds percent (66 2/3%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding at least sixty-six and two-thirds
percent (66 2/3%) of the Commitment Percentages; provided, however, that if
any Lender shall be a Defaulting Lender, then, for so long as such breach
continues, the term "Required Lenders" shall mean Lenders (excluding each
Defaulting Lender) holding at least sixty-six and two-thirds percent
(66 2/3%) of the Advances (excluding Advances held by each Defaulting Lender),
and, if no Advances are outstanding, at least sixty-six and two-thirds
percent (66 2/3%) of the Commitment Percentages (excluding the Commitment
Percentages held by a Defaulting Lender).
"Reserve Percentage" shall mean the maximum effective percentage in
effect on any day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including
supplemental, marginal and emergency reserve requirements) with respect to
euroccurency funding.
"Restricted Indebtedness" shall mean any Indebtedness of Borrower or
any Subsidiary of Borrower if and to the extent that the incurrence of any such
Indebtedness is violative of the Public Notes Indenture
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or any of the other Public Notes Documents; provided, however, that in no event
shall any of the Obligations be deemed to be Restricted Indebtedness.
"Restricted Lien" shall mean any Lien upon any property of Borrower or
any Subsidiary of Borrower if (i) such Lien is a Limited Lien or (ii) the
existence of such Lien is prohibited by the Public Notes Indenture or any of the
other Public Notes Documents; provided, however, that in no event shall any Lien
granted in favor of Agent pursuant to any Loan Document be deemed a Restricted
Lien.
"Revolving Advances" shall mean all Advances made hereunder, excluding
Letters of Credit and the Term Loan but including the Revolving A Advances and
the Revolving B Advances.
"Revolving A Advances" shall mean Advances made pursuant to Section
2.1(a) hereof.
"Revolving B Advances" shall mean Advances made pursuant to Section
2.1(b) hereof.
"Revolving Credit A Cap" shall mean $70,000,000.
"Revolving Credit A Notes" shall mean, collectively, the promissory
notes referred to in Section 2.1(a) hereof.
"Revolving Credit B Cap" shall mean $20,000,000.
"Revolving Credit B Notes" shall mean, collectively, the promissory
notes referred to in Section 2.1(b) hereof.
"Revolving Credit Notes" shall mean, collectively, the Revolving Credit
A Notes and the Revolving Credit B Notes.
"Revolving Interest Rate" shall mean an interest rate per annum equal
to (a) the sum of the Alternate Base Rate plus the Applicable Margin with
respect to Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus the
Applicable Margin with respect to Eurodollar Rate Loans.
"Scotiabank Credit Agreement" shall mean that certain Credit Agreement
dated as of July 21, 1994, among Borrower, various financial institutions as
lenders, The Bank of Nova Scotia as administrative agent, and The Bank of Nova
Scotia and Bank Bumiputra Malaysia Berhad, New York Branch as managing agents.
"Senior Officer" shall mean the chairman of the board of directors, the
president, the chief financial officer, the treasurer of, or in-house legal
counsel to, Borrower.
"Service Inventory" shall mean service and replacement parts Inventory
used by Borrower's "McQuay" division.
"Settlement Date" shall mean the Closing Date and thereafter Thursday
of each week unless such day is not a Business Day in which case it shall be the
next succeeding Business Day.
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"Solvent" shall mean, with respect to any Person, such Person (i) owns
property whose fair saleable value is greater than the amount required to pay
all of such Person's Indebtedness (including contingent), (ii) is able to pay
all of its Indebtedness as such Indebtedness matures (whether by payment in
cash, from available funding sources, through refinancing of Indebtedness or
otherwise), (iii) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage,
and (iv) is not "insolvent" within the meaning of Section 101(32) of the
Bankruptcy Code.
"Subsidiary" shall mean a corporation or other entity of whose shares
of stock or other Equity Interests having ordinary voting power (other than
stock or other Equity Interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Term Loan" shall mean the Advances made pursuant to Section 2.3
hereof.
"Term Loan Rate" shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus the Applicable Margin with respect to
Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus the Applicable
Margin with respect to Eurodollar Rate Loans.
"Term Notes" shall mean, collectively, the promissory notes described
in Section 2.3 hereof.
"Termination Event" shall mean (i) a Reportable Event with respect to
any Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any member of
the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. ss. 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic Substance" includes
asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Trademark Security Agreement" shall mean the Trademark Security
Agreement to be executed by Borrower in favor of Agent on or before the Closing
Date and by which Borrower shall collaterally assign and grant a Lien to Agent,
for its benefit and for the ratable benefit of Lenders, as security for the
Obligations, upon all of Borrower's right, title and interest in and to all of
its trademarks.
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"UCC" shall mean the Uniform Commercial Code (or any successor statute)
as adopted and in force in the State of New York or, when the laws of any other
state govern the method or manner of the perfection
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or enforcement of any security interest in any of the Collateral, the Uniform
Commercial Code (or any successor statute) of such state.
"Undrawn Availability" shall mean, at any date, an amount equal to (a)
the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Amount, minus
(b) the sum of (i) the outstanding amount of Advances (other than the Term
Loan), plus (ii) all amounts due and owing to Borrower's trade creditors which
are more than sixty (60) days past due outstanding beyond normal trade terms,
other than any such amounts being Properly Contested, plus (iii) fees and
expenses which have not been paid or charged to Borrower's Account and which are
owing under Section 3 hereof or the existence of and amount of which have been
communicated to Borrower by Agent.
"Unfunded Capital Expenditures" shall mean, for any period, the Capital
Expenditures of a Person not financed by the incurrence of any Indebtedness
other than an Advance hereunder.
"Upstream Payment" shall mean a payment or distribution of cash or
other property by a Subsidiary of Borrower to Borrower, whether in repayment of
Indebtedness owed by such Subsidiary to Borrower, to pay dividends on account of
Borrower's ownership of Equity Interests or otherwise.
"Value" shall mean, with reference to the value of Inventory, value
determined on the basis of the lower of cost or market of such Inventory, with
the cost thereof calculated on a first-in, first-out basis, determined in
accordance with GAAP.
"Week" shall mean the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following Tuesday.
"Working Capital Formula Amount" shall mean, with respect to Borrower
at any date of determination, the aggregate amount equal to the sum of (x)
eighty-five percent (85%) of the net book value of accounts receivables and (y)
sixty-five percent (65%) of the net book value of inventories, in each case
calculated on a consolidated basis for Borrower and its Subsidiaries in
accordance with GAAP.
"Working Capital Financing" shall mean Advances made hereunder to
Borrower for use by Borrower as working capital in Borrower's Ordinary Course of
Business.
"Working Capital Indebtedness" shall mean, at any date of
determination, the amount of all Indebtedness for Money Borrowed of Borrower
(excluding the Revolving Advances hereunder) and Borrower's Subsidiaries under
any agreement, instrument, facility or arrangement that is intended to provide
working capital financing (including any asset securitization facility involving
the sale of accounts receivable) in the ordinary course of business.
1.3 UCC TERMS. All terms used herein and defined in the UCC as adopted
in the State of New York shall have the meaning given therein unless otherwise
defined herein.
1.4 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein," "hereof," and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references
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herein to the time of day shall mean the time in East Brunswick, New Jersey.
Unless otherwise provided, all references to any instruments or agreements to
which Agent is a party, including references to any of the Other Documents,
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof. Whenever the words "including" or "include"
shall be used, such words shall be understood to mean "including, without
limitation" or "include, without limitation." A Default or Event of Default
shall be deemed to exist at all times during the period commencing on the date
that such Default or Event of Default occurs to the date on which such Default
or Event of Default is waived in writing pursuant to this Agreement or, in the
case of a Default, is cured with any period of cure expressly provided for in
this Agreement; and an Event of Default shall "continue" or be "continuing"
until such Event of Default has been waived in writing by Agent. Any Lien
referred to in this Agreement or any of the Other Documents as having been
created in favor of Agent, any agreement entered into by Agent pursuant to this
Agreement or any of the Other Documents, any payment made by or to or funds
received by Agent pursuant to or as contemplated by this Agreement or any of the
Other Documents, or any act taken or admitted to be taken by Agent, shall,
unless otherwise expressly provided, be created, entered into, made or received,
or taken or omitted, for the benefit or account of Agent and Lenders. Whenever
the phrase "to the best of Borrower's knowledge" or words of similar import
relating to the knowledge or the awareness of Borrower are used herein, such
phrase shall mean and refer to (i) the actual knowledge of a Senior Officer of
Borrower or (ii) the knowledge that a Senior Officer would have obtained if he
had engaged in a good faith and diligent performance of his duties, including
the making of such reasonable specific inquiries as may be necessary of the
officers, employees or agents of Borrower and a good faith attempt to ascertain
the existence or accuracy of the matter to which such phrase relates.
1.5 ACCOUNTING MATTERS. Unless otherwise expressly provided in this
Agreement, all terms of an accounting character shall be interpreted, all
accounting determinations under this Agreement shall be made, and all financial
statements required to be delivered under this Agreement shall be prepared in
accordance with GAAP, applied on a consistent basis with the most recent audited
financial statements of Borrower. All calculations of Capital Expenditures,
Earnings Before Interest and Taxes, EBITDA and Permitted Purchase Money
Indebtedness shall be determined without consolidation of the accounts of any
Subsidiaries or Affiliates of Borrower with the accounts of Borrower.
SECTION 2. ADVANCES, PAYMENTS
2.1 REVOLVING ADVANCES.
(a) Revolving A Advances. Subject to the terms and conditions
set forth in this Agreement, each Lender, severally and not jointly, will make
Revolving A Advances to Borrower from time to time during the Term in aggregate
amounts outstanding at any time not to exceed such Lender's Commitment
Percentage of the lesser of (x) the Maximum Revolving A Amount, or (y) an amount
equal to the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(c)
hereof ("Receivables Advance Rate"), of the Net Amount of Eligible
Receivables, plus
(ii) up to the lesser of (A) 60%, subject to the provisions of
Section 2.1(c) hereof ("Inventory Advance Rate"; the Receivables
Advance Rate and the Inventory Advance Rate shall be
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referred to collectively, as the "Advance Rates"), of the Value of the
Eligible Inventory; or (B) $30,000,000, minus
(iii) the aggregate amount of LC Outstandings (excluding any
LC Outstandings cash collateralized pursuant to Section 2.10(e)
hereof), minus
(iv) any Asset Sale Reserve, minus
(v) the amount of the New York Reserve, if any, and the
amount of the Kentucky Reserve, if any, minus
(vi) such reserves as Agent may, in the exercise of its
Permitted Discretion, deem proper and necessary from time to time.
The amount derived from the sum of (A) Sections 2.1(a)(y)(i) and (ii)
minus (B) Section 2.1 (a)(y)(iii), (iv), (v) and (vi) at any time and from time
to time shall be referred to as the "Formula Amount." The Revolving A Advances
shall be evidenced by secured promissory notes ("Revolving Credit A Notes") in
favor of each Lender in substantially the form attached hereto as Exhibit A.
(b) Revolving B Advances. Subject to the terms and conditions
set forth in this Agreement and for so long as the aggregate amount of
outstanding Revolving A Advances is equal to the Revolving Credit A Cap, each
Lender, severally and not jointly, will make Revolving B Advances to Borrower
from time to time during the Term in aggregate amounts outstanding at any time
not to exceed such Lender's Commitment Percentage of the lesser of (x) the
Maximum Revolving B Amount, or (y) an amount equal to the remainder of the
Formula Amount minus the Revolving Credit A Cap. The Revolving B Advances shall
be evidenced by secured promissory notes ("Revolving Credit B Notes") in favor
of each Lender in substantially the form attached hereto as Exhibit A-2.
(c) Discretionary Rights. The Advance Rates may be increased
or decreased by Agent at any time and from time to time in the exercise of its
Permitted Discretion. Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing the reserves may
limit or restrict Advances requested by Borrower.
(d) Out-of-Formula Loans. If the unpaid balance of Revolving
Advances outstanding at any time should exceed the Formula Amount at such time
or any other limitation set forth in this Agreement (an "Out-of-Formula
Condition"), such Revolving Advances shall nevertheless constitute Obligations
that are secured by the Collateral and entitled to all of the benefits of the
Loan Documents. Agent, in its sole and absolute discretion, may require Lenders
to forbear from requiring Borrower to cure an Out-of-Formula Condition and to
honor requests by Borrower for Out-of-Formula Loans, provided that Agent's
authority to require Lenders to honor Borrower's requests for Out-of-Formula
Loans at any time shall be limited to an amount that does not exceed ten percent
(10%) of the Formula Amount and provided that an Out-of-Formula Condition has
not continued to exist for a period consisting of more than thirty (30)
consecutive days. In determining the existence or amount of an Out-of-Formula
Condition, Agent shall be entitled to rely upon Borrowing Base Certificates
delivered to it by Borrower. Any such Out-of-Formula Loans shall be payable on
demand and shall bear interest at the Default Rate. If Lenders do make
Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have
changed the limits of Sections 2.1(a) or (b) or be obligated to honor requests
for Revolving Advances when an Out-of-Formula
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Condition exists or would result therefrom or any other limitation set forth in
this Agreement would be exceeded. Agent shall not be responsible for, and
nothing herein shall be deemed to preclude or limit, any Out-of-Formula
Condition that results for any reason relating to changes in the quantity,
quality or eligibility of Collateral or the imposition of reserves, including
Collateral believed to be eligible in fact being or becoming ineligible or the
return of uncollected checks or other items applied to reduce the Revolving
Advances made to protect or preserve Collateral.
(e) Procedure for Revolving Advances Borrowing. Except as
otherwise provided in Section 2.16 below, Borrower may notify Agent prior to
12:00 noon on a Business Day of Borrower's request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as principal
or interest hereunder, or under any of the other Loan Documents, or as fees or
other charges under this Agreement or any other agreement with Agent or Lenders,
or with respect to any other Obligation, become due, same shall be deemed a
request for a Revolving Advance as of the date such payment is due, in the
amount required to pay in full such interest, fee, charge or Obligation under
this Agreement or any other agreement with Agent or Lenders, and such request
shall be irrevocable.
2.2 DISBURSEMENT OF ADVANCE PROCEEDS. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions hereof. The proceeds of each
Revolving Advance requested by Borrower or deemed to have been requested by
Borrower under Section 2.1(d) hereof shall, with respect to requested Revolving
Advances to the extent Lenders make such Revolving Advances subject to and in
accordance with the provisions hereof, be made available to Borrower on the day
so requested by way of credit to such operating account at PNC, or such other
bank as Borrower may designate following notification to Agent, in immediately
available federal funds or other immediately available funds or, with respect to
Revolving Advances deemed to have been requested by Borrower, be disbursed to
Agent to be applied to the outstanding Obligations giving rise to such deemed
request.
2.3 TERM LOAN. Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will fund its portion of the Term Loan
by making Advances to Borrower in the sum equal to such Lender's Commitment
Percentage of $30,000,000. The Advances comprising the Term Loan shall be
advanced on the Closing Date; shall be, with respect to principal, payable in
seventy (70) consecutive monthly installments of $425,000 each on the first day
of each month, commencing November 1, 1999, followed by a single installment
equal to the then remaining unpaid principal amount of the Term Loan, subject to
acceleration upon the occurrence of an Event of Default under this Agreement or
termination of this Agreement and provided that all unpaid principal and accrued
interest with respect to the Term Loan shall be due in payable in full on the
last day of the Term. Advances comprising the Term Loan shall be evidenced by
secured promissory notes (collectively, "Term Notes") in substantially the form
attached hereto as Exhibit A-2. Borrower shall not be permitted to reborrow any
amount repaid with respect to the Term Loan.
2.4 MAXIMUM ADVANCES. The aggregate balance of Advances (other than the
Term Loan) outstanding at any time shall not exceed the lesser of (a) Maximum
Revolving Amount or (b) the Formula Amount.
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2.5 REPAYMENT OF OBLIGATIONS.
(a) All Advances and other Obligations shall be due and
payable in full on the last day of the Term subject to earlier prepayment as
herein provided, PROVIDED, HOWEVER, that all Obligations that are at the time in
question contingent (including, all LC Outstandings that exist by virtue of an
outstanding Letter of Credit) may be cash collateralized and remain outstanding
pursuant to Section 2.10(e) hereof. The Term Loan shall be due and payable as
provided in Section 2.3 hereof and in the Term Notes.
(b) Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrower's Account as
of the Business Day on which Agent receives those items of payment, Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by Agent on account of the Obligations on the Business
Day that Agent receives such payments via wire transfer or electronic depository
check. Agent is not, however, required to credit Borrower's Account for the
amount of any item of payment that is unsatisfactory to Agent and Agent may
charge Borrower's Account for the amount of any item of payment which is
returned to Agent unpaid.
(c) All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements shall be made to Agent
at the Payment Office not later than 1:00 p.m. on the due date therefor in
Dollars and in immediately available funds to Agent. Agent and Lenders shall
have the right to effectuate payment on any and all Obligations due and owing
hereunder by charging Borrower's Account or by making Advances as provided in
Section 2.1 and Section 2.16 hereof.
(d) Borrower shall pay principal, interest, and all other
amounts payable hereunder, or under any related agreement, without any deduction
whatsoever, including any deduction for any setoff or counterclaim.
(e) All repayment of principal and interest with respect to
Revolving Advances, shall be applied first to any Revolving Advances outstanding
as Revolving B Advances, and thereafter to any Revolving Advances outstanding as
Revolving A Advances.
2.6 REPAYMENT OF EXCESS ADVANCES. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.7 STATEMENT OF ACCOUNT. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; PROVIDED,
HOWEVER, the failure by Agent or Lenders to record the date and amount of any
Advance shall not adversely affect Agent or any Lender. Each month, Agent shall
send to Borrower a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions among
Agent, Lenders and Borrower during such month. The monthly statements shall be
deemed correct and binding upon Borrower in the absence of manifest error and
shall constitute an account stated between Lenders and Borrower unless Agent
receives a written statement of Borrower's specific exceptions thereto within
thirty (30) days after such statement is received by Borrower. The records of
Agent with respect to
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Borrower's Account shall be conclusive evidence absent manifest error of the
amounts of Advances and other charges thereto and of payments applicable
thereto. In any instance in which Agent charges an amount to Borrower's Account
as authorized pursuant to this Agreement or any of the other Loan Documents
which exceeds $5,000, Agent shall, in addition to including such charge in the
monthly statement to Borrower, undertake to promptly provide Borrower with
notice of the date, amount and nature of such charge; PROVIDED, HOWEVER, Agent
shall have no liability to Borrower for failure to provide such notice.
2.8 LETTERS OF CREDIT. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of standby or documentary letters of
credit ("Letters of Credit") on behalf of Borrower; PROVIDED, HOWEVER, that
Agent will not be required to issue or cause to be issued any Letters of Credit
to the extent that the face amount of such Letters of Credit would then cause
the amount of (i) outstanding Revolving Advances plus (ii) outstanding Letters
of Credit to exceed the lesser of (x) the Maximum Revolving Amount or (y) the
Formula Amount , PROVIDED, FURTHER, HOWEVER, that Agent will not be required to
issue or cause to be issued any Letters of Credit to be utilized by Borrower for
purposes other than Approved Letter of Credit Purposes. The maximum amount of LC
Outstandings at any time shall not exceed, in the aggregate, the Dollar
Equivalent of $25,000,000. All disbursements or payments related to Letters of
Credit shall be deemed to be Revolving Advances and shall bear interest at the
applicable Contract Rate for Domestic Rate Loans.
2.9 ISSUANCE OF LETTERS OF CREDIT.
(a) Borrower may request Agent to issue or cause the issuance
of a Letter of Credit in a Permitted Currency by delivering to Agent at the
Payment Office, Agent's form of letter of credit application (the "Letter of
Credit Application") completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrower also has the right to give instructions and make agreements
with respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or any
other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.
(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts or acceptances of usance drafts when
presented for honor thereunder in accordance with the terms thereof and when
accompanied by the documents described therein and (ii) have an expiry date not
later than six (6) months after such Letter of Credit's date of issuance for
documentary Letters of Credit or twelve (12) months after such Letter of
Credit's date of issuance for standby Letters of Credit and in no event later
than three hundred sixty-five (365) days after the last day of the Term. Each
Letter of Credit shall be subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any amendments or revision thereof adhered to by the
Issuer and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) Agent shall use its reasonable efforts to notify Lenders
of the request by Borrower for a Letter of Credit hereunder.
(d) Agent shall have absolute discretion whether to accept any
draft. Without in any way limiting Agent's absolute discretion whether to accept
any draft, Borrower will not present for acceptance any draft, and Agent will
generally not accept any drafts (i) that arise out of transactions involving the
sale of
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goods by Borrower not in Borrower's Ordinary Course of Business, (ii) that
involve a sale to an Affiliate of Borrower, (iii) that involve any purchase for
which Agent has not received all related documents, instruments and forms
requested by Agent, (iv) for which Agent is unable to locate a purchaser in
Agent's Ordinary Course of business on standard terms, or (v) that is not
eligible for discounting with Federal Reserve Banks pursuant to paragraph 7 of
Section 13 of the Federal Reserve Act.
2.10 REQUIREMENTS FOR ISSUANCE OF LETTERS OF CREDIT.
(a) In connection with the issuance of any Letter of Credit,
Borrower shall indemnify, save and hold Agent, each Lender and each Issuer
harmless from any loss, cost, expense or liability, including payments made by
Agent, any Lender or any Issuer and expenses and reasonable attorneys' fees
incurred by Agent, any Lender or Issuer arising out of, or in connection with,
any Letter of Credit to be issued or created for Borrower. Borrower shall be
bound by Agent's or any Issuer's regulations and good faith interpretations of
any Letter of Credit issued or created for Borrower's account, although this
interpretation may be different from its own; and, neither Agent, nor any
Lender, nor any Issuer nor any of their correspondents shall be liable for any
error, negligence, or mistakes, whether of omission or commission, in following
Borrower's instructions or those contained in any Letter of Credit or of any
modifications, amendments or supplements thereto or in issuing or paying any
Letter of Credit, except for Agent's, any Lender's, any Issuer's or such
correspondents' willful misconduct or gross (not mere) negligence.
(b) Borrower shall authorize and direct any Issuer to name
Borrower as the "Applicant" or "Account Party" of each Letter of Credit. If
Agent is not the Issuer of any Letter of Credit, Borrower shall authorize and
direct the Issuer to deliver to Agent all instruments, documents, and other
writings and property received by the Issuer pursuant to the Letter of Credit
and to accept and rely upon Agent's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit, the application
therefor or any acceptance therefor.
(c) In connection with all Letters of Credit issued or caused
to be issued by Agent under this Agreement, Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority (i) to sign and/or
endorse Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign Borrower's name on bills of lading;
(iii) to clear Inventory through the United States of America Customs Department
("Customs") in the name of Borrower or Agent or Agent's designee, and to sign
and deliver to Customs officials powers of attorney in the name of Borrower for
such purpose; and (iv) to complete in Borrower's name or Agent's, or in the name
of Agent's designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Agent nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Agent's or its
attorney's willful misconduct or gross (not mere) negligence. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.
(d) Each Lender shall to the extent of the percentage amount
equal to the product of such Lender's Commitment Percentage times the aggregate
amount of all unreimbursed reimbursement obligations arising from disbursements
made or obligations incurred with respect to the Letters of Credit be deemed to
have irrevocably purchased an undivided participation in each such unreimbursed
reimbursement obligation. In the event that at the time a disbursement is made
the unpaid balance of Revolving Advances exceeds or would exceed, with the
making of such disbursement, the lesser of (i) the Maximum Revolving Amount less
the LC Outstandings at such time or (ii) the Formula Amount, and such
disbursement is not reimbursed by Borrower within two (2) Business Days, Agent
shall promptly notify each Lender and upon Agent's demand
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each Lender shall pay to Agent such Lender's proportionate share of such
unreimbursed disbursement together with such Lender's proportionate share of
Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from Borrower of any amount
disbursed by Agent for which Agent had already been reimbursed by Lenders, Agent
shall deliver to each Lender that Lender's pro rata share of such repayment.
Each Lender's participation commitment shall continue until the last to occur of
any of the following events: (A) Agent ceases to be obligated to issue or cause
to be issued Letters of Credit hereunder; (B) no Letter of Credit issued
hereunder remains outstanding and uncanceled; or (C) all Persons (other than
Borrower) have been fully reimbursed for all payments made under or relating to
Letters of Credit.
(e) With respect to all outstanding Letters of Credit, upon
the occurrence of (i) a Default or an Event of Default, (ii) termination of this
Agreement, (iii) an Out-of-Formula Condition, or (iv) the last day of the Term,
Borrower shall, forthwith upon Agent's request for Borrower to do so, cause cash
to be deposited and maintained in an account with Agent, as cash collateral, in
an amount equal to one hundred five percent (105%) of the outstanding Letters of
Credit, and Borrower hereby irrevocably authorizes Agent, in its discretion, on
Borrower's behalf and in Borrower's name, to open such an account and to make
and maintain deposits therein, or in an account opened by Borrower, in the
amounts required to be made by Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of Borrower coming into any Lender's
possession at any time. Agent will invest such cash collateral (less applicable
reserves) in such short-term money-market items as to which Agent and Borrower
mutually agree and the net return on such investments shall be credited to such
account and constitute additional cash collateral. Borrower may not withdraw
amounts credited to any such account except upon payment and performance in full
of all Obligations and termination of this Agreement. Upon termination or
expiration of all Letters of Credit and the payment and satisfaction of all of
the LC Outstandings, any remaining cash collateral shall be returned to Borrower
unless a Default or an Event of Default then exists or the Term has expired (in
any of which events Agent may apply such cash collateral to the payment of any
other Obligations outstanding, with any surplus to be turned over to Borrower).
2.11 ADDITIONAL PAYMENTS. Any sums expended by Agent or any Lender due
to Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document, including Borrower's obligations under Sections
4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account
as a Revolving Advance of a Domestic Rate Loan and added to the Obligations.
2.12 MANNER OF BORROWING AND PAYMENT.
(a) Each borrowing of Revolving Advances shall be advanced
according to the Commitment Percentages of Lenders. The Term Loan shall be
advanced according to the Commitment Percentages of the Lenders.
(b) Each payment (including each prepayment) by Borrower on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders. Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Term Note, shall be
made from or to, or applied to that portion of the Term Loan evidenced by the
Term Note pro rata according to the Commitment Percentages of Lenders. Except as
expressly provided herein, all payments (including prepayments) to be made by
Borrower on account of principal, interest and fees shall be made without set
off or counterclaim
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and shall be made to Agent on behalf of the Lenders to the Payment Office, in
each case on or prior to 1:00 p.m., in Dollars and in immediately available
funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.12(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by Borrower on account of Revolving Advances
shall be applied first to those Revolving Advances advanced by Agent. On or
before 1:00 p.m. on each Settlement Date commencing with the first Settlement
Date following the Closing Date, Agent and Lenders shall make certain payments
as follows: (i) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week (if any) exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and
(x) such repayments and (ii) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with funds in an amount equal to such Lender's applicable Commitment
Percentage of the difference between (y) such repayments and (z) such Revolving
Advances.
(ii) Agent and each Lender shall be entitled to earn
interest at the applicable Contract Rate on outstanding Advances which it has
funded.
(iii) Promptly following each Settlement Date, Agent
shall submit to each Lender a certificate with respect to payments received and
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefitted
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds ratably with each of Lenders; PROVIDED,
HOWEVER, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its applicable Commitment Percentage of the Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent on the next Settlement Date
and, in reliance upon such assumption, make available to Borrower a
corresponding amount. Agent will promptly notify Borrower of its receipt of any
such notice from a Lender. If such amount is made available to Agent on a date
after such next Settlement Date, such Lender shall pay to Agent on demand an
amount equal to the product of (i) the
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daily average Federal Funds Rate (computed on the basis of a year of 360 days)
during such period as quoted by Agent, times (ii) such amount, times (iii) the
number of days from and including such Settlement Date to the date on which such
amount becomes immediately available to Agent. A certificate of Agent submitted
to any Lender with respect to any amounts owing under this paragraph (e) shall
be conclusive, in the absence of manifest error. If such amount is not in fact
made available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrower; PROVIDED, HOWEVER, that Agent's
right to such recovery shall not prejudice or otherwise adversely affect
Borrower's rights (if any) against such Lender.
2.13 MANDATORY PREPAYMENTS. When Borrower sells or otherwise disposes
of any Collateral or Additional Collateral, other than Inventory in Borrower's
Ordinary Course of Business, Borrower shall repay the Advances in an amount
equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable
costs of such sales or other dispositions), such repayments to be made promptly
but in no event more than one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be an implied consent to any
such sale otherwise prohibited by the terms and conditions hereof or of any of
the other Loan Documents. Such repayments shall be applied first, to the
Obligations in such order as Agent may determine, subject to Borrower's ability
to reborrow Revolving Advances in accordance with the terms hereof; PROVIDED,
HOWEVER, that, so long as no Default or Event of Default exists, the proceeds
from Permitted Dispositions other than the Louisville Sale shall be applied
first to any outstanding Revolving Advances and thereafter to the Term Loan, and
the proceeds of the Louisville Sale shall be applied first to the Term Loan and
thereafter to any outstanding Revolving Advances.
2.14 USE OF PROCEEDS. Borrower shall apply the proceeds of Advances to
(i) repay existing Indebtedness outstanding under the Scotiabank Credit
Agreement, (ii) to reimburse Issuer for LC Outstandings, and (iv) provide for
Borrower's working capital needs.
2.15 DEFAULTING LENDER.
(a) Notwithstanding anything to the contrary contained herein,
in the event any Lender (x) has refused (which refusal constitutes a breach by
such Lender of its obligations under this Agreement) to make available its
portion of any Advance or (y) notifies either Agent or Borrower that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.15 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that,
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the aggregate amount of Advances of any Non-Defaulting Lender exceeds such
Non-Defaulting Lender's Commitment Percentage of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Other Documents. All amendments,
waivers and other modifications of this Agreement and the Other Documents may be
made without regard to a Defaulting Lender and, for purposes of the definition
of "Required Lenders," a Defaulting Lender shall be deemed not to be a Lender
and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.15,
the rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.15 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to
the satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender
and shall be treated as a Lender under this Agreement.
2.16 PROVISIONS APPLICABLE TO EURODOLLAR RATE LOANS.
(a) Notwithstanding the provisions of Section 2.1 above, in
the event Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give
Agent at least three (3) Business Days prior written notice, specifying (i) the
date of the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be $2,000,000 or integral multiples of $250,000 in excess of
$2,000,000, and (iii) the duration of the first Interest Period therefor.
Interest Periods for Eurodollar Rate Loans shall be for one, two, or three
months; provided, if an Interest Period would end on a day that is not a
Business Day, it shall end on the next succeeding Business Day unless such day
falls in the next succeeding calendar month in which case the Interest Period
shall end on the next preceding Business Day. No Eurodollar Rate Loan shall be
made available to Borrower during the continuance of a Default or an Event of
Default.
(b) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on such
date as Borrower may elect as set forth in (a)(iii) above provided that the
exact length of each Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and no Interest
Period shall end after the last day of the Term.
Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.16(a) or by its notice of conversion given to Agent pursuant to
Section 2.16(c), as the case may be. Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrower, Borrower
shall be deemed to have elected to convert to a Domestic Rate Loan subject to
Section 2.16(c) herein below.
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(c) Provided that no Event of Default shall have occurred and
be continuing, Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrower desires to convert a loan, Borrower shall give Agent not less than
three (3) Business Days' prior written notice to convert from a Domestic Rate
Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written notice to
convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date
of such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
outstanding more than five (5) Eurodollar Rate Loans, in the aggregate.
(d) Borrower shall jointly and severally indemnify Agent and
Lenders and hold Agent and Lenders harmless from and against any and all losses
or expenses that Agent and Lenders may sustain or incur as a consequence of any
prepayment, conversion of or any default by Borrower in the payment of the
principal of or interest on any Eurodollar Rate Loan or failure by Borrower to
complete a borrowing of, a prepayment of or conversion of or to a Eurodollar
Rate Loan after notice thereof has been given, including any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrower shall be conclusive absent manifest error.
(e) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate
Loans hereunder shall forthwith be canceled and Borrower shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Agent,
either pay all such affected Eurodollar Rate Loans or convert such affected
Eurodollar Rate Loans into loans of another type. If any such payment or
conversion of any Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such Eurodollar Rate Loan, Borrower shall
pay Agent, upon Agent's request, such amount or amounts as may be necessary to
compensate Lenders for any loss or expense sustained or incurred by Lenders in
respect of such Eurodollar Rate Loan as a result of such payment or conversion,
including any interest or other amounts payable by Lenders to lenders of funds
obtained by Lenders in order to make or maintain such Eurodollar Rate Loan. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Lenders to Borrower shall be conclusive absent manifest
error.
2.17 GROSS UP FOR TAXES. If Borrower shall be required by Applicable
Law to withhold or deduct any taxes from or in respect of any sum payable under
this Agreement or any of the other Loan Documents, (a) the sum payable to Agent
or such Lender shall be increased as may be necessary so that, after making all
required withholding or deductions, Agent or such Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
withholding or deductions been made, (b) Borrower shall make such withholding or
deductions, and (c) Borrower shall pay the full amount withheld or deducted to
the relevant taxation authority or other authority in accordance with Applicable
Law.
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2.18 WITHHOLDING TAX EXEMPTION. At least five (5) Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States or any state thereof agrees that it will deliver to Borrower
and Agent two (2) duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payment under this Agreement and its Notes without deduction
or withholding of any United States federal income taxes. Each Lender which so
delivers a Form 1001 or 4224 further undertakes to deliver to Borrower and Agent
two (2) additional copies of such form (or a successor form) on or before the
date that such form expires (currently, three (3) successive calendar years for
Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Borrower or Agent, in each case, certifying that such
Lender is entitled to receive payments under this Agreement and its Notes
without deduction or withholding of any United States federal income taxes,
unless an event (including any change in treaty, law or regulation) has occurred
prior to the date on which any such delivery would otherwise be required that
renders all such forms inapplicable or that would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender
advises Borrower and Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income taxes.
SECTION 3. INTEREST AND FEES
3.1 INTEREST. Interest on Advances shall accrue and be payable monthly
in arrears, on the first day of each month with respect to Domestic Rate Loans
and, with respect to Eurodollar Rate Loans, at the end of each Interest Period
or, for any Eurodollar Rate Loans with an Interest Period in excess of three (3)
months, at the earlier of (a) each three months on the anniversary date of the
commencement of such Eurodollar Rate Loan or (b) the end of the Interest Period.
Interest charges shall be computed on the actual principal amount of Advances
outstanding during the month (the "Monthly Advances") at a rate per annum equal
to (i) with respect to Revolving Advances, the applicable Revolving Interest
Rate and (ii) with respect to the Term Loan, the applicable Term Loan Rate (as
applicable, the "Contract Rate"). Whenever, subsequent to the date of this
Agreement, the Alternate Base Rate is increased or decreased, the applicable
Contract Rate shall be similarly changed without notice or demand of any kind by
an amount equal to the amount of such change in the Alternate Base Rate during
the time such change or changes remain in effect. The Eurodollar Rate shall be
adjusted with respect to Eurodollar Rate Loans without notice or demand of any
kind on the effective date of any change in the Reserve Percentage as of such
effective date. Upon and after the occurrence of an Event of Default, and during
the continuation thereof, the Obligations shall bear interest at the applicable
Contract Rates plus two (2%) percent per annum (as applicable, the "Default
Rate").
3.2 LETTER OF CREDIT FEES. Borrower shall pay (x) to Agent, for the
benefit of Lenders, fees for each Letter of Credit for the period from and
excluding the date of issuance of same to and including the date of expiration
or termination, equal to the Dollar Equivalent of the average daily face amount
of each outstanding Letter of Credit multiplied by one and three-quarters
percent (1.75%) per annum, and (y) to the Issuer, (i) equal to the average daily
face amount of each outstanding Letter of Credit multiplied by one quarter
percent (0.25%) per annum, and (ii) any and all other fees and expenses as
agreed upon by the Issuer and Borrower in connection with any Letter of Credit,
including in connection with the opening, amendment or renewal of any such
Letter of Credit and any acceptances created thereunder, all such fees to be
calculated on the basis of a 360-day year for the actual number of days elapsed
and to be payable monthly, in arrears, on the first day of each month and on the
last day of the Term, and Borrower shall reimburse Agent for any and all fees
and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees,
the "Letter of Credit
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Fees"). All such charges shall be deemed earned in full on the date when the
same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason. Any such charge
in effect at the time of a particular transaction shall be the charge for that
transaction, notwithstanding any subsequent change in the Issuer's prevailing
charges for that type of transaction. All Letter of Credit Fees payable
hereunder shall be deemed earned in full on the date when the same are due and
payable hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
3.3 FACILITY FEE. In consideration of Agent's and Lender's
establishment of the commitments in favor of Borrower hereunder, and Agent's
syndication of such commitments and its agreement to serve as collateral and
administrative agent hereunder, Borrower agrees to pay the following fee as well
as all the fees set forth in the Fee Letter, all of which shall be deemed fully
earned when due and payable and shall be nonrefundable: if, for any month during
the Term, the sum of the average daily unpaid balance of the Revolving Advances
PLUS LC Outstandings for each day of such month does not equal the Maximum
Revolving Amount, then Borrower shall pay to Agent for the ratable benefit of
Lenders a fee at a rate equal to the Applicable Facility Fee per annum on the
amount by which the Maximum Revolving Amount exceeds such average daily unpaid
balance. Such fee shall be payable to Agent on the last day of each month.
3.4 COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Contract Rate during such extension.
3.5 MAXIMUM CHARGES. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under Applicable
Law. In the event interest and other charges as computed hereunder would
otherwise exceed the highest rate permitted under Applicable Law, such excess
amount shall be first applied to any unpaid principal balance owed by Borrower,
and if the then remaining excess amount is greater than the previously unpaid
principal balance, Lenders shall promptly refund such excess amount to Borrower
and the provisions hereof shall be deemed amended to provide for such
permissible rate.
3.6 INCREASED COSTS. In the event of any change in any Applicable Law,
treaty or governmental regulation, or in the interpretation or application
thereof, or compliance by any Lender (for purposes of this Section 3.6, the term
"Lender" shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) and the office or branch where Agent or any
Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Other Document or change the
basis of taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income of Agent or any
Lender by the jurisdiction in which it maintains its principal office);
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(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including pursuant to Regulation D of the Board
of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement or any
Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be, provided that the foregoing shall
not apply to increased costs which are reflected in the Eurodollar Rate. Agent
or such Lender shall certify the amount of such additional cost or reduced
amount to Borrower, and such certification shall be conclusive absent manifest
error.
3.7 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. In the
event that Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate applicable pursuant to Section 2.16 hereof for any Interest
Period; or
(b) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank Eurodollar market,
with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate
Loan,
then Agent shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Agent no later than 10:00 a.m. two (2) Business Days prior to the
date of such proposed borrowing, that its request for such borrowing shall be
canceled or made as an unaffected type of Eurodollar Rate Loan, (ii) any
Domestic Rate Loan or Eurodollar Rate Loan that was to have been converted to an
affected type of Eurodollar Rate Loan shall be continued as or converted into a
Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00 a.m.
two (2) Business Days prior to the proposed conversion, shall be maintained as
an unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrower shall notify Agent, no later than 10:00 a.m. two (2) Business Days
prior to the last Business Day of the then current Interest Period applicable to
such affected Eurodollar Rate Loan, shall be converted into an unaffected type
of Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
Borrower shall not have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
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3.8 CAPITAL ADEQUACY.
(a) In the event that Agent or any Lender shall have
determined that any Applicable Law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Body, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.8, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Agent's or any Lender's capital as a
consequence of its obligations hereunder to a level below that which Agent or
such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to be material,
then, from time to time, Borrower shall pay upon demand to Agent or such Lender
such additional amount or amounts as will compensate Agent or such Lender for
such reduction. In determining such amount or amounts, Agent or such Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.8 shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with respect to any
Applicable Law or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.8(a) hereof when delivered to Borrower shall be conclusive
absent manifest error.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1 SECURITY INTEREST IN THE COLLATERAL.
(a) To secure the prompt payment and performance to Agent and
each Lender of all of the Obligations (excluding, however, any Obligations
consisting from time to time of Revolving B Advances and any interest or fees
payable in connection with Revolving B Advances), Borrower hereby assigns,
pledges and grants to Agent, for its benefit and the ratable benefit of Lenders,
a continuing security interest in and to all of the Collateral, whether now
owned or existing or hereafter acquired or arising and wheresoever located.
Borrower shall mark its books and records as may be necessary or appropriate to
evidence, protect and perfect Agent's security interest and shall cause its
financial statements to reflect such security interest.
(b) To secure the prompt payment and performance to Agent and
each Lender of the Obligations consisting of Revolving B Advances and any
interest or fees payable in connection with Revolving B Advances, Borrower
hereby assigns, pledges and grants to Agent, for its benefit and the ratable
benefit of Lenders, a continuing security interest in and to all of Borrower's
"accounts" and "inventory," as such terms are defined in the UCC, and the
proceeds thereof, whether now owned or existing or hereafter acquired or arising
and wheresoever located. Borrower shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect Agent's security
interest and shall cause its financial statements to reflect such security
interest.
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(c) To secure the prompt payment and performance to Agent and
each Lender of a portion of Obligations outstanding on any date that does not
exceed five percent (5%) of an amount equal to Borrower's Consolidated Total
Assets on such date, MINUS the amount of Indebtedness, if any, secured by a
Limited Lien in favor of any Person other than Agent (but Borrower acknowledges
that the existence of any such Limited Lien, other than in favor of Agent,
constitutes an Event of Default), Borrower hereby assigns, pledges and grants to
Agent, for its benefit and the ratable benefit of Lenders, a continuing security
interest in and to all of the Additional Collateral, whether now owned or
existing or hereafter acquired or arising and wheresoever located. Borrower
shall mark its books and records as may be necessary or appropriate to evidence,
protect and perfect Agent's security interest and shall cause its financial
statements to reflect such security interest.
4.2 PERFECTION OF SECURITY INTEREST. Borrower shall take all action
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral and to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including (i)
immediately discharging all Liens other than Permitted Encumbrances, (ii) using
its diligent efforts to obtain landlords' or mortgagees' Lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering, or causing to be executed or
delivered, Lien Perfection Documents requested by Agent, in each case in form
and substance satisfactory to Agent, relating to the creation, validity,
perfection, maintenance or continuation of Agent's security interest under the
UCC or other Applicable Law. Agent is hereby authorized to file financing
statements signed by Agent instead of Borrower in accordance with Section
9-402(2) of the UCC. All charges, expenses and fees Agent may incur in doing any
of the foregoing, and any local taxes relating thereto, shall be charged to
Borrower's Account as a Revolving Advance of a Domestic Rate Loan and added to
the Obligations, or, at Agent's option, shall be paid to Agent for the ratable
benefit of Lenders immediately upon demand.
4.3 DISPOSITION OF COLLATERAL. Borrower will safeguard and protect all
Collateral for Agent's general account and make no disposition thereof whether
by sale, lease or otherwise except (a) the sale of Inventory in Borrower's
Ordinary Course of Business, (b) Permitted Dispositions, and (c) the disposition
or transfer of obsolete and worn-out Equipment in Borrower's Ordinary Course of
Business during any Fiscal Year having an aggregate fair market value of not
more than $4,000,000 and only to the extent that the proceeds of any such
disposition of Equipment (i) are used to acquire replacement Equipment within
one hundred eighty (180) days of such disposition which is subject to Agent's
first priority security interest or (ii) are remitted to Agent for application
to the Obligations.
4.4 PRESERVATION OF COLLATERAL. Following the occurrence of an Event of
Default, in addition to the rights and remedies set forth in Section 11.1
hereof, Agent: (a) may at any time take such steps as Agent deems necessary to
protect Agent's interest in and to preserve the Collateral, including the hiring
of such security guards or the placing of other security protection measures as
Agent may deem appropriate; (b) may employ and maintain at any of Borrower's
premises a custodian who shall have full authority to do all acts necessary to
protect Agent's interests in the Collateral; (c) may lease warehouse facilities
to which Agent may move all or part of the Collateral; (d) may use Borrower's
owned or leased lifts, hoists, trucks and other facilities or equipment for
handling or removing the Collateral; and (e) shall have, and is hereby granted,
a right of ingress and egress to the places where the Collateral is located, and
may proceed over and
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through Borrower's owned or leased property. Borrower shall cooperate fully with
all of Agent's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent's expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrower's Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations.
4.5 OWNERSHIP OF COLLATERAL. With respect to the Collateral, at the
time the Collateral becomes subject to Agent's security interest: (a) Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Agent, and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by Borrower or delivered to Agent or any
Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of Borrower that appear on such
documents and agreements shall be genuine and Borrower shall have full capacity
to execute same; and (d) Borrower's Equipment and Inventory shall be located as
set forth on SCHEDULE 4.5 and shall not be removed from such locations without
the prior written consent of Agent except with respect to the sale of Inventory
in Borrower's Ordinary Course of Business and Equipment to the extent permitted
in Section 4.3 hereof ; PROVIDED, HOWEVER, Borrower may move Inventory or
Equipment, or any record relating to any Collateral, to a location in the United
States other than those shown on SCHEDULE 4.5 hereto so long as Borrower has
given Agent at least thirty (30) Business Days prior written notice of such new
location and prior to moving any Inventory or Equipment to such location
Borrower has executed and delivered to Agent appropriate Lien Perfection
Documents, including Lien Waiver Agreements, to perfect or continue the
perfection of Agent's Liens with respect to such Inventory or Equipment;
PROVIDED, FURTHER, HOWEVER, Borrower may have Equipment and Service Inventory at
locations other than those set forth on SCHEDULE 4.5 so long as the aggregate
Value of such Service Inventory and the fair market value of such Equipment does
not exceed $5,000 at any single location or $50,000 in the aggregate for all
such locations.
4.6 DEFENSE OF AGENT'S AND LENDERS' INTERESTS. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period Borrower shall not, without Agent's prior written
consent, pledge, sell (except Inventory in Borrower's Ordinary Course of
Business and Equipment to the extent permitted in Section 4.3 hereof), assign,
transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Borrower shall defend Agent's interests in the Collateral against
any and all Persons whatsoever. At any time following either (a) the occurrence
of an Event of Default or (b) the termination of this Agreement, Agent shall
have the right to take possession of the Collateral in whatever physical form
contained, including labels, stationery, documents, instruments and advertising
materials. If Agent exercises this right to take possession of the Collateral,
Borrower shall, upon demand, assemble it in the best manner possible and make it
available to Agent at a place reasonably convenient to Agent. In addition, with
respect to all Collateral, Agent and Lenders shall be entitled to all of the
rights and remedies set forth herein and further provided by the UCC or other
Applicable Law. Borrower shall, and Agent may, at its option, instruct all
suppliers, carriers, forwarders, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which Agent holds a security
interest to deliver same to Agent and/or subject to Agent's order and if they
shall come into Borrower's possession, they, and each of them, shall be held by
Borrower in trust as Agent's trustee, and Borrower will immediately deliver them
to Agent in their original form together with any necessary endorsement.
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4.7 BOOKS AND RECORDS. Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books proper accruals with respect to all Charges and claims; and (c) on a
reasonably current basis set up on its books, from its earnings, allowances
against doubtful Receivables, advances and investments and all other proper
accruals (including by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or
amortization of properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to this subsection
shall be made in accordance with, or as required by, GAAP consistently applied
in the opinion of such independent public accountant as shall then be regularly
engaged by Borrower.
4.8 FINANCIAL DISCLOSURE. Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by Borrower at any time during the
Term to exhibit and deliver to Agent and each Lender copies of any of Borrower's
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession, and to disclose to Agent and each
Lender any information such accountants may have concerning Borrower's financial
status and business operations. Borrower hereby authorizes all federal, state
and municipal authorities to furnish to Agent and each Lender copies of reports
or examinations relating to Borrower, whether made by Borrower or otherwise;
however, Agent and each Lender will attempt to obtain such information or
materials directly from Borrower prior to obtaining such information or
materials from such accountants or such authorities.
4.9 COMPLIANCE WITH LAWS. Borrower shall comply in all material
respects with all Applicable Law with respect to its respective Collateral or
any part thereof or to the operation of Borrower's business the non-compliance
with which could reasonably be expected to have a Material Adverse Effect on
Borrower. Borrower may, however, contest or dispute any acts, rules,
regulations, orders and directions of those bodies or officials in any
reasonable manner, provided that such contest or dispute is pursued diligently,
in good faith and by appropriate proceedings, any related Lien has not attached
to any Collateral or been stayed and sufficient reserves are established to the
reasonable satisfaction of Agent to protect Agent's Lien on or security interest
in the Collateral. The Collateral at all times shall be maintained in accordance
with the requirements of all insurance carriers which provide insurance with
respect to the Collateral so that such insurance shall remain in full force and
effect.
4.10 INSPECTION OF PREMISES. At all reasonable times Agent (and one or
more Lenders together with Agent) shall have full access to and the right to
audit, check, inspect and make abstracts and copies from Borrower's books,
records, audits, correspondence and all other papers relating to the Collateral
and the operation of Borrower's business. Agent, any Lender and their agents may
enter upon any of Borrower's premises at any time during business hours and at
any other reasonable time, and from time to time, for the purpose of inspecting
the Collateral and any and all records pertaining thereto and the operation of
Borrower's business.
4.11 INSURANCE.
(a) Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At Borrower's own cost and
expense in amounts and with carriers acceptable to Agent, Borrower shall (a)
keep all its properties in which it has an interest insured against the hazards
of fire, flood, sprinkler leakage, those hazards covered by extended coverage
insurance and such other hazards, and for such amounts, as is customary in the
case of companies engaged in businesses similar to Borrower's including business
interruption insurance; (b) maintain a bond in such amounts as is customary in
the case of companies
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engaged in businesses similar to Borrower insuring against larceny, embezzlement
or other criminal misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of Borrower either directly or through authority to draw upon such funds
or to direct generally the disposition of such assets; (c) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which Borrower is engaged in business; and (e) furnish Agent
with (i) copies of all policies and evidence of the maintenance of such policies
by the renewal thereof at least thirty (30) days before any expiration date, and
(ii) appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as loss payee and an additional insured, respectively, as
its interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, and providing (A) that all proceeds thereunder shall
be payable to Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be canceled, amended or
terminated unless at least thirty (30) days prior written notice is given to
Agent. In the event of any loss thereunder, the carriers named therein are
hereby directed by Agent and Borrower to make payment for such loss to Agent and
not to Borrower and Agent jointly. If any insurance losses are paid by check,
draft or other instrument payable to Borrower and Agent jointly, Agent may
endorse Borrower's name thereon and do such other things as Agent may deem
advisable to reduce the same to cash. When any Event of Default exists, Agent is
hereby authorized to adjust and compromise claims under insurance coverage
referred to in clauses (a) and (b) above. All loss recoveries received by Agent
upon any such insurance may be applied to the Obligations, in such order as
Agent in its sole discretion shall determine; PROVIDED, HOWEVER, so long as no
Event of Default or Default shall exist, Agent shall apply any such loss
recoveries, with respect to assets other than Borrower's Real Property and
Equipment (the "Fixed Asset Collateral"), first to any outstanding Revolving
Advances and second to the Term Loan. Any surplus shall be paid by Agent to
Borrower or applied as may be otherwise required by Applicable Law. Any
deficiency thereon shall be paid by Borrower to Agent, on demand.
(b) Anything hereinabove in this Section 4.11 to the contrary
notwithstanding, and subject to the fulfillment of the conditions set forth
below, Agent shall remit to Borrower insurance proceeds received by Agent during
any calendar year under insurance policies procured and maintained by Borrower
which insure Fixed Asset Collateral to the extent such insurance proceeds do not
exceed $1,000,000 in the aggregate during such calendar year or $500,000 per
occurrence. In the event the amount of insurance proceeds received by Agent for
any occurrence exceeds $500,000 , then Agent shall not be obligated to remit the
insurance proceeds to Borrower unless Borrower shall provide Agent with evidence
reasonably satisfactory to Agent that the insurance proceeds will be used by
Borrower to repair, replace or restore the Fixed Asset Collateral which was the
subject of the insurable loss. If Borrower has previously received (or, after
giving effect to any proposed remittance by Agent to Borrower would receive)
insurance proceeds which equal or exceed $1,000,000 in the aggregate during any
calendar year, then Agent may, in its sole discretion, either remit the
insurance proceeds to Borrower upon Borrower providing Agent with evidence
reasonably satisfactory to Agent that the insurance proceeds will be used by
Borrower to repair, replace or restore the Fixed Asset Collateral which was the
subject of the insurable loss, or apply the proceeds to the Obligations, as
aforesaid. The agreement of Agent to remit insurance proceeds in the manner
above provided shall be subject in each instance to satisfaction of each of the
following conditions: (x) no Event of Default or Default shall have occurred and
(y) Borrower shall use such insurance proceeds to repair, replace or restore (in
accordance with the Mortgages) the Fixed Asset Collateral that was the subject
of the insurable loss and for no other purpose.
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4.12 FAILURE TO PAY INSURANCE. If Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor on behalf of Borrower,
and charge Borrower's Account therefor as a Revolving Advance of a Domestic Rate
Loan and such expenses so paid shall be part of the Obligations.
4.13 PAYMENT OF TAXES. Borrower will pay, when due, all Charges
lawfully levied or assessed upon Borrower or any of the Collateral including
real and personal property taxes, assessments and charges and all franchise,
income, employment, social security benefits, withholding, and sales taxes. If
any tax by any Governmental Body is or may be imposed on or as a result of any
transaction between Borrower and Agent or any Lender which Agent or any Lender
may be required to withhold or pay or if any Charges not being Properly
Contested remain unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent's or any Lender's opinion, may possibly create a
valid Lien on the Collateral, Agent may without notice to Borrower pay the
Charges and Borrower hereby indemnifies and holds Agent and each Lender harmless
in respect thereof. The amount of any payment by Agent under this Section 4.13
shall be charged to Borrower's Account as a Revolving Advance and added to the
Obligations and, until Borrower shall furnish Agent with an indemnity therefor
(or supply Agent with evidence satisfactory to Agent that due provision for the
payment thereof has been made), Agent may hold without interest any balance
standing to Borrower's credit and Agent shall retain its security interest in
any and all Collateral held by Agent.
4.14 PAYMENT OF LEASEHOLD OBLIGATIONS. Borrower shall at all times pay,
when and as due, its rental obligations under all leases under which it is a
tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request will provide evidence of having done so.
4.15 RECEIVABLES.
(a) NATURE OF RECEIVABLES. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Borrower, or work, labor or services theretofore
rendered by Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrower to Agent.
(b) SOLVENCY OF CUSTOMERS. Each Customer, to the best of
Borrower's knowledge, as of the date each Receivable is created, is and will be
Solvent and able to pay all Receivables on which the Customer is obligated in
full when due or, with respect to such Customers of Borrower who, to the best of
Borrower's knowledge, are not Solvent, Borrower has set up on its books and in
its financial records bad debt reserves adequate to cover such Receivables.
(c) LOCATIONS OF BORROWER. Borrower's chief executive office
is located at the addresses set forth on SCHEDULE 4.15(c) hereto. Until written
notice is given to Agent by Borrower of any other office at which Borrower keeps
its records pertaining to Receivables, all such records shall be kept at such
executive office.
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(d) COLLECTION OF RECEIVABLES. Until Borrower's authority to
do so is terminated by Agent (which notice Agent may give at any time following
the occurrence of a Default or an Event of Default or when Agent in its sole
discretion deems it to be in Lenders' best interest to do so), Borrower will, at
Borrower's sole cost and expense, but on Agent's and Lenders' behalf and for
Agent's and Lenders' account, collect as Agent's and Lenders' property all
amounts received on Receivables, and shall not commingle such collections with
Borrower's funds in which Agent does not have a Lien or use the same except to
pay Obligations. Borrower shall, upon request, deliver to Agent, or deposit in
the Blocked Account, in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness.
(e) NOTIFICATION OF ASSIGNMENT OF RECEIVABLES. At any time
that a Default or an Event of Default exists, Agent shall have the right to send
notice of the assignment of, and Agent's security interest in, the Receivables
to any and all Customers or any third party holding or otherwise concerned with
any of the Collateral and the sole right to collect the Receivables, take
possession of the Collateral, or both. Agent's actual collection expenses,
including stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrower's Account and added to the Obligations.
Agent may, at any time or times, send verification of Receivables to any
Customer.
(f) POWER OF AGENT TO ACT ON BORROWER'S BEHALF. Agent shall
have the right to receive, endorse, assign and/or deliver in the name of Agent
or Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Borrower
hereby constitutes Agent or Agent's designee as Borrower's attorney with power
(i) to endorse Borrower's name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral; (ii) after the
occurrence of an Event of Default, to sign Borrower's name on any invoice or
bill of lading relating to any of the Receivables, drafts against Customers,
assignments and verifications of Receivables; (iii) to send verifications of
Receivables to any Customer; (iv) to sign Borrower's name on all financing
statements or any other documents or instruments deemed necessary or appropriate
by Agent to preserve, protect, or perfect Agent's interest in the Collateral and
to file same; (v) after the occurrence of an Event of Default, to demand payment
of the Receivables; (vi) after the occurrence of an Event of Default, to enforce
payment of the Receivables by legal proceedings or otherwise; (vii) after the
occurrence of an Event of Default, to exercise all of Borrower's rights and
remedies with respect to the collection of the Receivables and any other
Collateral; (viii) after the occurrence of an Event of Default, to settle,
adjust, compromise, extend or renew the Receivables; (ix) after the occurrence
of an Event of Default, to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) after the occurrence of an Event of Default,
to prepare, file and sign Borrower's name on a proof of claim in bankruptcy or
similar document against any Customer; (xi) after the occurrence of an Event of
Default, to prepare, file and sign Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with the
Receivables; and (xii) to do all other acts and things not expressly set forth
above that are necessary to carry out this Agreement. All acts of said attorney
or designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with gross
(not mere) negligence; this power being coupled with an interest is irrevocable
while any of the Obligations remain unpaid. Agent shall have the right at any
time following the occurrence of an Event of Default or Default, to change the
address for delivery of mail addressed to Borrower to such address as Agent may
designate and to receive, open and dispose of all mail addressed to Borrower.
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(g) NO LIABILITY. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom. Following the occurrence of a Default or
an Event of Default, Agent may, without notice or consent from Borrower, sue
upon or otherwise collect, extend the time of payment of, compromise or settle
for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is authorized and empowered to accept following the
occurrence of an Event of Default or Default the return of the goods represented
by any of the Receivables, without notice to or consent by Borrower, all without
discharging or in any way affecting Borrower's liability hereunder.
(h) ESTABLISHMENT OF CASH MANAGEMENT SYSTEM. All proceeds of
Collateral shall, at the direction of Agent, be deposited by Borrower into a
lockbox account, dominion account or other "blocked account" ("Blocked Account")
as Agent may require pursuant to an arrangement with such bank or banks as may
be selected by Borrower and be acceptable to Agent. Borrower shall issue to any
such bank, an irrevocable letter of instruction directing said bank to transfer
such funds so deposited to Agent, either to any account maintained by Agent at
said bank or by wire transfer to appropriate account(s) of Agent. All funds
deposited into any Blocked Account shall immediately become the property of
Agent and Borrower shall obtain the agreement by each bank at which a Blocked
Account is maintained to waive any offset rights against the funds so deposited.
Neither Agent nor any Lender assumes any responsibility for such Blocked
Account, including any claim of accord and satisfaction or release with respect
to deposits accepted by any bank thereunder. Agent may also establish depository
accounts ("Depository Accounts") in the name of Agent at a bank or banks for the
deposit of such funds and Borrower shall deposit all proceeds of Collateral or
cause same to be deposited, in kind, in such Depository Accounts of Agent.
(i) ADJUSTMENTS. Borrower will not, without Agent's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore customary in
Borrower's Ordinary Course of Business.
4.16 INVENTORY. To the extent Inventory held for sale or lease has been
produced by Borrower, it has been and will be produced by Borrower in accordance
with the Federal Fair Labor Standards Act of 1938 and all rules, regulations and
orders thereunder. Borrower shall promptly notify Agent in writing if Borrower
enters into any License Agreement other than as set forth on SCHEDULE 4.16.
4.17 MAINTENANCE OF EQUIPMENT. The Equipment shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved
(reasonable wear and tear excepted). Borrower shall not use or operate the
Equipment in violation of any Applicable Law.
4.18 EXCULPATION OF LIABILITY. Nothing herein contained shall be
construed to constitute Agent or any Lender as Borrower's agent for any purpose
whatsoever, nor, to the fullest extent permitted by Applicable Law, shall Agent
or any Lender be responsible or liable for any shortage, discrepancy, damage,
loss or destruction of any part of the Collateral wherever the same may be
located and regardless of the cause thereof. Neither Agent nor any Lender,
whether by anything herein or in any assignment or otherwise,
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assume any of Borrower's obligations under any contract or agreement assigned to
Agent or such Lender, and neither Agent nor any Lender shall be responsible in
any way for the performance by Borrower of any of the terms and conditions
thereof.
4.19 ENVIRONMENTAL MATTERS.
(a) Borrower shall ensure that the Real Property remains in
compliance with all Environmental Laws and shall not place or permit to be
placed any Hazardous Substances on any Real Property to the extent prohibited by
Environmental Laws.
(b) Borrower shall establish and maintain a system to assure
and monitor continued compliance with all applicable Environmental Laws which
system shall include periodic reviews of such compliance.
(c) Borrower shall comply with the provisions of the
Environmental Agreement.
4.20 FINANCING STATEMENTS. Except as respects the financing statements
filed by Agent and the financing statements described on SCHEDULE 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
4.21 PLEDGED NOTES. Borrower shall promptly deliver to Agent any and
all notes and other instruments payable to Borrower that (a) represent proceeds
of any Collateral or (b) that are in a face amount greater than the Dollar
Equivalent of $1,000,000.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 AUTHORITY. Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within
Borrower's corporate powers, have been duly authorized, are not in contravention
of any Applicable Law or the terms of Borrower's Organization Documents relating
to Borrower's formation or to the conduct of Borrower's business or of any
material agreement or undertaking to which Borrower is a party or by which
Borrower is bound, and (b) will not conflict with nor result in any breach in
any of the provisions of or constitute a default under or result in the creation
of any Lien except Permitted Encumbrances upon any asset of Borrower under the
provisions of any agreement, Organization Documents or other instrument to which
Borrower or its property is a party or by which it may be bound.
5.2 FORMATION AND QUALIFICATION.
(a) Borrower is duly organized and in good standing under the
laws of the state listed on SCHEDULE 5.2(a) and is qualified to do business and
is in good standing in the states listed on SCHEDULE 5.2(a) which constitute all
states in which qualification and good standing are necessary for Borrower to
conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have a Material Adverse Effect. Borrower has
delivered to Agent true and complete copies of its Organization Documents and
will promptly notify Agent of any amendment or changes thereto.
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(b) The only Subsidiaries of Borrower are listed on
SCHEDULE 5.2(b).
5.3 TAX RETURNS. Borrower's federal tax identification number is set
forth on SCHEDULE 5.3. Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid all taxes,
assessments, fees and other governmental Charges that are due and payable,
except to the extent any such taxes, assessments, fees and other governmental
Charges are being Properly Contested. Federal, state and local income tax
returns of Borrower have been examined and reported upon by the appropriate
taxing authority or closed by applicable statute and satisfied for all Fiscal
Years prior to and including the 1994 Fiscal Year. The provision for taxes on
the books of Borrower are adequate for all years not closed by applicable
statutes, and for its current Fiscal Year, and Borrower has no knowledge of any
material deficiency or additional assessment in connection therewith not
provided for on its books.
5.4 FINANCIAL STATEMENTS. The consolidated and consolidating balance
sheets of Borrower, its Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of June 30, 1999, and the related
statements of income, changes in stockholder's equity, and changes in cash flow
for the period ended on such date, all accompanied by reports thereon containing
opinions without qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared in accordance
with GAAP, consistently applied (except for changes in application in which such
accountants concur and present fairly the financial position of Borrower and its
Subsidiaries at such date and the results of their operations for such period).
Since June 30, 1999, there has been no change in the condition, financial or
otherwise, of Borrower or its Subsidiaries as shown on the consolidated balance
sheet as of such date and no change in the aggregate value of machinery,
equipment and Real Property owned by Borrower and its Subsidiaries, except
changes in the Ordinary Course of Business of Borrower or its Subsidiaries, none
of which individually or in the aggregate has been materially adverse to the
financial conditions or operations of Borrower.
5.5 CORPORATE NAME. Borrower has not been known by any other corporate
name in the past five (5) years and does not sell Inventory under any other name
except as set forth on SCHEDULE 5.5, nor has Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years.
5.6 O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.
(a) Borrower has duly complied in all material respects with,
and its facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act.
(b) Except as disclosed in the Environmental Agreement,
Borrower has duly complied in all material respects with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of all Environmental Laws; there are no
outstanding citations, notices or orders of non-compliance issued to Borrower or
relating to its business, assets, property, leaseholds or Equipment under any
such laws, rules or regulations.
(c) Except as disclosed in the Environmental Agreement,
Borrower has obtained and kept in full force and effect all required federal,
state and local licenses, certificates or permits relating to all applicable
Environmental Laws.
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(d) Each of the representations and warranties made by
Borrower in the Environmental Agreement are true and correct.
5.7 SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.
(a) Borrower is and will at all time remain Solvent.
(b) Except as disclosed in SCHEDULE 5.7(b), Borrower has (i)
no pending or threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect on Borrower, and
(ii) no liabilities or Indebtedness for Money Borrowed other than the
Obligations.
(c) Neither Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on SCHEDULE 5.7(c)
hereto. Except as set forth in SCHEDULE 5.7(c), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and Borrower and each member
of the Controlled Group has met all applicable minimum funding requirements
under Section 302 of ERISA in respect of each Plan, (ii) each Plan which is
intended to be a qualified plan under Section 401(a) of the Code as currently in
effect has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code, (iii) neither Borrower nor any
member of the Controlled Group has incurred any liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become
due which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan, (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither
Borrower nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such assets and accrued
benefits and other liabilities, (vi) neither Borrower nor any member of the
Controlled Group has breached any of the responsibilities, obligations or duties
imposed on it by ERISA with respect to any Plan, (vii) neither Borrower nor any
member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4972 or 4980B of the Code, and no fact exists which could
give rise to any such liability, (viii) neither Borrower nor any member of the
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged
in a "prohibited transaction" described in Section 406 of the ERISA or Section
4975 of the Code nor taken any action which would constitute or result in a
Termination Event with respect to any such Plan which is subject to ERISA, (ix)
Borrower and each member of the Controlled Group has made all contributions due
and payable with respect to each Plan, (x) there exists no event described in
Section 4043(c) of ERISA, for which the thirty (30) day notice period contained
in Section 4043(a) of ERISA has not been waived, (xi) neither Borrower nor any
member of the Controlled Group has any fiduciary responsibility for investments
with respect to any plan existing for the benefit of persons other than
employees or former employees of Borrower and any member of the Controlled
Group, and (xii) neither Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.
5.8 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower that are
registered in the United States are set forth on SCHEDULE 5.8, are valid and
have been duly
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registered or filed with all appropriate Governmental Bodies and constitute all
of the intellectual property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such material patent, trademark, copyright, design right, tradename, trade
secret or license and Borrower is not aware of any grounds for any challenge,
except as set forth in SCHEDULE 5.8 hereto. Each patent, patent application,
patent license, trademark, trademark application, trademark license, service
mark, service mark application, service mark license, copyright, copyright
application and copyright license owned or held by Borrower and all trade
secrets used by Borrower consist of original material or property developed by
Borrower or was lawfully acquired by Borrower from the proper and lawful owner
thereof. Each of such items has been maintained so as to preserve the value
thereof from the date of creation or acquisition thereof.
5.9 LICENSES AND PERMITS. Except as set forth in SCHEDULE 5.9, Borrower
(a) is in compliance with and (b) has procured and is now in possession of, all
material licenses or permits required by any Applicable Law or regulation for
the operation of its business in each jurisdiction wherein it is now conducting
or proposes to conduct business and where the failure to procure such licenses
or permits could have a Material Adverse Effect on Borrower.
5.10 DEFAULT OF INDEBTEDNESS FOR MONEY BORROWED. Borrower is not in
default in the payment of the principal of or interest on any Indebtedness for
Money Borrowed or under any instrument or agreement under or subject to which
any Indebtedness for Money Borrowed has been issued and no event has occurred
under the provisions of any such instrument or agreement which with or without
the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
5.11 NO DEFAULT. Borrower is not in default in the payment or
performance of any of its material contractual obligations and no Default has
occurred.
5.12 NO BURDENSOME RESTRICTIONS. Borrower is not party to any contract
or agreement the performance of which could have a Material Adverse Effect on
Borrower. Borrower has not agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien which is not a
Permitted Encumbrance.
5.13 NO LABOR DISPUTES. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of Borrower's employees
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on SCHEDULE 5.13 hereto.
5.14 MARGIN REGULATIONS. Borrower is not engaged, nor will it engage,
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 Regulation U 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 Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U of such
Board of Governors.
5.15 NOT A REGULATED ENTITY. Neither Borrower nor any Guarantor is (i)
an "investment company" or a "person directly or indirectly controlled by or
acting on behalf of an investment company" within the meaning of the Investment
Company Act of 1940; (ii) a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company"
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of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935; or (iii) subject to regulation under the Federal Power Act, the
Interstate Commerce Act, any public utilities code or any other Applicable Law
regarding its authority to incur Indebtedness.
5.16 DISCLOSURE. No representation or warranty made by Borrower in this
Agreement, in any other Loan Document or in any financial statement, report,
certificate or any other document furnished in connection herewith contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower or which reasonably should be known to Borrower which
Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement which could reasonably be expected to have a
Material Adverse Effect on Borrower.
5.17 SWAPS. Borrower is not a party to, nor will it be a party to, any
swap agreement whereby Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
5.18 CONFLICTING AGREEMENTS. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or affecting
the Collateral conflicts with, or requires any Consent which has not already
been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.19 APPLICATION OF CERTAIN LAWS AND REGULATIONS. Neither Borrower nor
any Affiliate of Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including statutes or regulations
relative to common or interstate carriers or to the sale of electricity, gas,
steam, water, telephone, telegraph or other public utility services.
5.20 BUSINESS AND PROPERTY OF BORROWER. Upon and after the Closing
Date, Borrower does not propose to engage in any business other than that
described in the Form 10-K filed by Borrower with the Securities and Exchange
Commission on September 21, 1998 and activities necessary to conduct the
foregoing. On the Closing Date, Borrower will own all the property and possess
all of the rights and Consents necessary for the conduct of the business of
Borrower.
5.21 COMPLIANCE WITH LAWS. Borrower is not in violation of any
Applicable Law in any respect which could reasonably be expected to have a
Material Adverse Effect on Borrower, nor is Borrower in violation of any order
of any Governmental Body or arbitration board or other tribunal.
5.22 SURVIVAL AND REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Borrower contained in this Agreement and the
Other Documents shall be true at the time of Borrower's execution of this
Agreement and the Other Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto. Each representation and warranty contained
in this Agreement and the other Loan Documents shall be deemed to be reaffirmed
by Borrower on each day that any Obligations are outstanding or that Borrower
delivers a request for an Advance hereunder, except for changes arising from the
nature of Borrower's or, if applicable, any of its Subsidiaries' business or
operations that may occur after the date hereof in Borrower's Ordinary Course of
Business so long as Agent has consented to such changes or such changes are not
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violative of any provision of this Agreement. Notwithstanding the foregoing,
representations and warranties which by their terms are applicable only to a
specific date shall be deemed made only at and as of such date.
SECTION 6. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1 PAYMENT OF FEES. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Account or Depository Accounts as provided for in Section 4.15(h). Agent may,
without making demand, charge Borrower's Account for all such fees and expenses.
6.2 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any Intellectual Property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with all Applicable Laws governing
the conduct of its business where the failure to do so could reasonably be
expected to have a Material Adverse Effect on Borrower; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof where the failure to do so could reasonably be
expected to have a Material Adverse Effect on Borrower.
6.3 VIOLATIONS. Promptly notify Agent in writing of any violation of
any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to Borrower which could reasonably be expected to
have a Material Adverse Effect on Borrower.
6.4 GOVERNMENT RECEIVABLES. Notify Agent immediately if Borrower's
Receivables arising out of contracts between Borrower and any Governmental Body
(with respect to which the Federal Assignment of Claims Act or other Applicable
Law has not been complied with) exceed $3,000,000 in the aggregate and
thereafter at Agent's request, take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other
Applicable Law and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of contracts between
Borrower and any such Governmental Body.
6.5 FIXED CHARGE COVERAGE RATIO. Maintain, as of the end of each period
described below, a Fixed Charge Coverage Ratio of not less than the ratio set
forth below for period corresponding thereto:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
For the Fiscal Quarter ending 1.00:1.00
January 1, 2000
For the two (2) Fiscal Quarters 1.00:1.00
ending April 1, 2000
</TABLE>
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<TABLE>
<S> <C>
For the three (3) Fiscal Quarters 1.00:1.00
ending July 1, 2000
On a four (4) Fiscal Quarter 1.00:1.00
rolling basis, tested at the
end of each Fiscal Quarter
after July 1, 2000
</TABLE>
6.6 MINIMUM CONSOLIDATED NET WORTH. Maintain, at all times, a
Consolidated Net Worth of not less than $165,000,000, PLUS, beginning with
Fiscal Year 2000 and for each Fiscal Year thereafter, an amount equal to fifty
percent (50%) of Borrower's Net Income for each such Fiscal Year.
6.7 CONSOLIDATED TOTAL ASSETS. Maintain, at all times, Consolidated
Total Assets of at least $650,000,000.
6.8 EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Execute and deliver to Agent
from time to time, promptly upon demand, such supplemental agreements,
statements, assignments and transfers, or instructions or documents relating to
the Collateral, and such other instruments as Agent may request, in order that
the full intent of this Agreement may be carried into effect.
6.9 PAYMENT OF INDEBTEDNESS. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and Indebtedness of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested and diligently in good faith by
appropriate proceedings and Borrower shall have provided for such reserves as
Agent may reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.
6.10 STANDARDS OF FINANCIAL STATEMENTS. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
6.11 YEAR 2000 COMPATIBILITY. Take all action necessary to assure that
Borrower's computer based systems are able to operate and effectively process
data, including dates, on and after January 1, 2000. Without limiting the
generality of the foregoing, Borrower shall (i) have taken all action necessary
to ensure that all computer based systems of Borrower and its Subsidiaries are
capable of the following: (a) handling date information involving all and any
dates before, during and/or after January 1, 2000, including accepting input,
providing output and performing date calculations in whole or in part; (b)
operating, accurately without interruption on and in respect of any and all
dates before, during and/or after January 1, 2000, and without any change in
performance; (c) responding to and processing two-digit year input without
creating any ambiguity as to the century; (d) storing and providing date input
information without creating any ambiguity as to the century; and (ii) have
taken all action necessary to ensure that all computer based systems of each of
their vendors, suppliers and customers are capable of (a) through (d) above,
where non-compliance could be reasonably expected to have a Material Adverse
Effect. In addition, at the request of Agent, Borrower
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shall provide Agent assurances in form and substance satisfactory to Agent of
Borrower's and each of its Subsidiaries' Year 2000 compatibility. Borrower shall
provide Agent, upon request, written assurances acceptable to Agent that such
systems are Year 2000 compliant.
6.12 LICENSE AGREEMENTS. Keep each License Agreement to which it is a
party in full force and effect for so long as Borrower has any Inventory, the
manufacture, sale or distribution of which is in any manner governed by or
subject to such License Agreement.
6.13 LOUISVILLE PROPERTY. If Borrower has not consummated the sale of
the Louisville Property on or before April 1, 2000, Borrower shall, promptly
upon Agent's request, deliver to Agent: (i) a Mortgage with respect to the
Louisville Property, (ii) a fully paid mortgagee title insurance policy (or
binding commitment to issue a title insurance policy, marked to Agent's
satisfaction to evidence the form of such policy to be delivered with respect to
the Mortgage), in standard ALTA form, issued by a title insurance company
satisfactory to Agent, in an amount equal to not less than the fair market value
of the Louisville Property, insuring the Mortgage to create a valid Lien on the
Louisville Property with no exceptions which Agent shall not have approved in
writing and no survey exceptions, (iii) a survey of the Louisville Property
satisfactory to Agent, and (iv) such other documents as Agent shall, in its
Permitted Discretion, request.
6.14 ASSET SALES AND NET ASSET SALE PROCEEDS. Borrower shall notify
Agent in writing ten (10) days prior to Borrower or any of its Subsidiaries
consummating any Asset Sale and, in such notice, shall specify (i) the amount of
the Net Asset Sale Proceeds expected to be received by Borrower or such
Subsidiary, and (ii) how Borrower or such Subsidiary intends to utilize such Net
Asset Sale Proceeds. If the Asset Sale involves a sale or other disposition of
any Collateral or Additional Collateral, then the Net Asset Sale Proceeds shall
be turned over to Agent for application to the Obligations as prescribed by this
Agreement (unless otherwise agreed in writing by Agent and the Required Lenders
in their sole discretion). If the Asset Sale does not involve a sale or other
disposition of any Collateral or Additional Collateral, then the Net Asset Sale
Proceeds may be used by either Borrower or any Subsidiary of Borrower, in each
case in the Ordinary Course of Business, but in all events in a manner that does
not cause a breach by Borrower under any Material Contract.
6.15 POST-CLOSING MATTERS.
(a) NEW YORK REAL ESTATE. On or before November 1, 1999,
Borrower shall deliver to Agent the following, each to be in form and substance
satisfactory to Agent: (i) a Mortgage with respect to the New York Property
executed by Borrower and the Auburn Industrial Development Authority, (ii) a
fully paid mortgagee title insurance policy (or binding commitments to issue
title insurance policies, marked to Agent's satisfaction to evidence the form of
such policies to be delivered with respect to such Mortgage), in standard ALTA
form, issued by a title insurance company satisfactory to Agent, each in an
amount equal to not less than the fair market value of the New York Property
subject to the Mortgage, insuring the Mortgage to create a valid Lien on the New
York Property with no exceptions which Agent shall not have approved in writing
and no survey exceptions, and (iii) a survey of the New York Property.
(b) ALABAMA REAL ESTATE. On or before December 1, 1999,
Borrower shall deliver to Agent the following, each to be in form and substance
satisfactory to Agent: (i) a Mortgage with respect to the Alabama Property
executed by Borrower and the Industrial Development of the City of Scottsboro,
Alabama, (ii) a fully paid mortgagee title insurance policy (or binding
commitments to issue title insurance policies, marked to Agent's satisfaction to
evidence the form of such policies to be delivered with respect to
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such Mortgage), in standard ALTA form, issued by a title insurance company
satisfactory to Agent, each in an amount equal to not less than the fair market
value of the Alabama Property subject to the Mortgage, insuring the Mortgage to
create a valid Lien on the Alabama Property with no exceptions which Agent shall
not have approved in writing and no survey exceptions, and (iii) a survey of the
Alabama Property.
(c) CANADIAN STOCK. On or before November 1, 1999, Borrower
shall deliver to Agent all Lien Perfection Documents with respect to the Equity
Interests of AAF-McQuay Canada Inc., a corporation organized under the laws of
Canada, that constitute Pledged Foreign Stock.
(d) UNITED KINGDOM STOCK. Unless Borrower shall have disposed
of such stock prior to November 1, 1999, on or before November 1, 1999 Borrower
shall deliver to Agent all Lien Perfection Documents with respect to the Equity
Interests of J&E Hall Limited, a corporation organized under the laws of the
United Kingdom, that constitute Pledged Foreign Stock.
(e) INTELLECTUAL PROPERTY MATTERS. (i) On or before October
10, 1999, Borrower shall deliver to Agent appropriate assignment documents
sufficient for filing in the United States Patent and Trademark Office to vest
title to all of the Intellectual Property in Borrower and (ii) Borrower shall
use its best efforts to obtain releases from Connecticut National Bank, Citicorp
North America, Inc. and Citicorp Industrial Credit, Inc. of any filings recorded
in the United States Patent and Trademark Office in favor of each such Persons.
(f) CANADIAN BLOCKED ACCOUNT. On or before November 1, 1999,
Borrower shall, if and to the extent requested by Agent, establish a Blocked
Account with the Bank of Nova Scotia for the collection of Receivables
denominated in Canadian Dollars.
SECTION 7. NEGATIVE COVENANTS.
Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1 MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person, or acquire all or a substantial
portion of the assets or Equity Interests of any Person other than Permitted
Investments, or permit any other Person to consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets to any Person, except (i) sales by Borrower of its
Inventory in Borrower's Ordinary Course of Business, (ii) transfers of Consigned
Inventory by Borrower to the extent not prohibited by this Agreement, (iii)
sales and other dispositions of Equipment of Borrower to the extent expressly
permitted by this Agreement, (iv) Permitted Investments, (v) Permitted
Dispositions, and (vi) any other dispositions of assets expressly authorized by
this Agreement.
7.2 CREATION OF LIENS.
(a) Create, incur, assume or suffer to exist, or permit any Subsidiary
to create, incur, assume or suffer to exist, any Restricted Lien; or
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(b) Create, incur, assume or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
7.3 GUARANTEES. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to
Lenders), except (i) as disclosed on SCHEDULE 7.3, (ii) guarantees made in
Borrower's Ordinary Course of Business up to an aggregate amount of $4,000,000,
and (iii) the endorsement of checks in Borrower's Ordinary Course of Business,
if and to the extent that such assumptions, endorsements or guarantees are not
violative of the Public Notes Indenture or any of the other Public Notes
Documents.
7.4 INVESTMENTS.
(a) Make, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Investment if and to
the extent that the creation, incurrence, assumption or existence thereof would
violate any restriction, limitation or prohibition in any Material Contract; or
(b) Make, incur, assume or suffer to exist any Investment in
any other Person, except the following (provided that such Investment is not
violative of the Public Notes Indenture or any of the other Public Notes
Documents):
(i) Cash Equivalent Investments,
(ii) Investments existing on the Closing Date to the
extent described on SCHEDULE 7.4,
(iii) without duplication, Investments permitted as
Indebtedness under Section 7.8,
(iv) without duplication, Investments permitted as
Capital Expenditures under Section 7.6,
(v) without duplication, Investments permitted as
guarantees under Section 7.3,
(vi) without duplication, Investments permitted as
advances, loans or extensions of credit under Section 7.5,
(vii) Investments in Subsidiaries, joint ventures or
partnerships, provided that the aggregate amount of such Investments
outstanding at any time does not exceed $10,000,000 and, at the time of
each such Investment and after giving effect thereto, no Default or
Event of Default exists and Borrower has Undrawn Availability of at
least $10,000,000,
(viii) Investments received in connection with the
bankruptcy or reorganization of suppliers and Customers of Borrower and
in settlement of delinquent obligations of, and other disputes with,
suppliers and Customers arising in Borrower's Ordinary Course of
Business.
7.5 LOANS. Make advances, loans or extensions of credit to any Person,
including any Subsidiary or Affiliate except (i) the extension of commercial
trade credit in connection with the sale of Inventory in
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Borrower's Ordinary Course of Business; and (ii) loans or advances of money made
by Borrower to a Guarantor, provided that any instrument given to evidence any
such loan or advance is promptly pledged to Agent as security for the
Obligations; (iii) loans to its employees in Borrower's Ordinary Course of
Business not to exceed $500,000 in the aggregate at any time outstanding for any
individual or $3,000,000 in the aggregate at any time outstanding for all such
advances; and (iv) Permitted Investments, if and to the extent that such
advances, loans or extensions of credit are not violative of any Material
Contract.
7.6 CAPITAL EXPENDITURES. Contract for or make any Capital
Expenditures in any Fiscal Year in an amount in excess of $12,000,000.
7.7 DIVIDENDS. Declare, pay or make any dividend or distribution on any
shares of the Equity Interests of Borrower (other than Upstream Payments or
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of Borrower.
7.8 INDEBTEDNESS.
(a) Create, incur, assume or suffer to exist, or permit any Subsidiary
to create, incur, assume or suffer to exist, any Indebtedness if and to the
extent that the creation, incurrence, assumption or existence thereof would
violate any restriction, limitation or prohibition in any Material Contract; or
(b) Create, incur, assume or suffer to exist any Indebtedness except
the following (provided that the creation, incurrence, assumption or existence
thereof does not violate any restriction, limitation or prohibition in any
Material Contract):
(i) Indebtedness to Agent and Lenders relating to the
Advances and other Obligations,
(ii) Indebtedness in existence on the Closing Date that is
owing to Persons other than Lenders, that is not secured by a Lien
other than a Permitted Encumbrance, and that is described on SCHEDULE
5.7(b) and any extensions, renewals, refundings or replacements
thereof; PROVIDED, THAT, any such extension, extension, renewal,
refunding or replacement that is in an aggregate principal amount not
greater than the principal amount of, and is on terms no less favorable
to Borrower than the terms of, the Indebtedness so extended, renewed,
refunded or replaced,
(iii) Permitted Purchase Money Debt and any other Indebtedness
incurred for Capital Expenditures, to the extent that the aggregate
amount of such Indebtedness does not exceed the amount permitted under
Section 7.6 hereof,
(iv) unsecured Indebtedness incurred in Borrower's Ordinary
Course of Business (including open accounts extended by suppliers on
normal trade terms in connection with purchases of goods and services,
worker's compensation, taxes, compensation and other accrued expenses
incurred in Borrower's Ordinary Course of Business, but excluding
Indebtedness for Money Borrowed or Contingent Liabilities in respect
thereof),
(v) Indebtedness in respect of Charges to the extent that
payment thereof is being Properly Contested,
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(vi) Indebtedness with respect to reasonable warranties and
indemnities related to sales of Inventory in Borrower's Ordinary Course
of Business,
(vi) Indebtedness for Money Borrowed owing to Borrower's
Subsidiaries and Affiliates in an aggregate amount outstanding at any
time not to exceed $3,000,000, and
(vii) Permitted Contingent Liabilities.
7.9 NATURE OF BUSINESS. Engage in any business other than the business
in which it is engaged on the Closing Date and any business or activities that
are substantially similar, related or incidental thereto; substantially change
the nature of the business in which it is presently engaged; or except as
specifically permitted hereby, purchase or invest, directly or indirectly, in
any assets or property other than in Borrower's Ordinary Course of Business for
assets or property which are useful in, necessary for and are to be used in its
business as presently conducted.
7.10 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions disclosed in
Borrower's Ordinary Course of Business, on an arm's-length basis on terms no
less favorable than terms which would have been obtainable from a Person other
than an Affiliate.
7.11 LEASES. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $10,000,000 in any one Fiscal Year.
7.12 SUBSIDIARIES.
(a) Form any Subsidiary.
(b) Except to the extent constituting a Permitted Investment,
enter into any partnership, joint venture or similar arrangement with any
Person.
7.13 FISCAL YEAR AND ACCOUNTING CHANGES. Change its Fiscal Year, permit
any Subsidiary to have a fiscal year that is different from the Fiscal Year or
make any change (i) in accounting treatment and reporting practices except as
required by GAAP or (ii) in tax reporting treatment except as required by
Applicable Law.
7.14 PLEDGE OF CREDIT. Except through the issuance of a Letter of
Credit hereunder, pledge Agent's or any Lender's credit on any purchases or for
any purpose whatsoever or use any portion of any Advance in or for any business
other than Borrower's business as conducted on the date of this Agreement.
7.15 AMENDMENT OF ORGANIZATION DOCUMENTS. Amend, modify or waive any
term or material provision of its Organization Documents except as required by
Applicable Law.
7.16 COMPLIANCE WITH ERISA. (i) (x) Maintain, or permit any member of
the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on SCHEDULE 5.7(c), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction," as that term is
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defined in Section 406 of ERISA and Section 4975 of the Code, (iii) incur, or
permit any member of the Controlled Group to incur, any "accumulated funding
deficiency," as that term is defined in Section 302 of ERISA or Section 412 of
the Code, (iv) terminate, or permit any member of the Controlled Group to
terminate, any Plan where such event could result in any liability of Borrower
or any member of the Controlled Group or the imposition of a Lien on the
property of Borrower or any member of the Controlled Group pursuant to Section
4068 of ERISA, (v) assume, or permit any member of the Controlled Group to
assume, any obligation to contribute to any Multiemployer Plan not disclosed on
SCHEDULE 5.7(c), (vi) incur, or permit any member of the Controlled Group to
incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly
to notify Agent of the occurrence of any Termination Event, (viii) fail to
comply, or permit a member of the Controlled Group to fail to comply, with the
requirements of ERISA or the Code or other Applicable Laws in respect of any
Plan, or (ix) fail to meet, or permit any member of the Controlled Group to fail
to meet, all minimum funding requirements under ERISA or the Code or postpone or
delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Plan.
7.17 PREPAYMENT OF INDEBTEDNESS. At any time, directly or indirectly,
prepay any Indebtedness for Money Borrowed (other than the Obligations), or
repurchase, redeem or otherwise acquire any Indebtedness of Borrower, including
any outstanding Public Notes.
7.18 PUBLIC NOTES DOCUMENTS. At any time, directly or indirectly, amend
or modify the terms of any of the Public Notes Documents, other than to extend
the time of payment of any of the Public Notes or to reduce the rate of interest
payable in connection therewith.
7.19 UPSTREAM PAYMENTS. Create or suffer to exist any encumbrance or
restriction on the ability of any Subsidiary of Borrower to make any Upstream
Payment, except for encumbrances or restrictions (i) pursuant to any of the
Other Documents and (ii) existing under Applicable Law.
7.20 TAX CONSOLIDATION. File or consent to the filing of any
consolidated income tax return with any Person other than a Subsidiary.
7.21 NO FURTHER NEGATIVE PLEDGES. Hereafter enter into or become
subject to any agreement prohibiting or otherwise restricting the creation or
assumption of any Lien upon any of its property, whether now owned or hereafter
acquired, or requiring the grant of any security for any obligation if security
is given for any other obligation, except pursuant to the Loan Documents or
pursuant to the terms of any Permitted Purchase Money Indebtedness to the extent
such limitations relate only to the property that is the subject of the Purchase
Money Lien securing such Permitted Purchase Money Indebtedness.
SECTION 8. CONDITIONS PRECEDENT.
8.1 CONDITIONS TO INITIAL ADVANCES. The agreement of Lenders to make
the initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) OTHER DOCUMENTS. Agent shall have received each of the
Other Documents duly executed and delivered by an authorized officer of each of
the parties thereto, including Borrower;
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(b) FILINGS, REGISTRATIONS AND RECORDINGS. Each document
(including any UCC financing statement) required by this Agreement, or any Other
Documents or under Applicable Law or reasonably requested by the Agent to be
filed, registered or recorded in order to create, in favor of Agent, a perfected
security interest in or Lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence satisfactory to it, of each such
filing, registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto;
(c) CORPORATE PROCEEDINGS OF BORROWER. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of Borrower authorizing (i) the execution,
delivery and performance of this Agreement, the Notes, the Mortgages, any
related agreements, and each of the other Loan Documents and (ii) the granting
by Borrower of the security interests in and Liens upon the Collateral in each
case certified by the Secretary or an Assistant Secretary of Borrower as of the
Closing Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate;
(d) INCUMBENCY CERTIFICATES OF BORROWER. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower,
dated the Closing Date, as to the incumbency and signature of the officers of
Borrower executing this Agreement, any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;
(e) ORGANIZATION DOCUMENTS. Agent shall have received a copy
of the Organization Documents of Borrower, and all amendments thereto, certified
by the Secretary of State or other appropriate official of its jurisdiction of
organization together with copies of the By-Laws of Borrower and all agreements
of Borrower's shareholders certified as accurate and complete by the Secretary
of Borrower;
(f) GOOD STANDING CERTIFICATES. Agent shall have received good
standing certificates for Borrower dated not more than thirty (30) days prior to
the Closing Date, issued by the Secretary of State or other appropriate official
of Borrower's jurisdiction of incorporation and each jurisdiction where the
conduct of Borrower's business activities or the ownership of its properties
necessitates qualification;
(g) LEGAL OPINION. Agent shall have received favorable legal
opinions of Borrower's counsel or Agent's special counsel (qualified to practice
in the States of Kentucky, Alabama, Arkansas, Maryland, Minnesota, Missouri, New
York, Texas and Virginia in form and substance satisfactory to Agent, which
shall cover such matters incident to the transactions contemplated by this
Agreement and the other Loan Documents as Agent may require, and Borrower hereby
authorizes and directs each such counsel to deliver such opinions to Agent;
(h) NO LITIGATION. No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Borrower or against the officers or directors of Borrower (A)
in connection with any of the Loan Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and no injunction, writ, restraining order or other order of any
nature materially adverse to Borrower or the conduct of its business or
inconsistent with the due consummation of the transactions contemplated hereby
shall have been issued by any Governmental Body;
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(i) COLLATERAL EXAMINATION. Agent shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Inventory,
General Intangibles, Real Property and Equipment of Borrower and all books and
records in connection therewith;
(j) FEES. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Closing Date pursuant to Section 3 hereof;
(k) INSURANCE. Agent shall have received in form and substance
satisfactory to Agent, (i) certified copies of Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and (ii) certified copies of
Borrower's liability insurance policies, together with endorsements naming Agent
as a co-insured.
(l) TITLE INSURANCE. Agent shall have received fully paid
mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Agent's satisfaction to evidence the form of such
policies to be delivered with respect to the Mortgages), in standard ALTA form,
issued by a title insurance company satisfactory to Agent, each in an amount
equal to not less than the fair market value of the Real Property subject to the
Mortgage, insuring each Mortgage to create a valid Lien on the Real Property
with no exceptions which Agent shall not have approved in writing and no survey
exceptions;
(m) ENVIRONMENTAL REPORTS. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms with respect to all Real Property owned or leased by Borrower;
(n) PAYMENT INSTRUCTIONS. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(o) LOCKBOX AND BLOCKED ACCOUNT AGREEMENTS. Agent shall have
received duly executed agreements establishing the Blocked Accounts acceptable
in all respects to Agent for the collection and servicing of the Receivables and
other proceeds of Collateral;
(p) CONSENTS. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by any of
the Loan Documents; and, Agent shall have received such Consents and waivers of
such third parties as might assert claims with respect to the Collateral, as
Agent and its counsel shall deem necessary;
(q) NO ADVERSE MATERIAL CHANGE. Since June 30, 1999, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and no representations
made or information supplied to Agent shall have been proven to be inaccurate or
misleading in any material respect;
(r) LIEN WAIVER AGREEMENTS. Agent shall have Lien Waiver
Agreements satisfactory to Agent with respect to premises leased by Borrower at
which any Inventory or Equipment is located;
(s) MORTGAGES. Agent shall have received in form and substance
satisfactory to Lenders (i) the executed Mortgages, and (ii) surveys.
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(t) CONTRACT REVIEW. Agent shall have reviewed all Material
Contracts of Borrower and all other leases, union contracts, labor contracts,
vendor supply contracts, license agreements and distributorship agreements which
Agent or its counsel deems necessary and such contracts and agreements shall be
satisfactory in all respects to Agent and its counsel;
(u) CLOSING CERTIFICATE. Agent shall have received a closing
certificate signed by the chief financial officer or treasurer of Borrower dated
as of the date hereof, stating that (i) all representations and warranties set
forth in this Agreement and the other Loan Documents are true and correct on and
as of such date, (ii) Borrower is on such date in compliance with all the terms
and provisions set forth in this Agreement and the other Loan Documents and
(iii) on such date no Default or Event of Default has occurred or is continuing;
(v) BORROWING BASE. Agent shall have received evidence from
Borrower that the aggregate amount of Eligible Receivables and Eligible
Inventory is sufficient in value and amount to support Advances in the amount
requested by Borrower on the Closing Date;
(w) UNDRAWN AVAILABILITY. After giving effect to the initial
Advances hereunder in amounts necessary to repay all Indebtedness outstanding
under the Scotiabank Credit Agreement and all fees payable hereunder on the
Closing Date, Borrower shall have Undrawn Availability on the Closing Date of at
least $20,000,000;
(x) NO LABOR DISPUTES. Agent shall have received assurances
satisfactory to it that there are no threats of strikes or work stoppages by any
employees, or organization of employees, of Borrower or any Guarantor, which
Agent reasonably determines may have a Material Adverse Effect; and
(y) OTHER. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to Agent and its counsel.
8.2 CONDITIONS TO EACH ADVANCE. The agreement of Lenders to make any
Advance requested to be made on any date (including the initial Advance) is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Borrower in or pursuant to this Agreement
and any of the Other Documents, and each of the representations and warranties
contained in any certificate, document or financial or other statement furnished
at any time under or in connection with this Agreement or any of the Other
Documents shall all be true and correct in all material respects on and as of
such date as if made on and as of such date;
(b) NO DEFAULT. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; PROVIDED, HOWEVER that Lenders,
in their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default;
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(c) BORROWING BASE CERTIFICATES; MAXIMUM ADVANCES. Agent shall
have received each Borrowing Base Certificate required by the terms of this
Agreement or otherwise requested by Agent, and, in the case of any Advances
requested to be made, after giving effect thereto, the aggregate Advances shall
not exceed the maximum amount of Advances permitted under Section 2.1 hereof;
(d) NO LITIGATION. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court or Governmental Body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of, this
Agreement or any of the Other Documents or the consummation of the transactions
contemplated hereby or thereby; and
(e) NO MATERIAL ADVERSE EFFECT. No event shall have occurred
and no condition shall exist which has or could be reasonably expected to have a
Material Adverse Effect.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
SECTION 9. INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1 DISCLOSURE OF MATERIAL MATTERS. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including Borrower's reclamation
or repossession of, or the return to Borrower of, a material amount of goods or
claims or disputes asserted by any Customer or other obligor.
9.2 SCHEDULES. Deliver to Agent on or before the twentieth (20th) day
of each month as and for the prior month (a) Receivables agings, (b) accounts
payable schedules, (c) booked order (backlog) reports (d) Inventory reports, (e)
a reconciliation of accounts receivable, accounts payable and Inventory against
the general ledger, and (f) a Borrowing Base Certificate (PROVIDED, that at any
time Undrawn Availability is less than $10,000,000, Borrower shall deliver
Borrowing Base Certificates to Agent on a weekly or daily basis, as requested by
Agent). In addition, Borrower will deliver to Agent at such intervals as Agent
may require: (i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Collateral as Agent may
require including trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section are
to be in form satisfactory to Agent and executed by Borrower and delivered to
Agent from time to time solely for Agent's convenience in maintaining records of
the Collateral, and Borrower's failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent's Lien with respect
to the Collateral.
9.3 ENVIRONMENTAL REPORTS. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the chief financial officer or treasurer of Borrower
stating, to the best of his knowledge, that Borrower is in compliance in all
material respects with all Environmental Laws and laws relating to occupational
safety and health. To the extent
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Borrower is not in compliance with the foregoing laws, the certificate shall set
forth with specificity all areas of non-compliance and the proposed action
Borrower will implement in order to achieve full compliance.
9.4 LITIGATION. Promptly notify Agent in writing of any litigation,
suit or administrative proceeding affecting Borrower, whether or not the claim
is covered by insurance, and of any suit or administrative proceeding, which in
any such case could reasonably be expected to have a Material Adverse Effect on
Borrower.
9.5 MATERIAL OCCURRENCES. Promptly notify Agent in writing upon the
occurrence of (a) any Default or Event of Default; (b) any event of default
under any Public Note Document; (c) any event which with the giving of notice or
lapse of time, or both, would constitute an event of default under any Public
Note Document; (d) any event, development or circumstance whereby any financial
statements or other reports furnished to Agent fail in any material respect to
present fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of Borrower as of the date of such statements;
(e) any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject Borrower to a tax imposed by Section 4971 of the
Code; (f) each and every default by Borrower which might result in the
acceleration of the maturity of any Indebtedness for Money Borrowed, including
the names and addresses of the holders of such Indebtedness with respect to
which there is a default existing or with respect to which the maturity has been
or could be accelerated, and the amount of such Indebtedness for Money Borrowed;
and (g) any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower propose to take with
respect thereto.
9.6 INTENTIONALLY OMITTED.
9.7 ANNUAL FINANCIAL STATEMENTS. Furnish Agent within ninety (90) days
after the end of each Fiscal Year of Borrower, financial statements of Borrower
on a consolidating and consolidated basis including statements of income and
stockholders' equity and cash flow from the beginning of the current Fiscal Year
to the end of such Fiscal Year and the balance sheet as at the end of such
Fiscal Year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail, and the consolidated financial
statements having been reported upon without qualification by Ernst & Young or
another independent certified public accounting firm selected by Borrower and
satisfactory to Agent (the "Accountants"). The report of the Accountants shall
be accompanied by a statement of the Accountants certifying that (i) they have
caused Sections 6.5, 6.6, 6.7, 7.6 and 7.11 of this Agreement to be reviewed,
(ii) in making the examination upon which such report was based either no
information came to their attention which to their knowledge constituted an
Event of Default or a Default under such sections of this Agreement or, if such
information came to their attention, specifying any such Default or Event of
Default, its nature, when it occurred and whether it is continuing. In addition,
the reports shall be accompanied by a Compliance Certificate.
9.8 QUARTERLY FINANCIAL STATEMENTS. Furnish Agent within forty-five
(45) days after the end of each Fiscal Quarter, an unaudited balance sheet of
Borrower on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrower on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
Fiscal Year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in
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all material respects, subject to normal year end adjustments. The reports shall
be accompanied by a Compliance Certificate.
9.9 MONTHLY FINANCIAL STATEMENTS. Furnish Agent within thirty (30) days
after the end of each month, an unaudited balance sheet of Borrower on a
consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrower on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
Fiscal Year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a Compliance Certificate.
9.10 OTHER REPORTS. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall be required to file
with the Securities and Exchange Commission, and (ii) copies of all notices sent
pursuant to the Public Note Documents.
9.11 ADDITIONAL INFORMATION. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Notes have been complied with by Borrower including, and
without the necessity of any request by Agent, (a) copies of all environmental
audits and reviews, (b) at least thirty (30) days prior thereto, notice of
Borrower's opening of any new office or place of business or Borrower's closing
of any existing office or place of business, and (c) promptly upon Borrower's
learning thereof, notice of any labor dispute to which Borrower may become a
party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which Borrower is a
party or by which Borrower is bound.
9.12 PROJECTED OPERATING BUDGET. Furnish Agent, no later than thirty
(30) days after the beginning of each of Borrower's Fiscal Years commencing with
Fiscal Year 2001, a month by month projected operating budget and cash flow of
Borrower on a consolidated and consolidating basis for such Fiscal Year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by the President or chief financial officer of Borrower to
the effect that such projections have been prepared on the basis of sound
financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.13 VARIANCES FROM OPERATING BUDGET. Furnish Agent, concurrently with
the delivery of the financial statements referred to in Section 9.7 and each
quarterly report, a written report summarizing all material variances from
budgets submitted by Borrower pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14 NOTICE OF SUITS, ADVERSE EVENTS. Furnish Agent with prompt notice
of (i) any lapse or other termination of any Consent issued to Borrower by any
Governmental Body or any other Person that is material to the operation of
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by Borrower with any Governmental Body or Person, if such
reports indicate any material change in the business, operations, affairs or
condition of Borrower, or if copies thereof are requested by Lender, and (iv)
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copies of any material notices and other communications from any Governmental
Body or Person which specifically relate to Borrower.
9.15 ERISA NOTICES AND REQUESTS. Furnish Agent with immediate written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) Borrower or any member of the Controlled Group knows or
has reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which Borrower or any member of the
Controlled Group has taken, is taking or proposes to take with respect thereto,
(iii) a funding waiver request has been filed with respect to any Plan together
with all communications received by Borrower or any member of the Controlled
Group with respect to such request, (iv) any material increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) Borrower or any member of
the Controlled Group shall receive from the PBGC a notice of intention to
terminate a Plan or to have a trustee appointed to administer a Plan, together
with copies of each such notice, (vi) Borrower or any member of the Controlled
Group shall receive any favorable or unfavorable determination letter from the
Internal Revenue Service regarding the qualification of a Plan under Section
401(a) of the Code, together with copies of each such letter; (vii) Borrower or
any member of the Controlled Group shall receive a notice regarding the
imposition of withdrawal liability, together with copies of each such notice;
(viii) Borrower or any member of the Controlled Group shall fail to make a
required installment or any other required payment under Section 412 of the Code
on or before the due date for such installment or payment; (ix) Borrower or any
member of the Controlled Group knows that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or
will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
9.16 ADDITIONAL DOCUMENTS. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
SECTION 10. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1 failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities provided for herein
or in any Other Document when due or make any other payment, fee or charge
provided for herein or in any Other Document when due;
10.2 any representation or warranty made or deemed made by Borrower in
this Agreement or any Other 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 misleading in any material respect on the
date when made or deemed to have been made;
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10.3 failure by Borrower to (i) furnish financial information when due
or when requested, or (ii) permit the inspection of its books or records, as
required by any Loan Document, except for a failure or neglect of a Borrower to
furnish the information required by Section 9.2 hereof that is cured within ten
(10) days from the occurrence of such failure or neglect, provided that such
opportunity to cure shall not apply if Borrower has failed or neglected to
furnish the required information within the time required by Section 9.2 two (2)
previous times within the previous twelve (12) months;
10.4 issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of Borrower's property;
10.5 failure or neglect of Borrower to perform, keep or observe any
term, provision, condition, covenant herein contained, or contained in any Other
Document or other arrangement, now or hereafter entered into between Borrower
and Agent or any Lender except for a failure or neglect of Borrower to perform,
keep or observe any term, provision, condition or covenant, contained in
Sections 6.2, 6.7, 6.8 or 6.9 hereof which is cured within twenty (20) days
after the occurrence of such failure or neglect;
10.6 any judgment or judgments are rendered against Borrower or any
Guarantor for an aggregate amount in excess of $500,000 if such judgment results
in the imposition of any Lien upon any of the Collateral, there shall be any
period of twenty (20) consecutive days during which such judgment is not
satisfied, stayed pending appeal or otherwise discharged, or the holder of such
judgment shall commence enforcement proceedings with respect thereto;
10.7 Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or declared insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8 Borrower or any Guarantor shall admit in writing its inability, or
be generally unable, to pay its debts as they become due, cease operations of
its present business or cease to be Solvent;
10.9 any Guarantor, shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present business, (iii)
make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
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10.10 any Subsidiary of Borrower shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, within thirty
(30) days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action, which, as determined by Agent, have
a Material Adverse Effect on Borrower, for the purpose of effecting any of the
foregoing;
10.11 any change in Borrower's condition or affairs (financial or
otherwise) taken as a whole, which, as determined by Agent, in Agent's opinion,
has a Material Adverse Effect;
10.12 any Lien created hereunder or provided for hereby or under any
Other Document for any reason ceases to be or is not a valid and perfected Lien
having a first priority interest;
10.13 an event of default has occurred and been declared under the any
of the IDB Documents or the Public Notes Documents which default shall not have
been cured or waived within any applicable grace period or for which any of the
holders of the IDB Bonds or Public Notes (or an indenture trustee for either)
are permitted to accelerate the maturity of any of the IDB Bonds or Public
Notes, take enforcement action, or exercise any remedies;
10.14 a default of the obligations of Borrower under any other
agreement to which it is a party shall occur that has or could reasonably be
expected to have a Material Adverse Effect and which is not cured within any
applicable grace period;
10.15 termination or breach of any Guaranty or any Guaranty Security
Document executed and delivered to Agent in connection with the Obligations or,
if any Guarantor attempts to terminate or challenges the validity of or its
liability under, any such Guaranty, Guaranty Security Document or similar
agreement;
10.16 any Change of Control shall occur;
10.17 any material provision of this Agreement or any of the Other
Documents shall, for any reason, cease to be valid and binding on Borrower, or
Borrower shall so claim in writing to Agent;
10.18 (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of Borrower,
the continuation of which is material to the continuation of Borrower's
business, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify any such license, permit, trademark, tradename or patent and such
proceedings shall not be dismissed or discharged within sixty (60) days, or (C)
schedule or conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of Borrower's business and
the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
license, permit, trademark, tradename or patent; (ii) any agreement which is
necessary or material to the operation of Borrower's business shall be revoked
or terminated and not replaced by a substitute acceptable to Agent within thirty
(30) days after the date of such revocation or
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termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect on Borrower;
10.19 any material portion of the Collateral shall be seized or taken
by a Governmental Body, or Borrower or the title and rights of Borrower which is
the owner of any material portion of the Collateral shall have become the
subject matter of litigation which might, in the opinion of Agent, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;
10.20 the operations of a material portion of Borrower's manufacturing
facilities are interrupted at any time for more than one hundred twenty (120)
hours; or
10.21 an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, Borrower or any
member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, could reasonably be expected to have a
Material Adverse Effect on Borrower.
SECTION 11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 RIGHTS AND REMEDIES. Upon or after (i) the occurrence of an Event
of Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; (ii) an occurrence of any of the other Events of Default
and at any time thereafter (such default not having previously been cured), at
the option of Required Lenders all Obligations shall be immediately due and
payable and Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances; and (iii) a filing of a
petition against Borrower in any involuntary case under any state or federal
bankruptcy laws, the obligation of Lenders to make Advances hereunder shall be
terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over Borrower. Upon or after the occurrence
of any Event of Default, Agent shall have the right to exercise any and all
other rights and remedies provided for herein, under the UCC and at law or
equity generally, including the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Agent may enter any of Borrower's premises or
other premises without legal process and without incurring liability to Borrower
therefor, and Agent may thereupon, or at any time thereafter, in its discretion
without notice or demand, take the Collateral and remove the same to such place
as Agent may deem advisable and Agent may require Borrower to make the
Collateral available to Agent at a convenient place. With or without having the
Collateral at the time or place of sale, Agent may sell the Collateral, or any
part thereof, at public or private sale, at any time or place, in one or more
sales, at such price or prices, and upon such terms, either for cash, credit or
future delivery, as Agent may elect. Except as to that part of the Collateral
which is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Agent shall give Borrower reasonable
notification of such sale or sales, it being agreed that in all events written
notice mailed to Borrower at least five (5) days prior to such sale or sales is
reasonable notification. At any public sale Agent or any Lender may bid for and
become the purchaser, and Agent, any Lender or any other purchaser at any such
sale thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right and
equity are hereby expressly waived and released by Borrower. In connection with
the exercise of the foregoing remedies, Agent is granted permission to use
all of Borrower's trademarks,
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trade styles, trade names, patents, patent applications, licenses, franchises
and other proprietary rights which are used in connection with (a) Inventory for
the purpose of marketing, advertising for sale and disposing of such Inventory
and (b) Equipment for the purpose of completing the manufacture of unfinished
goods. The proceeds realized from the sale of any Collateral shall be applied as
follows: first, to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations and any fees payable under this
Agreement; and, third, to the principal of the Obligations. If any deficiency
shall arise, Borrower shall remain liable to Agent and Lenders therefor.
11.2 AGENT'S DISCRETION. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3 SETOFF. In addition to any other rights which Agent or any Lender
may have under Applicable Law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply Borrower's property
held by Agent and such Lender to reduce the Obligations.
11.4 RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
SECTION 12. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 WAIVER OF NOTICE. Borrower hereby waives notice of non-payment of
any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit 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.
12.2 DELAY. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3 JURY WAIVER. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
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THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 13. EFFECTIVE DATE AND TERMINATION.
13.1 TERM. This Agreement shall become effective on the date hereof and
shall continue in full force and effect until September 30, 2002 (the "Term"),
unless sooner terminated as herein provided.
13.2 TERMINATION.
(a) TERMINATION BY AGENT. Agent may (and upon the direction of
any Lender in accordance with Section 15.2 hereof, shall) terminate the
Agreement without notice upon or after the occurrence of an Event of Default;
PROVIDED, HOWEVER, that the Agreement shall automatically terminate as provided
in Section 11.1(i) hereof.
(b) TERMINATION BY BORROWER. Borrower may terminate this
Agreement at any time upon ninety (90) days prior written notice upon payment in
full of the Obligations, including all the fees set forth in the Fee Letter.
13.3 TERMINATION. On the last day of the Term or effective upon any
earlier termination of this Agreement by Agent or by Borrower, all of the
Obligations shall be immediately due and payable as provided in Section 2.5
hereof, Lenders shall have no obligation to make any Advances, and Agent shall
have no obligation to issue or procure any Letters of Credit. The termination of
the Agreement shall not affect Borrower's, Agent's or any Lender's rights, or
any of the Obligations having their inception prior to the effective date of
such termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrower's
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished Agent and Lenders with
an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, Borrower waives any rights which it may have under the UCC to
demand the filing of termination statements with respect to the Collateral, and
Agent shall not be required to send such termination statements to Borrower, or
to file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
SECTION 14. REGARDING AGENT.
14.1 APPOINTMENT. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of each of the Loan Documents and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto and Agent shall hold all Collateral, payments of
principal and interest, fees (except the fees set forth in the Fee Letter),
charges and
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collections (without giving effect to any collection days) received pursuant
to this Agreement, for its benefit and the ratable benefit of Lenders. Agent may
perform any of its duties hereunder by or through its agents or employees. As to
any matters not expressly provided for by this Agreement (including collection
of the Notes) Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding; PROVIDED, HOWEVER,
that Agent shall not be required to take any action which exposes Agent to
liability or which is contrary to this Agreement or the Other Documents or
Applicable Law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.
14.2 NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, any of the Loan Documents or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of any of the Loan Documents or for any failure of Borrower to
perform its obligations hereunder. Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, any of the Loan Documents, or
to inspect the properties, books or records of Borrower. The duties of Agent as
respects the Advances to Borrower shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
14.3 LACK OF RELIANCE ON AGENT AND RESIGNATION.
(a) Independently and without reliance upon Agent or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Borrower in connection
with the making and the continuance of the Advances hereunder and the taking or
not taking of any action in connection herewith, and (ii) its own appraisal of
the creditworthiness of Borrower. Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as shall
be provided by Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of any of
the Loan Documents, or of the financial condition of Borrower, or be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement, the Notes, the Other
Documents or the financial condition of Borrower, or the existence of any Event
of Default or any Default.
(b) Agent may resign on sixty (60) days written notice to each
of Lenders and Borrower and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrower. Any
such successor Agent shall succeed to the rights, powers and duties of Agent,
and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's
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rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent. After any Agent's
resignation as Agent, the provisions of this Section 14 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
14.4 CERTAIN RIGHTS OF AGENT. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5 RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6 NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received written notice from a Lender or
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default." In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; PROVIDED, HOWEVER, that, unless and until Agent shall have received
such directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7 INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; PROVIDED, HOWEVER, that, Lenders shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8 AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
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14.9 DELIVERY OF DOCUMENTS. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, and 9.9 from Borrower pursuant to
the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10 BORROWER'S UNDERTAKING TO AGENT. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy Borrower's obligations to make payments for the account of Lenders or
the relevant one or more of them pursuant to this Agreement.
SECTION 15. MISCELLANEOUS.
15.1 GOVERNING LAW; PROCESS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, Borrower accepts for itself
and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrower at its address set forth in Section 15.7
and service so made shall be deemed completed five (5) days after the same shall
have been so deposited in the mails of the United States of America, or, at the
Agent's and/or any Lender's option, by service upon CT Corporation, which
Borrower irrevocably appoints as Borrower's agent for the purpose of accepting
service within the State of New York. Nothing herein shall affect the right to
serve process in any manner permitted by Applicable Law or shall limit the right
of Agent or any Lender to bring proceedings against Borrower in the courts of
any other jurisdiction. Borrower waives any objection to jurisdiction and venue
of any action instituted hereunder and shall not assert any defense based on
lack of jurisdiction or venue or based upon forum non conveniens. Any judicial
proceeding by Borrower against Agent or any Lender involving, directly or
indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be brought only in
a federal or state court located in the County of Manhattan, State of New York.
15.2 ENTIRE UNDERSTANDING; AMENDMENTS.
(a) This Agreement and the documents executed concurrently
herewith contain the entire understanding between Borrower, Agent and each
Lender and supersedes all prior agreements and understandings, if any, relating
to the subject matter hereof. Any promises, representations, warranties or
guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing, signed by Borrower's, Agent's and each Lender's
respective officers. Neither this Agreement nor any portion or provisions hereof
may be changed, modified, amended, waived, supplemented, discharged, canceled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Borrower acknowledges
that it has been advised by counsel in connection with the execution of this
Agreement and Other Documents and is not relying upon oral representations or
statements inconsistent with the terms and provisions of this Agreement.
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(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrower may, subject to the provisions of this
Section 15.2(b), from time to time enter into written supplemental agreements to
this Agreement or any of the Other Documents executed by Borrower, for the
purpose of adding or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of Lenders, Agent or Borrower thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
PROVIDED, HOWEVER, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage or commitment
amount of any Lender;
(ii) extend the maturity of any Note or the due date
for any amount payable hereunder, or decrease the rate of interest or
reduce any fee payable by Borrower to Lenders pursuant to this
Agreement or alter the amount of repayments;
(iii) alter the definition of the term Required
Lenders or alter, amend or modify this Section 15.2(b);
(iv) release any material portion of the Collateral
during any calendar year (other than in accordance with the provisions
of this Agreement);
(v) change the rights and duties of Agent;
(vi) increase the Maximum Revolving Amount or permit
any Out-of-Formula Loan to be made if after giving effect thereto the
total of Revolving Advances outstanding hereunder would exceed the
Formula Amount for more than thirty (30) consecutive days or exceed one
hundred ten percent (110%) of the Formula Amount; or
(vii) increase the Advance Rates above the Advance
Rates in effect on the Closing Date.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrower, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to
this Section 15.2 and such Lender shall not respond or reply to Agent in writing
within ten (10) Business Days of delivery of such request, such Lender shall be
deemed to have consented to the matter that was the subject of the request. In
the event that Agent requests the consent of a Lender pursuant to this Section
15.2 and such consent is denied, then PNC may, at its option, require such
Lender to assign its interest in the Advances to PNC or to another Lender or to
any other Person designated by the Agent (the "Designated Lender"), for a price
equal to the then outstanding principal amount thereof plus accrued and unpaid
interest and fees due such Lender, which interest and fees shall be paid when
collected from Borrower. In the event PNC elects to require any Lender to assign
its interest to PNC or to the Designated Lender, PNC will so notify such Lender
in writing
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within forty-five (45) days following such Lender's denial, and such Lender will
assign its interest to PNC or the Designated Lender no later than five (5) days
following receipt of such notice pursuant to a Commitment Transfer Supplement
executed by such Lender, PNC or the Designated Lender, as appropriate, and
Agent.
15.3 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrower, Agent, each Lender, all future holders of the Obligations
and their respective successors and assigns, except that Borrower may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Agent and each Lender.
(b) Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Participant"). Each Participant may exercise all rights of payment (including
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Participant were the
direct holder thereof provided that Borrower shall not be required to pay to any
Participant more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Participant had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrower be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Participant. Borrower hereby grants to any Participant
a continuing security interest in any deposits, moneys or other property
actually or constructively held by such Participant as security for the
Participant's interest in the Advances.
(c) Any Lender may with the consent of Agent (which consent
shall not be unreasonably withheld or delayed) and Borrower (which consent shall
not be unreasonably withheld or delayed, and shall not be required if an Event
of Default exists) sell, assign or transfer all or any part of its rights under
the Loan Documents to one or more Purchasing Lenders, and one or more Purchasing
Lenders may commit to make Advances hereunder, in minimum amounts of not less
than $5,000,000, pursuant to a Commitment Transfer Supplement, executed by an
Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for
recording; PROVIDED, HOWEVER, that nothing contained herein shall prohibit or
restrict PNC from assigning any of its rights and obligations under the Loan
Document to any other Person after the Closing Date. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrower hereby consents to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the
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Other Documents. Borrower shall execute and deliver such further documents and
do such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrower, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in the
amount of $3,500 payable by the applicable Purchasing Lender upon the effective
date of each transfer or assignment to such Purchasing Lender.
(e) Borrower authorizes each Lender to disclose to any
Participant or Purchasing Lender and any prospective Participant or Purchasing
Lender any and all financial information in such Lender's possession concerning
Borrower which has been delivered to such Lender by or on behalf of Borrower
pursuant to this Agreement or in connection with such Lender's credit evaluation
of Borrower.
15.4 TAX TREATMENT. If any interest in any Loan Document is transferred
to any Purchasing Lender or Participant that is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Purchasing Lender or Participant, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section 2.18
hereof.
15.5 APPLICATION OF PAYMENTS. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
15.6 INDEMNITY. Borrower shall indemnify Agent, each Lender and each of
their respective officers, directors, Affiliates, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against Agent or any Lender in any
litigation, proceeding or investigation instituted or conducted by any
Governmental Body or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, any of
the Loan Documents, whether or not Agent or any Lender is a party thereto,
except to the extent that any of the foregoing arises out of the willful
misconduct or gross (not mere) negligence of the party being indemnified.
15.7 NOTICE. Any notice or request hereunder may be given to Borrower
or to Agent or any Lender at their respective addresses set forth below or at
such other address as may hereafter be specified in a notice designated as a
notice of change of address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice
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of change of address) with electronic confirmation of its receipt. Any notice or
other communication required or permitted pursuant to this Agreement shall be
deemed given (a) when personally delivered to any officer of the party to whom
it is addressed, (b) on the earlier of actual receipt thereof or three (3) days
following posting thereof in the U.S. Mail by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation of its
receipt, in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the other
by like notice:
(A) If to Agent or PNC Bank, National Association
PNC at: Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Attention: Mr. Ryan Peak
Telephone: (732) 220-4315
Telecopier: (732) 220-4393
with a copy to: Parker, Hudson, Rainer & Dobbs LLP
1500 Marquis Two Tower
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: C. Edward Dobbs, Esq.
Telephone: (404) 523-5300
Telecopier: (404) 522-8409
(B) If to a Lender other than Agent, as specified on the signature
pages hereof or the appropriate Commitment Transfer Supplement
(C) If to Borrower, at: AAF-McQuay, Inc.
215 Central Avenue
Louisville, Kentucky 40208
Attention: Mr. Ronald Pederson
Telephone: (502) 637-0278
Telecopier: (502) 637-0177
with a copy to: AAF-McQuay, Inc.
215 Central Avenue
Louisville, Kentucky 40208
Attention: General Counsel
Telephone: (502) 637-0503
Telecopier: (502) 551-0113
15.8 SURVIVAL. The obligations of Borrower under Sections 2.16(e),
2.17, 2.18, 3.6, 3.7, 3.8, 14.7 and 15.6 shall survive termination of this
Agreement and the Other Documents and payment in full of the Obligations. The
obligations of Lenders under Section 14.7 shall survive termination of this
Agreement and the Other Documents and payment in full of the Obligations.
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15.9 SEVERABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under Applicable Laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.10 EXPENSES. All costs and expenses including reasonable attorneys'
fees (whether outside counsel or the allocated costs of in house counsel, but
not for the same legal work performed by each such counsel) and disbursements
incurred by Agent, Agent on behalf of Lenders and Lenders (a) in all efforts
made to enforce payment of any Obligation or effect collection of any
Collateral, (b) in connection with the entering into, modification, amendment,
administration and enforcement of this Agreement or any consents or waivers
hereunder and all related agreements, documents and instruments, (c) in
instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with Borrower, or (e) in connection with any advice given to Agent or any Lender
with respect to its rights and obligations under this Agreement and all related
agreements, may be charged to Borrower's Account and shall be part of the
Obligations.
15.11 INJUNCTIVE RELIEF. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
15.12 CONSEQUENTIAL DAMAGES. Neither Agent nor any Lender, nor any
agent or attorney for any of them, shall be liable to Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
15.13 CAPTIONS. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
15.14 COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
15.15 CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
15.16 CONFIDENTIALITY; SHARING INFORMATION.
(a) Agent, each Lender and each Participant shall hold all
non-public information obtained by Agent, such Lender or such Participant
pursuant to the requirements of this Agreement in accordance with Agent's, such
Lender's and such Participant's customary procedures for handling confidential
information of this nature; provided, however, Agent, each Lender and each
Participant may disclose such confidential information (a) to its examiners,
affiliates, outside auditors, counsel and other professional
- 81 -
<PAGE>
advisors, (b) to Agent, any Lender or, subject to the provisions of this Section
15.16(a), to any prospective Participants and Purchasing Lenders, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by Applicable Law or court order, Agent, each Lender and each
Participant shall use its best efforts prior to disclosure thereof, to notify
Borrower of the applicable request for disclosure of such non-public information
(A) by a Governmental Body or representative thereof (other than any such
request in connection with an examination of the financial condition of a Lender
or a Participant by such Governmental Body) or (B) pursuant to legal process and
(ii) in no event shall Agent, any Lender or any Participant be obligated to
return any materials furnished by Borrower other than those documents and
instruments in possession of Agent or any Lender in order to perfect its Lien on
the Collateral once the Obligations have been paid in full and this Agreement
has been terminated.
(b) Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
Borrower or one or more of its Affiliates (in connection with this Agreement or
otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such
Lender and Borrower hereby authorizes each Lender to share any information
delivered to such Lender by Borrower and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to enter into this
Agreement, to any such Subsidiary or Affiliate of such Lender, it being
understood that any such Subsidiary or Affiliate of any Lender receiving such
information shall be bound by the provision of Section 15.16 as if it were a
Lender hereunder. Such authorization shall survive the repayment of the other
Obligations and the termination of the Loan Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 82 -
<PAGE>
15.17 PUBLICITY. Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrower, Agent and Lenders, including announcements which are commonly known as
tombstones, in such publications and to such selected parties as Agent shall in
its sole and absolute discretion deem appropriate.
Each of the parties has executed and delivered this Agreement in
Atlanta, Georgia as of the day and year first above written.
ATTEST: AAF-MCQUAY INC.
By:
- ------------------------------ -------------------------------------------
PAUL HEIM, Assistant Secretary ANDREW R. MORRISON, Chief Financial Officer
[CORPORATE SEAL] 215 Central Avenue
Louisville, Kentucky 40208
PNC BANK, NATIONAL ASSOCIATION, as
a Lender and as Agent
By:
----------------------------------------
KURT V. PUTKONEN, Vice President
Commitment Percentage: 100%
STATE OF GEORGIA )
) ss.
COUNTY OF FULTON )
On this 30th day of September, 1999, before me personally came Andrew
R. Morrison, to me known, who, being by me duly sworn, did depose and say that
he is the Chief Financial Officer of AAF-MCQUAY INC., the corporation described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation,
and that he signed his name thereto by like order.
------------------------------
NOTARY PUBLIC
STATE OF GEORGIA )
) ss.
COUNTY OF FULTON )
On this 30th day of September, 1999, before me personally came Kurt V.
Putkonen , to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of PNC BANK, NATIONAL ASSOCIATION, the national banking
association described in and which executed the foregoing instrument and that he
signed his name thereto by on behalf of said association.
------------------------------
NOTARY PUBLIC
- 83 -
<PAGE>
Exhibit A
FORM OF REVOLVING CREDIT A NOTE
REVOLVING CREDIT A NOTE
$__________ __________________
___________,_______
This Revolving Credit A Note is executed and delivered under and
pursuant to the terms of that certain Revolving Credit, Term Loan and Security
Agreement dated September 30, 1999 (as amended, restated, supplemented or
modified from time to time, the "Loan Agreement") by and among AAF- MCQUAY INC.,
a Delaware corporation having its principal place of business at 215 Central
Avenue, Louisville, Kentucky 40208 ("Borrower"), the various financial
institutions named therein or which hereafter become a party thereto (each
individually a "Lender" and collectively "Lenders"), PNC BANK, NATIONAL
ASSOCIATION (in its individual capacity, "PNC") for itself as a Lender, and as
agent for Lenders (together with its successors in such capacity "Agent").
Capitalized terms not otherwise defined herein shall have the meanings provided
in the Loan Agreement.
FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of
__________________ (together with its successors or assigns, the "Holder"), at
the office of Agent located at Two Tower Center Boulevard, East Brunswick, New
Jersey 08816 or at such other place as Agent may from time to time designate to
Borrower in writing:
(i) the principal sum of ______________ AND __/100 DOLLARS
($__________) or, if different, from such amount, the unpaid principal balance
of Holder's Commitment Percentage of the Revolving A Advances as may be due and
owing under the Loan Agreement, payable in accordance with the provisions of the
Loan Agreement, subject to acceleration upon the occurrence of an Event of
Default under the Loan Agreement or earlier termination of the Loan Agreement
pursuant to the terms thereof; and
(ii) interest on the principal amount of this Note from time to time
outstanding until such principal amount is paid in full at the applicable
Revolving Interest Rate in accordance with the provisions of the Loan Agreement.
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, interest shall be payable at the Default Rate. In no
event, however, shall interest exceed the maximum interest rate permitted by
law.
This Note is one of the Revolving Credit A Notes referred to in the
Loan Agreement and is secured by the Liens granted pursuant to the Loan
Agreement and the Other Documents, is entitled to the benefits of the Loan
Agreement and the Other Documents and is subject to all of the agreements, terms
and conditions therein contained.
This Note is subject to mandatory prepayment and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the Loan
Agreement.
Exhibit A - Page 1
<PAGE>
If an Event of Default under Section 10.7 of the Loan Agreement shall
occur, then this Note shall immediately become due and payable, without notice,
together with reasonable attorneys' fees if the collection hereof is collected
by or through an attorney at law. If any other Event of Default shall occur
under the Loan Agreement or any of the Loan Documents, which is not cured within
any applicable grace period, then this Note may, as provided in the Loan
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys' fees, if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof.
This Note shall be construed and enforced in accordance with the
internal laws of the State of New York and is intended to take effect as a
sealed instrument under New York law.
BORROWER EXPRESSLY WAIVES ANY PRESENTMENT, DEMAND, PROTEST, NOTICE OF
PROTEST, OR NOTICE OF ANY KIND EXCEPT AS EXPRESSLY PROVIDED IN THE LOAN
AGREEMENT.
SIGNED, SEALED AND DELIVERED on the day and year first written above.
ATTEST: AAF-MCQUAY INC.
By:____________________________ By:__________________________
Name:_______________________ Name:_____________________
Title:______________________ Title:____________________
[CORPORATE SEAL]
STATE OF ___________ )
) SS.:
COUNTY OF ___________ )
On the ____ day of ____, ____, before me personally came
______________, to me known, who being by me duly sworn, did depose and say that
he is the ________________________ of AAF-McQuay Inc., the corporation described
in and which executed the foregoing instrument; and that he signed his name
thereto as the act and deed of such corporation by order of the board of
directors of said corporation.
_____________________________
Notary Public
Exhibit A - Page 2
<PAGE>
Exhibit A-1
FORM OF REVOLVING CREDIT B NOTE
REVOLVING CREDIT B NOTE
$__________ __________________
___________,_______
This Revolving Credit B Note is executed and delivered under and
pursuant to the terms of that certain Revolving Credit, Term Loan and Security
Agreement dated September 30, 1999 (as amended, restated, supplemented or
modified from time to time, the "Loan Agreement") by and among AAF- MCQUAY INC.,
a Delaware corporation having its principal place of business at 215 Central
Avenue, Louisville, Kentucky 40208 ("Borrower"), the various financial
institutions named therein or which hereafter become a party thereto (each
individually a "Lender" and collectively "Lenders"), PNC BANK, NATIONAL
ASSOCIATION (in its individual capacity, "PNC") for itself as a Lender, and as
agent for Lenders (together with its successors in such capacity "Agent").
Capitalized terms not otherwise defined herein shall have the meanings provided
in the Loan Agreement.
FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of
__________________ (together with its successors or assigns, the "Holder"), at
the office of Agent located at Two Tower Center Boulevard, East Brunswick, New
Jersey 08816 or at such other place as Agent may from time to time designate to
Borrower in writing:
(i) the principal sum of ______________ AND __/100 DOLLARS
($__________) or, if different, from such amount, the unpaid principal balance
of Holder's Commitment Percentage of the Revolving B Advances as may be due and
owing under the Loan Agreement, payable in accordance with the provisions of the
Loan Agreement, subject to acceleration upon the occurrence of an Event of
Default under the Loan Agreement or earlier termination of the Loan Agreement
pursuant to the terms thereof; and
(ii) interest on the principal amount of this Note from time to time
outstanding until such principal amount is paid in full at the applicable
Revolving Interest Rate in accordance with the provisions of the Loan Agreement.
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, interest shall be payable at the Default Rate. In no
event, however, shall interest exceed the maximum interest rate permitted by
law.
This Note is one of the Revolving Credit B Notes referred to in the
Loan Agreement and is secured by the Liens granted pursuant to the Loan
Agreement and the Other Documents, is entitled to the benefits of the Loan
Agreement and the Other Documents and is subject to all of the agreements, terms
and conditions therein contained.
This Note is subject to mandatory prepayment and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the Loan
Agreement.
Exhibit A-1 - Page 1
<PAGE>
If an Event of Default under Section 10.7 of the Loan Agreement shall
occur, then this Note shall immediately become due and payable, without notice,
together with reasonable attorneys' fees if the collection hereof is collected
by or through an attorney at law. If any other Event of Default shall occur
under the Loan Agreement or any of the Loan Documents, which is not cured within
any applicable grace period, then this Note may, as provided in the Loan
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys' fees, if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof.
This Note shall be construed and enforced in accordance with the
internal laws of the State of New York and is intended to take effect as a
sealed instrument under New York law.
BORROWER EXPRESSLY WAIVES ANY PRESENTMENT, DEMAND, PROTEST, NOTICE OF
PROTEST, OR NOTICE OF ANY KIND EXCEPT AS EXPRESSLY PROVIDED IN THE LOAN
AGREEMENT.
SIGNED, SEALED AND DELIVERED on the day and year first written above.
ATTEST: AAF-MCQUAY INC.
By:____________________________ By:__________________________
Name:_______________________ Name:_____________________
Title:______________________ Title:____________________
[CORPORATE SEAL]
STATE OF ___________ )
) SS.:
COUNTY OF ___________ )
On the ____ day of ____, ____, before me personally came
______________, to me known, who being by me duly sworn, did depose and say that
he is the ________________________ of AAF-McQuay Inc., the corporation described
in and which executed the foregoing instrument; and that he signed his name
thereto as the act and deed of such corporation by order of the board of
directors of said corporation.
_____________________________
Notary Public
FORM OF TERM NOTE
Exhibit A-1 - Page 2
<PAGE>
Exhibit A-2
FORM OF TERM NOTE
TERM NOTE
$__________ __________ ___,____
__________,________
This Term Note is executed and delivered under and pursuant to the
terms of that certain Revolving Credit, Term Loan and Security Agreement dated
September 30, 1999 (as amended, supplemented, restated or modified from time to
time, the "Loan Agreement"), by and among AAF-MCQUAY INC., a Delaware
corporation having its principal place of business at 215 Central Avenue,
Louisville, Kentucky 40208 ("Borrower"), the various financial institutions
named therein or which hereafter become a party thereto (each individually a
"Lender" and collectively "Lenders"), PNC BANK, NATIONAL ASSOCIATION (in its
individual capacity, "PNC") for itself as a Lender, and as agent for Lenders
(together with its successors in such capacity "Agent"). Capitalized terms not
otherwise defined herein shall have the meanings provided in the Loan Agreement.
FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of
__________________ (together with its successors or assigns, the "Holder"), at
the office of Agent located at Two Tower Center Boulevard, East Brunswick, New
Jersey 08816 or at such other place as Agent may from time to time designate to
Borrower in writing:
(i) the principal sum of ____________________ AND 00/100 DOLLARS
($__________.___), payable in accordance with the provisions of Section 2.3 of
the Loan Agreement; and
(ii) interest on the principal amount of this Note from time to time
outstanding, payable at the Term Loan Rate in accordance with the provisions of
the Loan Agreement. In no event, however, shall interest exceed the maximum
interest rate permitted by law. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, interest shall be payable at the
Default Rate.
This Note is one of the Term Notes referred to in the Loan Agreement
and is secured, inter alia, by the Liens granted pursuant to the Loan Agreement
and the Other Documents, is entitled to the benefits of the Loan Agreement and
the Other Documents and is subject to all of the agreements, terms and
conditions therein contained.
This Note is subject to mandatory prepayment and may be voluntarily
prepaid, in whole or in part, on the terms and conditions set forth in the Loan
Agreement.
If an Event of Default under Section 10.7 of the Loan Agreement shall
occur, then this Note shall immediately become due and payable, without notice,
together with reasonable attorneys' fees if the collection hereof is collected
by or through an attorney at law. If any other Event of Default shall occur
under the Loan Agreement or any of the Loan Documents, which is not cured within
any applicable grace period, then this Note may, as provided in the Loan
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys' fees, if the collection hereof is placed in
the hands of an attorney to obtain or enforce payment hereof.
Exhibit A-2 - Page 1
<PAGE>
This Note shall be construed and enforced in accordance with the
internal laws of the State of New York and is intended to take effect as a
sealed instrument under New York law.
BORROWER EXPRESSLY WAIVES ANY PRESENTMENT, DEMAND, PROTEST, NOTICE OF
PROTEST, OR NOTICE OF ANY KIND EXCEPT AS EXPRESSLY PROVIDED IN THE LOAN
AGREEMENT.
SIGNED, SEALED AND DELIVERED on the day and year first written above.
Attest: AAF-MCQUAY INC.
By:____________________________ By:__________________________
Name:_______________________ Name:_____________________
Title:______________________ Title:____________________
[CORPORATE SEAL]
STATE OF ________ )
) SS.:
COUNTY OF ________ )
On the ____ day of ________, ________, before me personally came
________, to me known, who being by me duly sworn, did depose and say that he is
the ________ of AAF-McQuay Inc., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto as the act and
deed of such corporation by order of the board of directors of said corporation.
_____________________________
Notary Public
My Commission Expires:
_____________________________
[NOTARIAL SEAL]
Exhibit A-2 - Page 2
<PAGE>
Exhibit B
FORM OF COMMITMENT TRANSFER SUPPLEMENT
COMMITMENT TRANSFER SUPPLEMENT
This COMMITMENT TRANSFER SUPPLEMENT, dated as of __________, _______,
among ___________________________ (the "Transferor Lender"), the Purchasing
Lender executing this Commitment Transfer Supplement (the "Purchasing Lender"),
and PNC BANK, NATIONAL ASSOCIATION ("PNC"), as agent for the Lenders (as defined
below) under the Loan Agreement (as defined below).
W I T N E S E T H:
WHEREAS, this Commitment Transfer Supplement is being executed and
delivered in accordance with Section 15.3 of the Revolving Credit, Term Loan and
Security Agreement dated September 30, 1999 (as from time to time amended,
supplemented or otherwise modified in accordance with the terms thereof, the
"Loan Agreement") among AAF-MCQUAY INC., a corporation organized under the laws
of the State of Delaware, (the "Borrower"), PNC and the various other financial
institutions (collectively, the "Lenders") and PNC as administrative and
collateral agent for Lenders (in such capacity, "Agent") named in or which
hereafter become a party to the Loan Agreement;
WHEREAS, each Purchasing Lender wishes to become a Lender party to the
Loan Agreement; and
WHEREAS, the Transferor Lender is selling and assigning to each
Purchasing Lender, rights, obligations and commitments under the Loan Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. All capitalized terms used herein which are not defined shall have
the meanings given to them in the Loan Agreement.
2. Upon receipt by the Agent of four counterparts of this Commitment
Transfer Supplement, to each of which is attached a fully completed Schedule I,
and each of which has been executed by the Transferor Lender and Agent, Agent
will transmit to Transferor Lender and each Purchasing Lender a Transfer
Effective Notice, substantially in the form of Schedule II to this Commitment
Transfer Supplement (a "Transfer Effective Notice"). Such Transfer Effective
Notice shall set forth, inter alia, the date on which the transfer effected by
this Commitment Transfer Supplement shall become effective (the "Transfer
Effective Date"), which date shall not be earlier than the first Business Day
following the date such Transfer Effective Notice is received. From and after
the Transfer Effective Date, each Purchasing Lender shall be a Lender party to
the Loan Agreement for all purposes thereof.
3. At or before 12:00 Noon (East Brunswick, New Jersey time) on the
Transfer Effective Date, each Purchasing Lender shall pay to Transferor Lender,
in immediately available funds, an amount equal to the purchase price, as agreed
between Transferor Lender and such Purchasing Lender (the "Purchase Price"), of
the portion of the Advances being purchased by such Purchasing Lender (such
Purchasing Lender's "Purchased Percentage") of the outstanding Advances and
other amounts owing to the Transferor Lender
Exhibit B - Page 1
<PAGE>
under the Loan Agreement and the Revolving Credit Note. Effective upon receipt
by Transferor Lender of the Purchase Price from a Purchasing Lender, Transferor
Lender hereby irrevocably sells, assigns and transfers to such Purchasing
Lender, without recourse, representation or warranty, and each Purchasing Lender
hereby irrevocably purchases, takes and assumes from Transferor Lender, such
Purchasing Lender's Purchased Percentage of the Advances and other amounts owing
to the Transferor Lender under the Loan Agreement and the Revolving Credit Note
together with all instruments, documents and collateral security pertaining
thereto.
4. Transferor Lender has made arrangements with each Purchasing Lender
with respect to (i) the portion, if any, to be paid, and the date or dates for
payment, by Transferor Lender to such Purchasing Lender of any fees heretofore
received by Transferor Lender pursuant to the Loan Agreement prior to the
Transfer Effective Date and (ii) the portion, if any, to be paid, and the date
or dates for payment, by such Purchasing Lender to Transferor Lender of fees or
interest received by such Purchasing Lender pursuant to the Loan Agreement from
and after the Transfer Effective Date.
5. (a) All principal payments that would otherwise by payable from and
after the Transfer Effective Date to or for the account of Transferor Lender
pursuant to the Loan Agreement and the Revolving Credit Note shall, instead, be
payable to or for the account of Transferor Lender and Purchasing Lender, as the
case may be, in accordance with their respective interests as reflected in this
Commitment Transfer Supplement.
(b) All interest, fees and other amounts that would otherwise
accrue for the account of Transferor Lender from and after the Transfer
Effective Date pursuant to the Loan Agreement and the Revolving Credit Note
shall, instead, accrue for the account of, and be payable to, Transferor Lender
and Purchasing Lender, as the case may be, in accordance with their respective
interests as reflected in this Commitment Transfer Supplement. In the event that
any amount of interest, fees or other amounts accruing prior to the Transfer
Effective Date was included in the Purchase Price paid by any Purchasing Lender,
Transferor Lender and each Purchasing Lender will make appropriate arrangements
for payment by Transferor Lender to such Purchasing Lender of such amount upon
receipt thereof from Borrower.
6. Concurrently with the execution and delivery hereof, Transferor
Lender will provide to each Purchasing Lender conformed copies of the Loan
Agreement and all related documents delivered to Transferor Lender.
7. Each of the parties to this Commitment Transfer Supplement agrees
that at any time and from time to time upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.
8. By executing and delivering this Commitment Transfer Supplement,
Transferor Lender and each Purchasing Lender confirm to and agree with each
other and Agent and Lenders as follows: (i) other than the representation and
warranty that it is the legal and beneficial owner of the interest being
assigned hereby free and clear of any adverse claim, Transferor Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement, the Revolving Credit Note or any
other instrument or document furnished pursuant thereto; (ii) Transferor Lender
makes no representation or warranty and assumes no
Exhibit B - Page 2
<PAGE>
responsibility with respect to the financial condition of Borrower or the
performance or observance by Borrower of any of the Obligations under the Loan
Agreement, the Revolving Credit Note or any other instrument or document
furnished pursuant hereto; (iii) each Purchasing Lender confirms that is has
received a copy of the Loan Agreement, together with copies of such financial
statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Commitment
Transfer Supplement; (iv) each Purchasing Lender will, independently and without
reliance upon Agent, Transferor Lender or any other Lenders and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Agreement; (v) each Purchasing Lender appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under the Loan
Agreement as are delegated to the Agent by the terms thereof; (vi) each
Purchasing Lender agrees that is will perform all of its respective obligations
as set forth in the Loan Agreement to be performed by each as a Lender; and
(vii) each Purchasing Lender represents and warrants to Transferor Lender,
Lenders, Agent and Borrower that it is either (x) entitled to the benefits of an
income tax treaty with the United States of America that provides for an
exemption from the United State withholding tax on interest and other payments
made by Borrower under the Loan Agreement and the Other Documents or (y) is
engaged in trade or business within the United States of America.
9. Schedule I hereto sets forth the revised Commitment Percentages of
Transferor Lender and the Commitment Percentage of each Purchasing Lender as
well as administrative information with respect to each Purchasing Lender.
10. This Commitment Transfer Supplement shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Commitment
Transfer Supplement to be executed by their respective duly authorized officers
on the date set forth above.
____________________________,
as Transferor Lender
By:__________________________
Name:________________________
Title:_______________________
____________________________,
as a Purchasing Lender
By:__________________________
Name:________________________
Title:_______________________
Exhibit B - Page 3
<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
as Agent
By:____________________________
Name:__________________________
Title:_________________________
Exhibit B - Page 4
<PAGE>
SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT
LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS
[Transferor Lender] Revised Commitment Amount $_________________
Revised Commitment Percentage: _____%
[Purchasing Lender] Commitment Amount $_________________
Commitment Percentage: _____%
Addresses for Notices
_______________________________
_______________________________
_______________________________
Attention:
Telephone:
Telecopier:
Exhibit B - Page 5
<PAGE>
SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT
[Form of Transfer Effective Notice]
To: ____________________________, as Transferor Lender and
____________________________, as Purchasing Lender:
The undersigned, as Agent under the Revolving Credit, Term Loan and
Security Agreement dated September 30, 1999 (as from time to time amended,
supplemented or otherwise modified in accordance with the terms thereof, the
"Loan Agreement") among AAF-MCQUAY INC., a corporation organized under the laws
of the State of Delaware, (the "Borrower"), the various other financial
institutions (collectively, the "Lenders") and PNC and PNC BANK, NATIONAL
ASSOCIATION, as a Lender and as agent for Lenders, acknowledges receipt of four
(4) executed counterparts of a completed Commitment Transfer Supplement in the
form attached hereto. [Note: Attach copy of Commitment Transfer Supplement.]
Terms defined in such Commitment Transfer Supplement are used herein as therein
defined.
Pursuant to such Commitment Transfer Supplement, you are advised that
the Transfer Effective Date will be [INSERT DATE OF TRANSFER EFFECTIVE NOTICE.]
PNC BANK, NATIONAL ASSOCIATION,
as Agent
By:____________________________
Name:_______________________
Title:______________________
ACCEPTED FOR RECORDATION
IN REGISTER:
Exhibit B - Page 6
<PAGE>
Exhibit C
FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
This Compliance Certificate is being delivered to PNC BANK, NATIONAL
ASSOCIATION, a national banking association (in its individual capacity "PNC"),
for itself as a Lender and as Agent for the Lenders, as that term is defined
herein, pursuant to Section ____ of that certain Revolving Credit, Term Loan and
Security Agreement dated September 30, 1999, among AAF-MCQUAY INC., a Delaware
corporation ("Borrower"), PNC and the other financial institutions that are
parties thereto as lenders (each individually a "Lender" and collectively
"Lenders"), and PNC in its capacity as administrative and collateral agent for
the Lenders (together with its successors in such capacity, "Agent") (together
with all amendments, modifications and supplements thereto and all restatements
thereof, the "Loan Agreement"). All capitalized terms used herein without
definition shall have the meanings assigned to those terms in the Loan
Agreement. The undersigned _______________________ of Borrower hereby certifies
on behalf of Borrower that, as of the last day of the most recently ended
_______________ (insert period), ending on _______________ ___, _____ (insert
date) (the "COMPLIANCE DATE"):
1. RATIO REQUIREMENTS AND OTHER CALCULATIONS.
a. Borrower's Fixed Charge Coverage Ratio for the fiscal
period ending on the Compliance Date was _____ to _____ calculated as follows
(all amounts in the following calculations are determined for Borrower):
i. Net income (or loss), _________
ii. Interest expense _________
iii. Charges against income for federal,
state and local taxes _________
iv. Extraordinary gains _________
v. Earnings Before Interest and Taxes:
((1)+(2)+(3)-(4)) _________
vi. Depreciation expense _________
vii. Amortization expense _________
viii. EBITDA: ((5)+(6)+(7)) _________
ix. Approved Charges _________
Exhibit C - Page 1
<PAGE>
x. Unfunded Capital Expenditures (Capital
Expenditures not financed by a means
other than an Advance under the
Loan Agreement) _________
xi. Approved Computer Expenditures _________
xii. Cash Taxes _________
xiii. Interest expense _________
xiv. Aggregate of all scheduled principal
payments on Indebtedness of Borrower
during such period which, in accordance
with GAAP, would be classified as
long-term debt _________
xv. Debt Payments: ((13)+(14)) _________
xvi. Fixed Charge Coverage Ratio:
(((8)+(9))-((10)+(11))-(12)) divided by
(15) _________
Required: Not less than 1.00 to 1.00
b. CONSOLIDATED NET WORTH. Borrower's Consolidated Net Worth
on the Compliance Date was $_____________ and is shown as the amount of
shareholders' equity on Borrower's balance for the period ending ____________.
i. Beginning Requirement $165,000,000
ii. 50% of Net Income, beginning with
Fiscal Year 2000 and for each Fiscal
Year thereafter _________
iii. Required Amount ((1) plus (2)) _________
Actual Amount:.
c. CONSOLIDATED TOTAL ASSETS. Borrower's Consolidated Total
Assets on the Compliance Date was $_____________.
Required: Not less than $650,000,000.
d. CAPITAL EXPENDITURES. The aggregate of all Capital
Expenditures contracted for or made by Borrower in the current fiscal year of
Borrower is ______________ (amount calculated for Borrower and its Subsidiaries
on a consolidated basis) (Reference Section 7.6 of the Loan Agreement).
Exhibit C - Page 2
<PAGE>
e. PURCHASE MONEY INDEBTEDNESS AND OTHER INDEBTEDNESS. Other
than Indebtedness to Lenders and Indebtedness in existence on the Closing Date
and due to Persons other than Lenders that is described on Schedule 5.8(b) of
the Loan Agreement, the aggregate of all Purchase Money Indebtedness and any
other Indebtedness created, incurred, assumed or suffered to exist by Borrower
in the current fiscal year of Borrower is $______________ (amount calculated for
Borrower).
f. LEASES. Other than capitalized leases permitted by Section
7.6 of the Loan Agreement, the aggregate annual rental payments for all leased
property of Borrower in the current fiscal year of Borrower is $______________
(amount calculated for Borrower).
2. COVENANTS.
a. MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS.
Since the immediately preceding Compliance Date, Borrower has not has
consummated any of the transactions prohibited by Section 7.1 of the Loan
Agreement, other than [IF BORROWER CONSUMMATED ANY OF THE TRANSACTIONS
PROHIBITED BY SECTION 7.1 OF THE LOAN AGREEMENT, DESCRIBE SUCH TRANSACTIONS IN
DETAIL].
b. CREATION OF LIENS. SINCE THE IMMEDIATELY PRECEDING
COMPLIANCE DATE, BORROWER HAS NOT CREATED OR SUFFERED TO EXIST ANY LIEN OR
TRANSFER UPON OR AGAINST ANY OF ITS PROPERTY OR ASSETS OR THE PROPERTY OR ASSETS
OF ITS SUBSIDIARIES, EXCEPT PERMITTED ENCUMBRANCES, OTHER THAN [IF BORROWER HAS
CREATED OR SUFFERED TO EXIST ANY LIEN OR TRANSFER UPON OR AGAINST ANY OF ITS
PROPERTY OR ASSETS OR ANY OF THE PROPERTY OR ASSETS OF ITS SUBSIDIARIES, EXCEPT
PERMITTED ENCUMBRANCES, DESCRIBE SUCH LIENS OR TRANSFERS IN DETAIL].
c. GUARANTIES. Since the immediately preceding Compliance
Date, Borrower has not become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to
Lenders), except (i) as disclosed on SCHEDULE 7.3 to the Loan Agreement, (ii)
guarantees made in Borrower's Ordinary Course of Business totaling
$_______________, which aggregate amount does not exceed the limitation set
forth in Section 7.3 of the Loan Agreement, and (iii) the endorsement of checks
in Borrower's Ordinary Course of Business, other than [IF BORROWER BECAME LIABLE
UPON THE OBLIGATIONS OF ANY PERSON BY ASSUMPTION, ENDORSEMENT OR GUARANTY
THEREOF OR OTHERWISE IN A MANNER OR AMOUNT PROHIBITED BY SECTION 7.3 OF THE LOAN
AGREEMENT, DESCRIBE SUCH TRANSACTIONS IN DETAIL].
d. INVESTMENTS. Since the immediately preceding Compliance
Date, Borrower has not consummated any of the transactions prohibited by Section
7.4 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY OF THE
TRANSACTIONS PROHIBITED BY SECTION 7.4 OF THE LOAN AGREEMENT, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
e. LOANS. Since the immediately preceding Compliance Date,
Borrower has not consummated any of the transactions prohibited by Section 7.5
of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY OF THE
TRANSACTIONS PROHIBITED BY SECTION 7.5 OF THE LOAN AGREEMENT, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
f. CAPITAL EXPENDITURES. Since the immediately preceding
Compliance Date, Borrower has not consummated any of the transactions prohibited
by Section 7.6 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY OF
THE TRANSACTIONS PROHIBITED BY SECTION 7.6 OF THE LOAN AGREEMENT, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
Exhibit C - Page 3
<PAGE>
g. DIVIDENDS. Since the immediately preceding Compliance Date,
Borrower has not consummated any of the transactions prohibited by Section 7.7
of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY OF THE
TRANSACTIONS PROHIBITED BY SECTION 7.7 OF THE LOAN AGREEMENT, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
h. INDEBTEDNESS. Since the immediately preceding Compliance
Date, Borrower has not consummated any of the transactions prohibited by Section
7.8 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY OF THE
TRANSACTIONS PROHIBITED BY SECTION 7.8 OF THE LOAN AGREEMENT, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
i. NATURE OF BUSINESS. Since the immediately preceding
Compliance Date, Borrower has not consummated any of the transactions prohibited
by Section 7.9 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY OF
THE TRANSACTIONS PROHIBITED BY SECTION 7.9 OF THE LOAN AGREEMENT, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
j. TRANSACTIONS WITH AFFILIATES. Since the immediately
preceding Compliance Date, Borrower has not consummated any of the transactions
prohibited by Section 7.10 of the Loan Agreement, other than [IF BORROWER
CONSUMMATED ANY OF THE TRANSACTIONS PROHIBITED BY SECTION 7.10 OF THE LOAN
AGREEMENT, DESCRIBE SUCH TRANSACTIONS IN DETAIL].
k. LEASES. Since the immediately preceding Compliance Date,
Borrower has not consummated any of the transactions prohibited by Section 7.11
of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY OF THE
TRANSACTIONS PROHIBITED BY SECTION 7.11 OF THE LOAN AGREEMENT, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
l. SUBSIDIARIES. Since the immediately preceding Compliance
Date, Borrower has not formed any Subsidiary or entered into any partnership,
joint venture or similar arrangement with any Person in a manner prohibited by
Section 7.12 of the Loan Agreement, other than [IF BORROWER HAS FORMED ANY
SUBSIDIARY OR ENTERED INTO ANY PARTNERSHIP, JOINT VENTURE OR SIMILAR ARRANGEMENT
WITH ANY PERSON IN A MANNER PROHIBITED BY SECTION 7.12 DESCRIBE SUCH FORMATIONS
OR OTHER TRANSACTIONS IN DETAIL].
m. FISCAL YEAR AND ACCOUNTING CHANGES. Since the immediately
preceding Compliance Date, Borrower has not made any of the changes prohibited
by Section 7.13 of the Loan Agreement, other than [IF BORROWER HAS MADE ANY OF
THE CHANGES PROHIBITED BY SECTION 7.13 OF THE LOAN AGREEMENT DESCRIBED SUCH
CHANGES IN DETAIL].
n. PLEDGE OF CREDIT. Since the immediately preceding
Compliance Date, Borrower has not consummated any of the transactions prohibited
by Section 7.14 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY
OF THE TRANSACTIONS PROHIBITED BY SECTION 7.14 OF THE LOAN AGREEMENT, DESCRIBE
SUCH TRANSACTIONS IN DETAIL].
o. AMENDMENT OF ORGANIZATION DOCUMENTS. Since the immediately
preceding Compliance Date, Borrower has not amended, modified or waived any term
or material provision of its Organizational Documents except as required by
Applicable Law, other than [IF BORROWER HAS AMENDED, MODIFIED OR WAIVED ANY TERM
OR MATERIAL PROVISION OF ITS ORGANIZATIONAL DOCUMENTS EXCEPT AS REQUIRED BY
APPLICABLE LAW DESCRIBE ANY SUCH AMENDMENTS, MODIFICATIONS, OR WAIVERS IN
DETAIL].
Exhibit C - Page 4
<PAGE>
p. COMPLIANCE WITH ERISA. Since the immediately preceding
Compliance Date, Borrower has not consummated any of the transactions prohibited
by Section 7.16 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY
OF THE TRANSACTIONS PROHIBITED BY SECTION 7.16 OF THE LOAN AGREEMENT, DESCRIBE
SUCH TRANSACTIONS IN DETAIL].
q. PREPAYMENT OF INDEBTEDNESS. Since the immediately preceding
Compliance Date, Borrower has not consummated any of the transactions prohibited
by Section 7.17 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY
OF THE TRANSACTIONS PROHIBITED BY SECTION 7.17 OF THE LOAN AGREEMENT, DESCRIBE
SUCH TRANSACTIONS IN DETAIL].
r. PUBLIC NOTES DOCUMENTS. Since the immediately preceding
Compliance Date, Borrower has not consummated any of the transactions prohibited
by Section 7.18 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY
OF THE TRANSACTIONS PROHIBITED BY SECTION 7.18 OF THE LOAN AGREEMENT, DESCRIBE
SUCH TRANSACTIONS IN DETAIL].
s. UPSTREAM PAYMENTS. Since the immediately preceding
Compliance Date, Borrower has not consummated any of the transactions prohibited
by Section 7.19 of the Loan Agreement, other than [IF BORROWER CONSUMMATED ANY
OF THE TRANSACTIONS PROHIBITED BY SECTION 7.19 OF THE LOAN AGREEMENT, DESCRIBE
SUCH TRANSACTIONS IN DETAIL].
t. TAX CONSOLIDATION. Since the immediately preceding
Compliance Date, Borrower has not filed or consented to the filing of any
consolidated income tax return with any Person other than a Subsidiary, other
than [IF BORROWER HAS FILED OR CONSENTED TO THE FILING OF ANY CONSOLIDATED
INCOME TAX RETURN WITH ANY PERSON OTHER THAN A SUBSIDIARY, DESCRIBE SUCH
TRANSACTIONS IN DETAIL].
u. FURTHER NEGATIVE PLEDGES. Since the immediately preceding
Compliance Date, Borrower has not entered into or become subject to any
agreement prohibiting or otherwise restricting the creation or assumption of any
Lien upon any of its property, whether now owned or hereafter acquired, or
requiring the grant of any security for any obligation if security is given for
any other obligation except pursuant to the terms of any Permitted Purchase
Money Indebtedness to the extent such limitations relate only to the property
that is the subject of the Purchase Money Lien securing such Permitted Purchase
Money Indebtedness [IF BORROWER HAS ENTERED INTO OR BECOME SUBJECT TO ANY SUCH
AGREEMENT, DESCRIBE SUCH TRANSACTIONS IN DETAIL].
The undersigned ______________________ [TREASURER/CHIEF FINANCIAL
OFFICER] of Borrower, executing and delivering this Compliance Certificate on
behalf of Borrower, further certifies that _____ [he/she] has reviewed the Loan
Agreement and has no knowledge of any event or condition which constitutes a
Default or an Event of Default under the Loan Agreement or the other Loan
Documents other than [IF ANY
Exhibit C - Page 5
<PAGE>
DEFAULT OR EVENT OF DEFAULT HAS OCCURRED, DESCRIBE THE SAME, THE PERIOD OF
EXISTENCE THEREOF AND WHAT ACTION BORROWER HAS TAKEN OR PROPOSES TO TAKE WITH
RESPECT THERETO].
IN WITNESS WHEREOF, Borrower, through its duly authorized
______________________ [TREASURER/CHIEF FINANCIAL OFFICER], has executed this
Compliance Certificate this _____ day of _______________, _____.
AAF-MCQUAY INC., a Delaware corporation
By:______________________________
Name:_________________________
Title:________________________
Exhibit C - Page 6
<PAGE>
Schedule 1.2
SCHEDULE OF PERMITTED ENCUMBRANCES
1. Mortgage given by Auburn Industrial Development Agency and Borrower
to New York Job Development Authority dated August 18, 1992, and recorded in the
Auburn County Clerk's Office on August 12, 1992 in Book 945 of Mortgages at Page
172, as assigned to WAMCO XXIV, Ltd. by and assignment dated March 27, 1997 and
recorded on April 8, 1997 in Book 65 of Assignment at Page 73 et. seq.
2. Mortgage, Security Agreement, Financing Statement and Assignment of
Rents and Leases dated May 1, 1999 made by Borrower and the Industrial
Development Board of the City of Scottsboro, Alabama, in favor of The Bank of
Nova Scotia, recorded August 30, 1999 as instrument No. 99-16610 in the office
of Probate Judge of Jackson County, Alabama.
3. Liens evidenced by the following existing financing statements:
<TABLE>
<CAPTION>
Secured Party Location File No. Date Filed Collateral
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Citicorp Dealer Finance Alabama, Secretary of State 94-37283 10/3/94 Informational filing regarding 2 1994
Prime Movers
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Alabama, Secretary of State 94-39175 10/17/94 Informational filing regarding 1 1994
Baker
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Alabama, Secretary of State 94-37282 10/3/94 Informational filing regarding 2 1994
Prime Movers
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Alabama, Secretary of State 95-03233 1/24/95 Informational filing regarding 1 1994
Mitsubishi
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Alabama, Secretary of State 95-08076 2/27/95 Informational filing regarding 1 1994
Prime Movers
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Delaware Secretary of State 9416152 12/1/94 4 Prime Movers and 1 Baker
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Delaware Secretary of State 9501110 1/23/95 1 1994 Mitsubishi
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Delaware Secretary of State 9416153 12/1/94 7 Bakers
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Delaware Secretary of State 9416464 12/8/94 1 Baker
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Delaware Secretary of State 9502810 2/24/95 1 Prime Mover
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Minnesota Secretary of 1737030 2/10/95 Informational filing for 1 1994
State Mitsubishi
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Minnesota Secretary of 1742130 3/3/95 Informational filing for 1 1994 Prime
State Mover
- -----------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Minnesota Secretary of 1704322 9/23/94 Informational filing for 1 1994 Baker
State
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Secured Party Location File No. Date Filed Collateral
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Citicorp Dealer Finance New York, Cayuga County 00112-95 2/7/95 3 1994 Baker forklifts
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 01374-94 10/7/94 1 1994 Baker
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 00114-95 2/7/95 1 1994 Baker
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 00110-95 2/7/95 1 1994 Baker
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 01324-94 9/28/94 1 1994 Baker
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 01326-94 9/28/94 4 1994 Baker forklifts
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 00111-95 2/7/95 1 1994 Baker
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 00113-95 2/7/95 2 1994 Baker forklifts
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance New York, Cayuga County 01325-94 9/28/94 1 1994 Baker
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Dealer Finance Virginia Secretary of State 9501137173 1/13/95 2 Bakers
- ----------------------------------------------------------------------------------------------------------------------------
Citicorp Del Lease, Inc. Alabama, Secretary of State 99-30923 7/23/99 Informational filing for 1 Mitsubishi
forklift
- ----------------------------------------------------------------------------------------------------------------------------
Clarklift of Minnesota, Maryland Secretary of State 160788384 3/18/96 1 forklift located in Fridley, Minnesota
Inc.
- ----------------------------------------------------------------------------------------------------------------------------
Clarklift of Minnesota, Maryland Secretary of State 152018158 7/20/95 1 forklift located in Fridley, Minnesota
Inc.
- ----------------------------------------------------------------------------------------------------------------------------
Clarklift of Minnesota, Maryland Secretary of State 161808269 6/28/96 1 forklift, 1 battery and 1 charger located
Inc. in Fridley, Minnesota
- ----------------------------------------------------------------------------------------------------------------------------
Clarklift of Minnesota, Minnesota Secretary of 1832890 3/18/96 1 forklift
Inc. State
- ----------------------------------------------------------------------------------------------------------------------------
Clarklift of Minnesota, Minnesota Secretary of 1860468 6/28/96 1 forklift, 1 battery and 1 charger
Inc. State
- ----------------------------------------------------------------------------------------------------------------------------
Clarklift of Minnesota, Minnesota Secretary of 1905095 1/2/97 1 forklift
Inc. State
- ----------------------------------------------------------------------------------------------------------------------------
Clarklift of Minnesota, Minnesota Secretary of 1776489 7/18/95 1 forklift
Inc. State
- ----------------------------------------------------------------------------------------------------------------------------
Copelco Capital, Inc. Virginia, Independent City 980000158 12/1/98 Leased copier
of Staunton
- ----------------------------------------------------------------------------------------------------------------------------
Copelco Capital Inc. Kentucky, Jefferson County 9905676 8/3/99 Leased copier
- ----------------------------------------------------------------------------------------------------------------------------
Copelco Capital, Inc. Virginia Secretary of State 9811207076 11/20/98 1 leased copier
- ----------------------------------------------------------------------------------------------------------------------------
Dollar Bank Leasing Pennsylvania Secretary of 26720743 3/27/97 Leased telephone equipment
Corp. State
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Secured Party Location File No. Date Filed Collateral
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dryden Oil Company, Virginia Secretary of State 9507147038 7/14/95 Specified loaned equipment used in
Inc. storing and dispensing Dryden's products
- ----------------------------------------------------------------------------------------------------------------------------
Ford Equipment Leasing Kentucky, Jefferson County 9500326 1/9/95 6 leased display stations and proceeds
Company thereof
- ----------------------------------------------------------------------------------------------------------------------------
Golden Eagle Credit Kentucky, Jefferson County 9802032 3/12/98 4 leased pagers
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Golden Eagle Credit Kentucky, Jefferson County 9802027 3/11/98 4 leased pagers
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing Virginia, Augusta County 43390 8/23/99 2 air compressors
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Newcourt Leasing Virginia, Independent City 990000071 5/14/99 2 air compressors
Corporation of Staunton
- ----------------------------------------------------------------------------------------------------------------------------
NTFC Capital New York, Cayuga County 00630-90 5/3/90 Leased telephone equipment
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Pittsburgh Equipment New Jersey Secretary of 1803796 11/26/97 Leased Telephone Equipment
Leasing Corporation State
- ----------------------------------------------------------------------------------------------------------------------------
Pittsburgh Equipment New York Secretary of 015312 1/22/98 Leased telephone equipment
Leasing Corporation State
- ----------------------------------------------------------------------------------------------------------------------------
Sanwa Business Credit Alabama, Secretary of State 98-30047 7/14/98 1 Mitsubishi forklift
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Sanwa Business Credit Virginia, Augusta County 40872 2/16/96 1 Mitsubishi
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
Sanwa Business Credit Virginia Secretary of State 9602157820 2/15/96 1 Mitsubishi
Corporation
- ----------------------------------------------------------------------------------------------------------------------------
SouthTrust Bank, Alabama, Secretary of State 89-00660 7/21/89 Machinery and equipment purchased
National Association with bond proceeds
formerly known as
SouthTrust Bank of
Alabama, National
Association
- ----------------------------------------------------------------------------------------------------------------------------
SouthTrust Bank of Alabama, Jackson County 79641 7/19/89 Fixtures leased from The Industrial
Alabama, National Development Board or the City of
Association, as Trustee Scottsboro, Alabama
- ----------------------------------------------------------------------------------------------------------------------------
T&W Finance Corp. IV Texas Secretary of State 003113 1/5/95 Leased Telephone Equipment
- ----------------------------------------------------------------------------------------------------------------------------
Tenant Company New York, Cayuga County 00037-96 1/10/96 1 385 LP Sweeper
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Secured Party Location File No. Date Filed Collateral
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Manifest Group, a Massachusetts, City of 6695 12/17/97 Leased telephone equipment
division of Lyon Canton
Financial Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------
The Manifest Group, a Massachusetts Secretary of 513856 12/1/97 Leased telephone equipment
division of Lyon State
Financial Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------
The Manifest Group, a Michigan Secretary of State D326156 1/13/98 Leased telephone equipment
division of Lyon
Financial Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------
Xerox Corporation Virginia, Augusta County 41333 10/8/96 1 copy machine
- ------------------------------------------------------------------------------------------------------------------------
Xerox Corporation Virginia Secretary of State 9610047104 10/4/96 1 copy machine
- ------------------------------------------------------------------------------------------------------------------------
Yale Financial Services, Indiana Secretary of State 2152186 10/16/97 Leased forklift
Inc.
- ------------------------------------------------------------------------------------------------------------------------
Yale Financial Services, Maryland Secretary of State 172898210 10/16/97 Leased forklift
Inc.
- ------------------------------------------------------------------------------------------------------------------------
Ford Equipment Leasing Kentucky, Jefferson County 0370 1/8/91 Leased computer equipment
Company
- ------------------------------------------------------------------------------------------------------------------------
Isotec Credit Corp. Maryland Secretary of State 73017672 10/28/87 Leased telephone equipment
- ------------------------------------------------------------------------------------------------------------------------
National City Bank, Missouri, Boone County 123230 11/2/90 Fixtures, equipment and other personal
Kentucky, Trustee property leased to Debtor under 1979
lease agreement between the City of
Columbia, Missouri and American Air
Filter Company
- ------------------------------------------------------------------------------------------------------------------------
NTFC Capital New York Secretary of 109662 5/24/90 Leased telephone equipment
Corporation State
- ------------------------------------------------------------------------------------------------------------------------
The Boatmen's National Arkansas, Fayetteville 60976 5/20/85 Filed copy of Mortgages and Security
Bank of St. Louis County Agreement relating to Industrial Revenue
Bonds
- ------------------------------------------------------------------------------------------------------------------------
The Boatmen's National Arkansas, Fayetteville 60974 5/20/85 Filed copy of Loan Agreement relating to
Bank of St. Louis County Industrial Revenue Bonds
- ------------------------------------------------------------------------------------------------------------------------
First National Bank of Missouri Secretary of State 1930755 11/2/90 Fixtures and all other personal property,
Louisville, as Trustee including equipment, leased to Debtor
under the 7/12/79 lease with the City of
Columbia, Missouri
- ------------------------------------------------------------------------------------------------------------------------
WAMCO XXIV, Ltd. New York, Cayuga County 01020-98 7/27/98 Fixture filing
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Secured Party Location File No. Date Filed Collateral
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WAMCO XXIV, Ltd. New York, Cayuga County 01019-98 7/27/98 Compressed air system, power paint
system, power conveyor track and
finished goods storage system
- ------------------------------------------------------------------------------------------------------------------------
WAMCO XXIV, Ltd. New York Secretary of 166247 8/3/93 Specified equipment, including
State Compressed air system, power paint
system, power conveyor track and
finished goods storage system
- ------------------------------------------------------------------------------------------------------------------------
WAMCO XXIV, Ltd. New York Secretary of 157528 7/22/98 Equipment and fixture filing
State
- ------------------------------------------------------------------------------------------------------------------------
WAMCO XXIV, Ltd. New York Secretary of 157529 7/22/98 Compressed air system, power paint
State system, power conveyor track and
finished goods storage
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 4.5
EQUIPMENT AND INVENTORY LOCATIONS
LOCATIONS IN THE UNITED STATES
<TABLE>
<S> <C> <C>
215 Central Avenue Weston Professional Centre 2125 8055 Penn Randall Place
Louisville, Kentucky 40208 N. Commerce Parkway Upper Marlboro, Maryland
Suite 9 20772
13600 Industrial Park Blvd. Weston, Florida 33326
Plymouth, Minnesota 55441 960 Turnpike Street
3540 West Prospect Road Canton, Massachusetts 02021
300 24th Street Suite 201
Faribault, Minnesota 55021 Ft. Lauderdale, Florida 33309 11938 Farmington Road
Livonia, Michigan 48150
302 Nichols Drive 1125 N.W. 76th Avenue
Hutchins, Texas 75141 Miami, Florida 33126 2510 Vandiver Drive
Columbia, Missouri
Route 612 Verona, 1202 Tech Boulevard
Virginia 24482 Suite 204 P. O. Box L, Stryker Lane
Tampa, Florida 33619 Building 4, Unit 10
17106 Alabama Highway 35 Belle Meade, New Jersey
Scottsboro, Alabama 4405 Vineland Road 08502
Suite C-9
35768 2355 Armstrong Avenue Orlando, Florida 32811 3167 San Mateo, N.E.
Fayetteville, Arkansas 72701 Suite 334
2624 Weaver Way Albuquerque, New Mexico
2100 Nelwood Drive Atlanta, Georgia 30340 87110
Columbia, Missouri 65202
99-1285 Halawa Valley Street 13504-J South Point Blvd.
4900 Technology Park Suite B-2 Charlotte, North Carolina
Auburn, New York 13021 Aiea, Hawaii 96701 28273
2330 West Mission Lane, #15 770 North Church Road 6779 Engle Road, Suite 1-J
Phoenix, Arizona 85021-2816 Suite J Middleburg Heights, Ohio
Elmhurst, Illinois 60126 44130
1955 West Grant Street Suite 205
Tucson, Arizona 84745 210 North Enterprise Blvd. 150 Janney Road
P. O. Box 642 Dayton, Ohio 45404
2568 Barrington Court Lebanon, Indiana 46052
Hayward, California 94545 2056 N.W. Aloclek Drive
9917 Pflumm Road Suite 320
18856 San Jose Avenue Lenexa, Kansas 66215 Hillsboro, Oregon 97124
Los Angeles, California
91748 3229 8th Street 9009 Rico
Metairie, Louisiana 70002 Road Monroeville, Pennsylvania
16605 Valley View Avenue 15146
Cerritos, California 90703 Harbor Place Towers
Suite 2800 33 Industrial Road
111 S. Calvert Street Elizabethtown, Pennsylvania
Baltimore, Maryland 21202 17022
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
12000 Crownpoint Drive, 5950 North Sam Houston 1146 Industry Drive
#110 Parkway East, Suite 406 Unit 40/F
San Antonio, Texas 78233 Humble, Texas 77396 Tukwila, Washington 98188
1250 Post & Paddock Road 3905 Deep Rock Road
Suite 200 Richmond, Virginia 23233
Grand Prairie, Texas 75050
</TABLE>
Locations Outside the United States
None.
<PAGE>
Schedule 4.15(c)
LOCATION OF EXECUTIVE OFFICES
AAF-McQuay Inc.
215 Central Avenue
Louisville, Kentucky 40208
<PAGE>
Schedule 4.16
LICENSE AGREEMENTS
License Agreement dated January 6, 1987 between MONOVIS Inc., a
Connecticut corporation, and Borrower.
<PAGE>
Schedule 4.19
REAL PROPERTY
All of Borrower's right, title and interest in and to the following
real property, whether owned or leased by Borrower: (a) the premises located at
17106 Alabama Highway in Scottsboro, Alabama, (b) the premises located at 2355
Armstrong Avenue, Fayetteville, Arkansas, (c) the premises located at 13600
Industrial Park Boulevard, Plymouth, Minnesota, (d) the premises located at 300
24th Street, Faribault, Minnesota, (e) the premises located at 2100 Nelwood
Drive, Columbia, Missouri, (f) the premises located at 4900 Technology Parkway,
Auburn, New York, (g) the premises located at 302 Nichols Drive, Hutchins,
Texas, and (g) the premises located at Route 612, Verona, Virginia.
<PAGE>
Schedule 5.2(a)
STATES OF QUALIFICATION AND GOOD STANDING
Borrower is duly organized and in good standing under the laws of the
State of Delaware, and is qualified to do business and is in good standing under
each of the fifty (50) states of the United States as well as the District of
Columbia.
<PAGE>
Schedule 5.2(b)
SUBSIDIARIES
[TO BE PROVIDED BY BORROWER]
<PAGE>
Schedule 5.3
FEDERAL TAX IDENTIFICATION NUMBER
Borrower's Federal Tax Identification Number is 41-0404230.
<PAGE>
Schedule 5.5
PRIOR NAMES
Prior Names: None.
Trade styles under which Borrower sells inventory: McQuay, McQuay
International, AAF, AAF International, Herman Nelson, American Air Filter,
McQuay Service and Barry Blower.
<PAGE>
Schedule 5.7(a)
INDEBTEDNESS FOR MONEY BORROWED
3. Indebtedness of the Borrower pursuant to the terms of [i] that
certain Trust Indenture dated as of May 1, 1999, by and between The Industrial
Development Board of The City of Scottsboro, Alabama and SouthTrust Bank,
National Association for the issuance of $1,920,000 The Industrial Development
Board of the City of Scottsboro (Alabama) Industrial Development Refunding
Revenue Bonds, Series 1999 (AAF-McQuay Inc. Project) and [ii] other related
documents
- Outstanding Principal Balance as of July 3, 1999, $1,920,000.00
4. Indebtedness of the Borrower pursuant to the terms of [i] that
certain Indenture of Trust dated as of December 1, 1977, by and between City of
Plymouth, Minnesota and Northwestern National Bank of Minneapolis, as Trustee
for the issuance of $1,000,000 City of Plymouth, Minnesota Industrial
Development Revenue Bonds (McQuay-Perfex Project) Series 1977 and [ii] other
related documents
- Outstanding Principal Balance as of July 3, 1999, $300,000.00
5. Indebtedness of the Borrower pursuant to the terms of [i] that
certain Indenture of Trust dated as of June 1, 1979, by and between City of
Plymouth, Minnesota and First Trust Company of Saint Paul, as Trustee for the
issuance of $3,300,000 City of Plymouth, Minnesota Industrial Development
Revenue Bonds (McQuay-Perfex Project) Series 1979 and [ii] other related
documents
- Outstanding Principal Balance as of July 3, 1999, $1,045,000.00
6. Indebtedness of the Borrower pursuant to the terms of [i] that
certain Indenture of Trust dated as of July 12, 1979, by and between The City of
Columbia , Missouri and First National Bank of Louisville, Trustee for the
issuance of $2,500,000 City of Columbia, Missouri Industrial Revenue Bonds,
Series July 12, 1979 (American Air Filter Company, Inc. Project) and [ii] other
related documents
- Outstanding Principal Balance as of July 3, 1999, $1,105,000.00
7. Indebtedness of the Borrower pursuant to the terms of [i] that
certain Trust Indenture dated as of August 1, 1978, by and between City of
Fayetteville, Arkansas and The Boatmen's National Bank of St. Louis, as Trustee
for the issuance of $4,000,000 City of Fayetteville, Arkansas Industrial
Development Revenue Bonds (American Air Filter Project), Series 1978 and [ii]
other related documents
- Outstanding Principal Balance as of July 3, 1999, $2,700,000.00
8. Indebtedness of the Borrower pursuant to the terms of that certain
Note dated December 16, 1992, and given by Borrower and made payable to the
order of New York State Urban Development Corporation in the face principal
amount of $2,500,000.00
- Outstanding Principal Balance as of July 3, 1999, $2,500,000.00
<PAGE>
9. Indebtedness of the Borrower pursuant to the terms of [i] that
certain Indenture dated as of February 14, 1996, by and between Borrower and IBJ
Schroder Bank & Trust Company, and [ii] related documents
- Outstanding Principal Balance as of July 3, 1999, $125,000,000
10. Indebtedness of the Borrower pursuant to the terms of [i] that
certain Reimbursement Agreement dated as of March 22, 1995, between Borrower and
The Bank of Nova Scotia and [ii] related documents for the issuance of letters
of credit (the "Letter of Credit Facility") which Letter of Credit Facility is
fully supported by an irrevocable stand-by letter of credit issued by The Bank
of Nova Scotia Berhad for the account of O.Y.L. Industries Berhad, a Malaysian
corporation
-- Outstanding letters of credit $10,045,094.51
11. Indebtedness of Borrower pursuant to the terms of that certain
Promissory Note given by the Borrower to McQuay Latin America LC in the face
principal amount of $400,000
- Outstanding amount $400,000.00
<PAGE>
Schedule 5.7(b)
LITIGATION
[TO BE PROVIDED BY BORROWER]
<PAGE>
Schedule 5.7(c)
PLANS
[TO BE PROVIDED BY BORROWER]
<PAGE>
Schedule 5.8
INTELLECTUAL PROPERTY
See attached summaries.
<PAGE>
Schedule 5.9
LICENSES AND PERMITS
None.
<PAGE>
Schedule 5.13
LABOR DISPUTES
[TO BE PROVIDED BY BORROWER]
<PAGE>
Schedule 7.3
GUARANTEES
[TO BE PROVIDED BY BORROWER]
<PAGE>
Schedule 7.4
INVESTMENTS
[TO BE PROVIDED BY BORROWER]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
page
<S> <C> <C> <C>
SECTION 1. DEFINITIONS.................................................................................- 1 -
1.1 Accounting Terms...................................................................- 1 -
1.2 General Terms......................................................................- 1 -
1.3 UCC Terms.........................................................................- 26 -
1.4 Certain Matters of Construction...................................................- 26 -
1.5 Accounting Matters................................................................- 26 -
SECTION 2. ADVANCES, PAYMENTS.........................................................................- 26 -
2.1 Revolving Advances................................................................- 26 -
2.2 Disbursement of Advance Proceeds..................................................- 28 -
2.3 Term Loan.........................................................................- 29 -
2.4 Maximum Advances..................................................................- 29 -
2.5 Repayment of Obligations..........................................................- 29 -
2.6 Repayment of Excess Advances......................................................- 30 -
2.7 Statement of Account..............................................................- 30 -
2.8 Letters of Credit.................................................................- 30 -
2.9 Issuance of Letters of Credit.....................................................- 30 -
2.10 Requirements For Issuance of Letters of Credit....................................- 31 -
2.11 Additional Payments...............................................................- 33 -
2.12 Manner of Borrowing and Payment...................................................- 33 -
2.13 Mandatory Prepayments.............................................................- 34 -
2.14 Use of Proceeds...................................................................- 35 -
2.15 Defaulting Lender.................................................................- 35 -
2.16 Provisions Applicable to Eurodollar Rate Loans....................................- 36 -
2.17 Gross Up for Taxes................................................................- 37 -
2.18 Withholding Tax Exemption.........................................................- 37 -
SECTION 3. INTEREST AND FEES..........................................................................- 38 -
3.1 Interest..........................................................................- 38 -
3.2 Letter of Credit Fees.............................................................- 38 -
3.3 Facility Fee......................................................................- 38 -
3.4 Computation of Interest and Fees..................................................- 39 -
3.5 Maximum Charges...................................................................- 39 -
3.6 Increased Costs...................................................................- 39 -
3.7 Basis For Determining Interest Rate Inadequate or Unfair..........................- 40 -
3.8 Capital Adequacy..................................................................- 40 -
SECTION 4. COLLATERAL: GENERAL TERMS..................................................................- 41 -
4.1 Security Interest in the Collateral...............................................- 41 -
4.2 Perfection of Security Interest...................................................- 41 -
4.3 Disposition of Collateral.........................................................- 42 -
4.4 Preservation of Collateral........................................................- 42 -
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C> <C>
4.5 Ownership of Collateral...........................................................- 42 -
4.6 Defense of Agent's and Lenders' Interests.........................................- 43 -
4.7 Books and Records.................................................................- 43 -
4.8 Financial Disclosure..............................................................- 43 -
4.9 Compliance with Laws..............................................................- 43 -
4.10 Inspection of Premises............................................................- 44 -
4.11 Insurance.........................................................................- 44 -
4.12 Failure to Pay Insurance..........................................................- 45 -
4.13 Payment of Taxes..................................................................- 45 -
4.14 Payment of Leasehold Obligations..................................................- 45 -
4.15 Receivables.......................................................................- 46 -
4.16 Inventory.........................................................................- 48 -
4.17 Maintenance of Equipment..........................................................- 48 -
4.18 Exculpation of Liability..........................................................- 48 -
4.19 Environmental Matters.............................................................- 48 -
4.20 Financing Statements..............................................................- 48 -
4.21 Pledged Notes.....................................................................- 48 -
SECTION 5. REPRESENTATIONS AND WARRANTIES.............................................................- 49 -
5.1 Authority.........................................................................- 49 -
5.2 Formation and Qualification.......................................................- 49 -
5.3 Tax Returns.......................................................................- 49 -
5.4 Financial Statements..............................................................- 49 -
5.5 Corporate Name....................................................................- 50 -
5.6 O.S.H.A. and Environmental Compliance.............................................- 50 -
5.7 Solvency; No Litigation, Violation, Indebtedness or Default.......................- 50 -
5.8 Patents, Trademarks, Copyrights and Licenses......................................- 51 -
5.9 Licenses and Permits..............................................................- 51 -
5.10 Default of Indebtedness for Money Borrowed........................................- 51 -
5.11 No Default........................................................................- 52 -
5.12 No Burdensome Restrictions........................................................- 52 -
5.13 No Labor Disputes.................................................................- 52 -
5.14 Margin Regulations................................................................- 52 -
5.15 Not a Regulated Entity............................................................- 52 -
5.16 Disclosure........................................................................- 52 -
5.17 Swaps.............................................................................- 52 -
5.18 Conflicting Agreements............................................................- 52 -
5.19 Application of Certain Laws and Regulations.......................................- 53 -
5.20 Business and Property of Borrower.................................................- 53 -
5.21 Compliance with Laws..............................................................- 53 -
5.22 Survival and Reaffirmation of Representations and Warranties......................- 53 -
SECTION 6. AFFIRMATIVE COVENANTS......................................................................- 53 -
6.1 Payment of Fees...................................................................- 53 -
6.2 Conduct of Business and Maintenance of Existence and Assets.......................- 53 -
6.3 Violations........................................................................- 54 -
6.4 Government Receivables............................................................- 54 -
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C> <C> <C>
6.5 Fixed Charge Coverage Ratio.......................................................- 54 -
6.6 Minimum Consolidated Net Worth....................................................- 54 -
6.7 Consolidated Total Assets.........................................................- 54 -
6.8 Execution of Supplemental Instruments.............................................- 54 -
6.9 Payment of Indebtedness...........................................................- 55 -
6.10 Standards of Financial Statements.................................................- 55 -
6.11 Year 2000 Compatibility...........................................................- 55 -
6.12 License Agreements................................................................- 55 -
6.13 Louisville Property...............................................................- 55 -
6.14 Asset Sales and Net Asset Sale Proceeds...........................................- 56 -
6.15 Post-Closing Matters..............................................................- 56 -
SECTION 7. NEGATIVE COVENANTS.........................................................................- 57 -
7.1 Merger, Consolidation, Acquisition and Sale of Assets.............................- 57 -
7.2 Creation of Liens.................................................................- 57 -
7.3 Guarantees........................................................................- 57 -
7.4 Investments.......................................................................- 57 -
7.5 Loans.............................................................................- 58 -
7.6 Capital Expenditures..............................................................- 58 -
7.7 Dividends.........................................................................- 58 -
7.8 Indebtedness......................................................................- 59 -
7.9 Nature of Business................................................................- 59 -
7.10 Transactions with Affiliates......................................................- 60 -
7.11 Leases............................................................................- 60 -
7.12 Subsidiaries......................................................................- 60 -
7.13 Fiscal Year and Accounting Changes................................................- 60 -
7.14 Pledge of Credit..................................................................- 60 -
7.15 Amendment of Organization Documents...............................................- 60 -
7.16 Compliance with ERISA.............................................................- 60 -
7.17 Prepayment of Indebtedness........................................................- 61 -
7.18 Public Notes Documents............................................................- 61 -
7.19 Upstream Payments.................................................................- 61 -
7.20 Tax Consolidation.................................................................- 61 -
7.21 No Further Negative Pledges.......................................................- 61 -
SECTION 8. CONDITIONS PRECEDENT.......................................................................- 61 -
8.1 Conditions to Initial Advances....................................................- 61 -
8.2 Conditions to Each Advance........................................................- 64 -
SECTION 9. INFORMATION AS TO BORROWER.................................................................- 65 -
9.1 Disclosure of Material Matters....................................................- 65 -
9.2 Schedules.........................................................................- 65 -
9.3 Environmental Reports.............................................................- 65 -
9.4 Litigation........................................................................- 65 -
9.5 Material Occurrences..............................................................- 65 -
9.6 Intentionally Omitted.............................................................- 66 -
9.7 Annual Financial Statements.......................................................- 66 -
</TABLE>
- iii -
<PAGE>
<TABLE>
<S> <C> <C> <C>
9.8 Quarterly Financial Statements....................................................- 66 -
9.9 Monthly Financial Statements......................................................- 66 -
9.10 Other Reports.....................................................................- 66 -
9.11 Additional Information............................................................- 67 -
9.12 Projected Operating Budget........................................................- 67 -
9.13 Variances From Operating Budget...................................................- 67 -
9.14 Notice of Suits, Adverse Events...................................................- 67 -
9.15 ERISA Notices and Requests........................................................- 67 -
9.16 Additional Documents..............................................................- 68 -
SECTION 10. EVENTS OF DEFAULT..........................................................................- 68 -
SECTION 11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.................................................- 71 -
11.1 Rights and Remedies...............................................................- 71 -
11.2 Agent's Discretion................................................................- 72 -
11.3 Setoff............................................................................- 72 -
11.4 Rights and Remedies not Exclusive.................................................- 72 -
SECTION 12. WAIVERS AND JUDICIAL PROCEEDINGS...........................................................- 72 -
12.1 Waiver of Notice..................................................................- 72 -
12.2 Delay.............................................................................- 72 -
12.3 Jury Waiver.......................................................................- 72 -
SECTION 13. EFFECTIVE DATE AND TERMINATION.............................................................- 72 -
13.1 Term..............................................................................- 72 -
13.2 Termination.......................................................................- 73 -
13.3 Termination.......................................................................- 73 -
SECTION 14. REGARDING AGENT............................................................................- 73 -
14.1 Appointment.......................................................................- 73 -
14.2 Nature of Duties..................................................................- 74 -
14.3 Lack of Reliance on Agent and Resignation.........................................- 74 -
14.4 Certain Rights of Agent...........................................................- 75 -
14.5 Reliance..........................................................................- 75 -
14.6 Notice of Default.................................................................- 75 -
14.7 Indemnification...................................................................- 75 -
14.8 Agent in its Individual Capacity..................................................- 75 -
14.9 Delivery of Documents.............................................................- 75 -
14.10 Borrower's Undertaking to Agent...................................................- 76 -
SECTION 15. MISCELLANEOUS..............................................................................- 76 -
15.1 Governing Law; Process............................................................- 76 -
15.2 Entire Understanding; Amendments..................................................- 76 -
15.3 Successors and Assigns; Participations; New Lenders...............................- 78 -
15.4 Tax Treatment.....................................................................- 79 -
15.5 Application of Payments...........................................................- 79 -
15.6 Indemnity.........................................................................- 79 -
</TABLE>
- iv -
<PAGE>
<TABLE>
<S> <C> <C> <C>
15.7 Notice............................................................................- 79 -
15.8 Survival..........................................................................- 80 -
15.9 Severability......................................................................- 81 -
15.10 Expenses..........................................................................- 81 -
15.11 Injunctive Relief.................................................................- 81 -
15.12 Consequential Damages.............................................................- 81 -
15.13 Captions..........................................................................- 81 -
15.14 Counterparts; Telecopied Signatures...............................................- 81 -
15.15 Construction......................................................................- 81 -
15.16 Confidentiality; Sharing Information..............................................- 81 -
15.17 Publicity.........................................................................- 82 -
</TABLE>
- v -
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
Exhibits
<S> <C>
Exhibit A Form of Revolving Credit A Note
Exhibit A-1 Form of Revolving Credit B Note
Exhibit A-2 Form of Term Note
Exhibit B Form of Commitment Transfer Supplement
Exhibit C Form of Compliance Certificate
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 4.16 License Agreements
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.3 Federal Tax Identification Number
Schedule 5.5 Prior Names
Schedule 5.7(b) Indebtedness and Litigation
Schedule 5.7(c) Plans
Schedule 5.8 Intellectual Property
Schedule 5.9 Licenses and Permits
Schedule 5.13 Labor Disputes
Schedule 7.3 Guarantees
Schedule 7.4 Investments
</TABLE>
- vi -
<PAGE>
------------------------------------------------------------------
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
------------------------------------------------------------------
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
------------------------------------------------------------------
WITH
------------------------------------------------------------------
AAF-MCQUAY INC.
(BORROWER)
------------------------------------------------------------------
SEPTEMBER 30, 1999
------------------------------------------------------------------
<PAGE>
FIRST AMENDMENT TO REVOLVING CREDIT,
TERM LOAN AND SECURITY AGREEMENT
This FIRST AMENDMENT TO REVOLVING CREDIT, TERM LOAN AND SECURITY
AGREEMENT (this "Amendment") is made and entered into this ____ day of October,
1999, by and among AAF-MCQUAY INC., a Delaware corporation "Borrower"); the
various financial institutions listed on the signature pages hereof and their
respective successors and permitted assigns which become "Lenders"; and PNC
BANK, NATIONAL ASSOCIATION, a national association ("PNC"), as collateral and
administrative agent for Lenders (PNC, together with its successors in such
capacity, the "Agent").
RECITALS:
Agent, Lenders and Borrower are parties to a certain Revolving Credit,
Term Loan and Security Agreement dated September 30, 1999 (the "Credit
Agreement") pursuant to which Lenders have made certain revolving credit and
term loans to Borrower.
The parties desire to amend the Credit Agreement as hereinafter set
forth.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good
and valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
a. By adding the following definition to Section 1.2 in
appropriate alphabetical order:
"Maximum Collateral Amount" shall mean, on any date
of determination thereof, the sum of (x) the outstanding
principal balance of the Term Loan PLUS (y) the Consolidated
Total Assets Formula Amount MINUS (z) the amount of
Indebtedness, if any, secured by a Limited Lien in favor of
any Person other than Agent (but Borrower acknowledges that
the existence of any such Limited Lien, other than in favor of
Agent, constitutes an Event of Default).
b. By deleting Section 4.1(a) and (b) in their entirety
and inserting the following in lieu thereof:
(a) To secure the prompt payment and performance to
Agent and each Lender of all of the Obligations (excluding,
however, (i) any Obligations consisting from time to time of
Revolving B Advances and any interest or fees
<PAGE>
payable in connection with Revolving B Advances, and (ii) the
portion of the Obligations that exceed on any date the Maximum
Collateral Amount), Borrower hereby assigns, pledges and
grants to Agent, for its benefit and the ratable benefit of
Lenders, a continuing security interest in and to all of the
Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located. Borrower shall
mark its books and records as may be necessary or appropriate
to evidence, protect and perfect Agent's security interest and
shall cause its financial statements to reflect such security
interest.
(b) To secure the prompt payment and performance to
Agent and each Lender of the Obligations consisting of (i)
Revolving B Advances, (ii) any interest or fees payable in
connection with Revolving B Advances and (iii) any portion of
the Obligations in excess of the Maximum Collateral Amount on
any date, Borrower hereby assigns, pledges and grants to
Agent, for its benefit and the ratable benefit of Lenders, a
continuing security interest in and to all of Borrower's
"accounts" and "inventory," as such terms are defined in the
UCC, and the proceeds thereof, whether now owned or existing
or hereafter acquired or arising and wheresoever located.
Borrower shall mark its books and records as may be necessary
or appropriate to evidence, protect and perfect Agent's
security interest and shall cause its financial statements to
reflect such security interest.
c. By deleting Section 6.5 in its entirety and inserting the
following in lieu thereof:
6.5 FIXED CHARGE COVERAGE RATIO. Maintain, as of the
end of each period described below, a Fixed Charge Coverage
Ratio of not less than the ratio set forth below for period
corresponding thereto:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
For the two (2) Fiscal Quarters 1.00:1.00
ending January 1, 2000
For the three (3) Fiscal Quarters 1.00:1.00
ending April 1, 2000
On a four (4) Fiscal Quarter 1.00:1.00
rolling basis, tested at the
end of each Fiscal Quarter
after April 1, 2000
</TABLE>
3. ADDITIONAL COVENANTS. To induce Agent and Lenders to enter into this
Amendment, Borrower covenants and agrees as follows: (a) Borrower will execute
and deliver to Agent any amendments or other modifications to any of the Lien
Perfection Documents as Agent may from time to time request in order to reflect
the amendments to the Credit Agreement set forth in this Amendment, including,
without limitation, amendments to the Trademark Security Agreement, the Patent
Security Agreement, the Pledge Agreement, the Collateral Assignment of Contract
Rights, and of the Mortgages, in each case in form and substance satisfactory to
Agent and (b) Borrower shall deliver endorsements or commitments for
- 2 -
<PAGE>
endorsements to the existing mortgagee title insurance policies insuring the
Liens of the Mortgages, which shall be in form and substance satisfactory to
Agent and which shall give effect to the mortgage amendments described in the
foregoing clause (a).
4. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and
reaffirms the Obligations, each of the Loan Documents and all of Borrower's
covenants, duties, indebtedness and liabilities under the Loan Documents.
5. ACKNOWLEDGMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Credit Agreement and the other Loan Documents executed by
Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with the terms thereof; all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by Borrower); the security interests and liens
granted by Borrower in favor of Lender are duly perfected, first priority
security interests and liens; the unpaid principal amount of the Revolving A
Advances on and as of the close of business on October 15, 1999, totaled
$51,786,353.79; the unpaid principal amount of the Revolving B Advances on and
as of the close of business on October 15, 1999, totaled $0.00; and the unpaid
principal amount of the Term Loan on and as of the close of business on October
15, 1999, totaled $30,000,000.00.
6. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Agent and Lenders, to induce Agent and Lenders to enter into this Amendment,
that no Default or Event of Default exists on the date hereof; the execution,
delivery and performance of this Amendment have been duly authorized by all
requisite corporate action on the part of Borrower and this Amendment has been
duly executed and delivered by Borrower; and all of the representations and
warranties made by Borrower in the Credit Agreement are true and correct on and
as of the date hereof.
7. BREACH OF AMENDMENT. This Amendment shall be part of the Credit
Agreement and a breach of any of any representation, warranty or covenant herein
shall constitute an Event of Default.
8. CONDITION PRECEDENT. The effectiveness of the amendments contained
in Section 2 hereof are subject to Agent receiving favorable legal opinions of
Borrower's counsel (qualified to practice in the States of Kentucky, Maryland
and Virginia) in form and substance satisfactory to Agent, which shall cover
such matters incident to the transactions contemplated by this Agreement and the
other Loan Documents as Agent may require.
9. EXPENSES OF AGENT AND LENDERS. Borrower agrees to pay, ON DEMAND,
all costs and expenses incurred by Agent and Lenders in connection with the
preparation, negotiation and execution of this Amendment and any other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including, without limitation, the costs and fees of
Agent's and Lenders' legal counsel and any taxes or expenses associated with or
incurred in connection with any instrument or agreement referred to herein or
contemplated hereby.
10. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective
upon acceptance by Agent and Lenders (notice of which acceptance is hereby
waived), whereupon the same shall be governed by and construed in accordance
with the internal laws of the State of New York.
- 3 -
<PAGE>
11. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
12. NO NOVATION, ETC. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Credit Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Credit
Agreement as herein modified shall continue in full force and effect.
13. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed
in any number of counterparts and by different parties to this Amendment on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
14. FURTHER ASSURANCES. Borrower agrees to take such further actions as
Agent and Lenders shall reasonably request from time to time in connection
herewith to evidence or give effect to the amendments set forth herein or any of
the transactions contemplated hereby.
15. SECTION TITLES. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto.
16. RELEASE OF CLAIMS. TO INDUCE AGENT AND LENDERS TO ENTER INTO THIS
AMENDMENT, BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES AGENT AND
EACH LENDER, AND ALL THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS OF LENDER, FROM ANY AND ALL LIABILITIES, CLAIMS, DEMANDS,
ACTIONS OR CAUSES OF ACTION OF ANY KIND OR NATURE (IF THERE BE ANY), WHETHER
ABSOLUTE OR CONTINGENT, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR
UNKNOWN, THAT BORROWER NOW HAS OR EVER HAD AGAINST AGENT AND EACH LENDER ARISING
UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS OR OTHERWISE. BORROWER
REPRESENTS AND WARRANTS TO AGENT AND LENDERS THAT BORROWER HAS NOT TRANSFERRED
OR ASSIGNED TO ANY PERSON ANY CLAIM THAT BORROWER EVER HAD OR CLAIMED TO HAVE
AGAINST AGENT OR ANY LENDER.
- 4 -
<PAGE>
17. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
ATTEST: AAF-MCQUAY INC.
("Borrower")
______________________________ By:____________________________
Name:______________________ Name:_________________________
Title:_____________________ Title:________________________
[CORPORATE SEAL]
PNC BANK, NATIONAL ASSOCIATION,
as a Lender and as Agent
By:____________________________
Name:_________________________
Title:________________________
- 5 -
<PAGE>
Exhibit 10.18
SECOND AMENDMENT TO REVOLVING CREDIT,
TERM LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO REVOLVING CREDIT, TERM LOAN AND SECURITY
AGREEMENT (this "Amendment") is made and entered into this 12th day of November,
1999, by and among AAF-MCQUAY INC., a Delaware corporation "Borrower"); the
various financial institutions listed on the signature pages hereof and their
respective successors and permitted assigns which become "Lenders"; and PNC
BANK, NATIONAL ASSOCIATION, a national association ("PNC"), as collateral and
administrative agent for Lenders (PNC, together with its successors in such
capacity, the "Agent").
RECITALS:
Agent, Lenders and Borrower are parties to a certain Revolving Credit,
Term Loan and Security Agreement dated September 30, 1999 (as at any time
amended, the "Credit Agreement") pursuant to which Lenders have made certain
revolving credit and term loans to Borrower.
The parties desire to amend the Credit Agreement as hereinafter set
forth.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good
and valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this
Amendment, unless otherwise defined herein, shall have the meaning ascribed to
such terms in the Credit Agreement.
1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement
is hereby amended as follows:
a. By deleting the of Section 7.7 in its entirety and
inserting the following in lieu thereof:
7.7 DIVIDENDS. Declare, pay or make any dividend or
distribution on any shares of the Equity Interests of Borrower (other
than dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or
assets to the purchase, redemption or other retirement of any common or
preferred stock, or of any options to purchase or acquire any such
shares of common or preferred stock of Borrower.
a. By deleting the of Section 13.2(a) in its entirety
and inserting the following in lieu thereof:
(a) TERMINATION BY AGENT. Agent may (and upon the direction of
the Required Lenders shall) terminate the Agreement without notice upon
or after the occurrence of an Event of Default; PROVIDED, HOWEVER, that
the Agreement shall automatically terminate as provided in Section
11.1(i) hereof.
a. By deleting the first paragraph of Section 15.2(b) in
its entirety and inserting the following in lieu thereof:
<PAGE>
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrower may, subject to the provisions of
this Section 15.2(b), from time to time enter into written supplemental
agreements to this Agreement or any of the Other Documents executed by
Borrower, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of
Lenders, Agent or Borrower thereunder or the conditions, provisions or
terms thereof or waiving any Event of Default thereunder, but only to
the extent specified in such written agreements; PROVIDED, HOWEVER,
that no such supplemental agreement shall, without the consent of all
Lenders:
(i) increase the Commitment Percentage or commitment
amount of any Lender;
(ii) extend the maturity of any Note or the due date
for any amount payable hereunder, or decrease the rate of
interest or reduce any fee payable by Borrower to Lenders
pursuant to this Agreement or alter the amount of repayments;
(iii) alter the definition of the term Required
Lenders or alter, amend or modify this Section 15.2(b);
(iv) release any portion of the Collateral with an
aggregate value in excess of $1,000,000 during any calendar
year (other than in accordance with the provisions of this
Agreement);
(v) change the rights and duties of Agent;
(vi) increase the Maximum Revolving Amount or permit
any Out-of-Formula Loan to be made if after giving effect
thereto the total of Revolving Advances outstanding hereunder
would exceed the Formula Amount for more than thirty (30)
consecutive days or exceed one hundred ten percent (110%) of
the Formula Amount; or
(vii) increase the Advance Rates above the Advance
Rates in effect on the Closing Date.
Any such supplemental agreement shall apply equally to each Lender and
shall be binding upon Borrower, Lenders and Agent and all future
holders of the Obligations. In the case of any waiver, Borrower, Agent
and Lenders shall be restored to their former positions and rights, and
any Event of Default waived shall be deemed to be cured and not
continuing, but no waiver of a specific Event of Default shall extend
to any subsequent Event of Default (whether or not the subsequent Event
of Default is the same as the Event of Default which was waived), or
impair any right consequent thereon.
a. By changing all references to November 1, 1999 or
December 1, 1999 in Section 6.15 to December 15, 1999.
1. RATIFICATION AND REAFFIRMATION. Borrower hereby
ratifies and reaffirms the Obligations, each of the Loan Documents and all of
Borrower's covenants, duties, indebtedness and liabilities under the Loan
Documents.
1. ACKNOWLEDGMENTS AND STIPULATIONS. Borrower
acknowledges and stipulates that the Credit Agreement and the other Loan
Documents executed by Borrower are legal, valid and binding obligations
<PAGE>
of Borrower that are enforceable against Borrower in accordance with the terms
thereof; all of the Obligations are owing and payable without defense, offset or
counterclaim (and to the extent there exists any such defense, offset or
counterclaim on the date hereof, the same is hereby waived by Borrower); the
security interests and liens granted by Borrower in favor of Lender are duly
perfected, first priority security interests and liens; the unpaid principal
amount of the Revolving A Advances on and as of the close of business on
November 10, 1999, totaled $52,909,075.17; the unpaid principal amount of the
Revolving B Advances on and as of the close of business on November 10, 1999,
totaled $0.00; and the unpaid principal amount of the Term Loan on and as of the
close of business on November 10, 1999, totaled $29,575,000.00.
1. REPRESENTATIONS AND WARRANTIES. Borrower represents
and warrants to Agent and Lenders, to induce Agent and Lenders to enter into
this Amendment, that no Default or Event of Default exists on the date hereof;
the execution, delivery and performance of this Amendment have been duly
authorized by all requisite corporate action on the part of Borrower and this
Amendment has been duly executed and delivered by Borrower; and all of the
representations and warranties made by Borrower in the Credit Agreement are true
and correct on and as of the date hereof.
1. BREACH OF AMENDMENT. This Amendment shall be part of
the Credit Agreement and a breach of any of any representation, warranty or
covenant herein shall constitute an Event of Default.
1. EXPENSES OF AGENT AND LENDERS. Borrower agrees to
pay, ON DEMAND, all costs and expenses incurred by Agent and Lenders in
connection with the preparation, negotiation and execution of this Amendment and
any other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the costs
and fees of Agent's and Lenders' legal counsel and any taxes or expenses
associated with or incurred in connection with any instrument or agreement
referred to herein or contemplated hereby.
1. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be
effective upon acceptance by Agent and Lenders (notice of which acceptance is
hereby waived), whereupon the same shall be governed by and construed in
accordance with the internal laws of the State of New York.
1. SUCCESSORS AND ASSIGNS. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
1. NO NOVATION, ETC. Except as otherwise expressly
provided in this Amendment, nothing herein shall be deemed to amend or modify
any provision of the Credit Agreement or any of the other Loan Documents, each
of which shall remain in full force and effect. This Amendment is not intended
to be, nor shall it be construed to create, a novation or accord and
satisfaction, and the Credit Agreement as herein modified shall continue in full
force and effect.
1. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment
may be executed in any number of counterparts and by different parties to this
Amendment on separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
1. FURTHER ASSURANCES. Borrower agrees to take such
further actions as Agent and Lenders shall reasonably request from time to time
in connection herewith to evidence or give effect to the amendments set forth
herein or any of the transactions contemplated hereby.
<PAGE>
1. SECTION TITLES. Section titles and references used in
this Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto.
1. RELEASE OF CLAIMS. TO INDUCE AGENT AND LENDERS TO
ENTER INTO THIS AMENDMENT, BORROWER HEREBY RELEASES, ACQUITS AND FOREVER
DISCHARGES AGENT AND EACH LENDER, AND ALL THEIR RESPECTIVE OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM ANY AND ALL
LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OF ACTION OF ANY KIND OR NATURE
(IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR UNDISPUTED, AT
LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR EVER HAD AGAINST
AGENT AND EACH LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR OTHERWISE. BORROWER REPRESENTS AND WARRANTS TO AGENT AND LENDERS
THAT BORROWER HAS NOT TRANSFERRED OR ASSIGNED TO ANY PERSON ANY CLAIM THAT
BORROWER EVER HAD OR CLAIMED TO HAVE AGAINST AGENT OR ANY LENDER.
1. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT TO TRIAL BY
JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF OR RELATED
TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers on the date first written above.
ATTEST: AAF-MCQUAY INC.
("Borrower")
_______________________________ By: _______________________________
Name:_______________________ Name:__________________________
Title:______________________ Title:_________________________
[CORPORATE SEAL]
PNC BANK, NATIONAL ASSOCIATION,
as a Lender and as Agent
By:________________________________
Name:___________________________
Title: _________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q
FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-END> OCT-02-1999
<CASH> 12078
<SECURITIES> 0
<RECEIVABLES> 241509
<ALLOWANCES> 7207
<INVENTORY> 113651
<CURRENT-ASSETS> 365493
<PP&E> 208118
<DEPRECIATION> 67853
<TOTAL-ASSETS> 752168
<CURRENT-LIABILITIES> 323404
<BONDS> 163449
0
0
<COMMON> 250
<OTHER-SE> 187487
<TOTAL-LIABILITY-AND-EQUITY> 752168
<SALES> 225127
<TOTAL-REVENUES> 225127
<CGS> 165153
<TOTAL-COSTS> 165153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5873
<INCOME-PRETAX> (856)
<INCOME-TAX> (437)
<INCOME-CONTINUING> (483)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (483)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
NEWS RELEASE
[AAF-MCQUAY LOGO]
Corporate Office
215 Central Ave.
Louisville, Kentucky 4028 USA
FOR IMMEDIATE RELEASE
MR. HO NYUK CHOY IS NEW PRESIDENT AND CEO OF AAF-MCQUAY
LOUISVILLE, KY. -- (NOVEMBER 4, 1999)-- Mr. Ho Nyuk Choy, Group Managing
Director of OYL Industries Berhad ("OYL"), will also assume active leadership
and direct management of AAF-McQuay Inc. (the Company) as President and Chief
Executive Officer, the Company announced today. He replaces Joseph B. Hunter,
who announced his intention to retire by the end of this calendar year. OYL
Industries is a major manufacturer of HVAC&R systems and products celebrating
its 25th anniversary this year. A wholly owned subsidiary of OYL, AAF-McQuay is
a leading manufacturer of air conditioning systems and air filtration products
primarily for commercial, industrial, and institutional customers.
Under Mr. Ho's leadership, OYL has grown more than 70% in the last four years,
despite Asia's economic difficulties. With a worldwide sales network spanning
more than 100 countries, OYL also has manufacturing facilities in 14 countries.
"The most immediate focus for McQuay is to continue to execute the strategy that
has recently been developed," said Mr. Ho. "Focus and follow-through are the
hallmarks of successful companies."
-more-
<PAGE>
HO NEW PRESIDENT AND CEO...PAGE TWO
Mr. Ho will be relocating to the company's corporate headquarters in Louisville,
Kentucky in the month of November.
Mr. Hunter has been the president and chief executive officer of AAF-McQuay
since the purchase of the company by OYL Industries Bhd in May 1994. Under his
leadership, the company has experienced significant sales growth, developed its
worldwide presence through acquisition and joint venture partnerships, and
established new operating systems and procedures to better prepare the company
to meet its growth targets in a global environment. He will continue to
contribute to the company as a member of the Board of Directors.
AAF-McQuay has production facilities in nine countries with sales operations in
more than 80 countries. AAF-McQuay is a member of the Hong Leong Group Malaysia,
one of Malaysia's leading manufacturers and exporters of commercial and
industrial air conditioners, refrigerators, freezers, and electrical components.
The Company includes AAF International, McQuay International and J&E Hall.
# # #
MEDIA INQUIRIES, PLEASE CONTACT:
Ben Schlinsog
McQuay International
(612) 553-5320
