FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 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: 001-13931
PENTACON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0531585
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10375 RICHMOND AVENUE, SUITE 700 HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
713-860-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK 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 [ ]
NUMBER OF SHARES OF COMMON STOCK OF THE REGISTRANT, PAR VALUE $.01 PER SHARE,
OUTSTANDING AT OCTOBER 29, 1999 WAS 16,668,129.
<PAGE>
PENTACON, INC.
FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
INDEX
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998 ................................ 3
Consolidated Statements of Operations for the Three
Months and Nine Months ended September 30,
1999 and 1998 ........................................ 4
Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 1999 and 1998 .................... 5
Notes to Consolidated Financial Statements ................. 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 9
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K ......................... 15
Signature ......................................................... 15
2
<PAGE>
PENTACON, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PENTACON, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<S> <C> <C>
Cash and cash equivalents ................................... $ 314 $ 744
Accounts receivable, net .................................... 43,762 34,610
Inventories, net ............................................ 123,764 116,390
Deferred income taxes ....................................... 7,176 4,216
Other current assets ........................................ 480 897
-------- --------
Total current assets .................... 175,496 156,857
Property and equipment, net of accumulated depreciation ..... 10,276 7,404
Goodwill, net of accumulated amortization ................... 135,805 134,528
Deferred income taxes ....................................... 316 672
Other assets ................................................ 4,405 1,892
-------- --------
Total assets ............................ $326,298 $301,353
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ............................................ $ 26,431 $ 33,895
Accrued expenses ............................................ 10,604 6,553
Accrued interest ............................................ 6,334 2,322
Income taxes payable ........................................ 2,058 3,384
Current maturities of long-term debt ........................ 459 31,957
-------- --------
Total current liabilities ............... 45,886 78,111
Long-term debt, net of current maturities ................... 162,025 106,632
-------- --------
Total liabilities ....................... 207,911 184,743
-------- --------
Commitments and contingencies
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding............... -- --
Common stock, $.01 par value, 51,000,000 shares
authorized 16,668,129 shares issued and outstanding........ 167 167
Additional paid in capital .................................. 100,691 100,501
Retained earnings ........................................... 17,529 15,942
-------- --------
Total stockholders' equity ................ 118,387 116,610
-------- --------
Total liabilities and stockholders' equity $326,298 $301,353
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
PENTACON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands, except share data)
<S> <C> <C> <C> <C>
Revenues ....................... $ 68,406 $ 60,292 $206,153 $126,576
Cost of sales .................. 46,834 39,704 140,043 82,471
-------- -------- -------- --------
Gross profit ......... 21,572 20,588 66,110 44,105
Operating expenses ............. 15,157 12,977 45,591 31,127
Goodwill amortization .......... 868 622 2,591 1,091
-------- -------- -------- --------
Operating income ..... 5,547 6,989 17,928 11,887
Write-off of debt issuance costs -- -- 2,308 --
Other (income) expense, net .... (10) (24) (60) (78)
Interest expense ............... 4,534 1,472 11,992 2,153
-------- -------- -------- --------
Income before taxes . 1,023 5,541 3,688 9,812
Income taxes ................... 595 3,029 2,101 5,270
-------- -------- -------- --------
Net income ........... $ 428 $ 2,512 $ 1,587 $ 4,542
======== ======== ======== ========
Net income per share:
Basic ................ $ 0.03 $ 0.15 $ 0.10 $ 0.35
Diluted .............. $ 0.03 $ 0.15 $ 0.10 $ 0.35
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
PENTACON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
SEPTEMBER 30,
-----------------------
1999 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income .................................................. $ 1,587 $ 4,542
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization ............................... 4,388 1,689
Deferred income taxes ....................................... 43 (108)
Compensation expense related to issuance of
management shares ...................................... -- 1,864
Write-off of debt issuance costs ............................ 2,308 --
Changes in operating assets and liabilities:
Accounts receivable ............................ (9,423) (1,111)
Inventories .................................... (9,866) (14,162)
Other current assets ........................... 123 (265)
Accounts payable and accrued expenses .......... (3,247) (9,544)
Income taxes payable ........................... (1,326) (3,473)
Other assets and liabilities, net .............. (720) 2,661
--------- ---------
Net cash used in operating activities .................. (16,133) (17,907)
Cash Flows From Investing Activities:
Capital expenditures ........................................ (4,341) (3,012)
Cash paid for acquisitions, net of cash acquired ............ -- (77,031)
Cash paid for Founding Companies, net of cash acquired ...... -- (21,948)
Other ....................................................... -- 19
--------- ---------
Net cash used in investing activities ................. (4,341) (101,972)
Cash Flows From Financing Activities:
Principal payments on debt .................................. (368,757) (87,921)
Borrowings of debt .......................................... 392,613 159,344
Proceeds from issuance of common stock, net of offering costs -- 50,815
Debt issuance costs ......................................... (3,812) (1,524)
--------- ---------
Net cash provided by financing activities .............. 20,044 120,714
--------- ---------
(Decrease)Increase in cash and cash equivalents ...................... (430) 835
Cash and cash equivalents, beginning of period ....................... 744 --
--------- ---------
Cash and cash equivalents, end of period ............................. $ 314 $ 835
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
Pentacon, Inc. ("Pentacon" or the "Company") was incorporated in March
1997. On March 10, 1998, Pentacon and separate wholly-owned subsidiaries
acquired in separate transactions, simultaneously with the closing of its
initial public offering (the "Offering") of its common stock, five businesses
(the "Initial Acquisitions"): Alatec Products, Inc. (Alatec), AXS Solutions,
Inc. (AXS), Capitol Bolt & Supply, Inc. (Capitol), Maumee Industries, Inc.
(Maumee), and Sales Systems, Limited (SSL), collectively referred to as the
"Founding Companies." The consideration for the Initial Acquisitions consisted
of a combination of cash and common stock. Because (i) the stockholders of the
Founding Companies owned a majority of the outstanding shares of Pentacon common
stock following the Offering and the Initial Acquisitions, and (ii) the
stockholders of Alatec received the greatest number of shares of Pentacon common
stock among the stockholders of the Founding Companies, for financial statement
presentation purposes, Alatec has been identified as the accounting acquiror.
The acquisitions of the remaining Founding Companies have been accounted for
using the purchase method of accounting. Therefore Alatec's historical financial
statements for all periods prior to March 10, 1998 are presented as the
historical financial statements of the registrant. Unless the context otherwise
requires, all references herein to the Company include Pentacon, the Founding
Companies and acquisitions subsequent to the Offering ("Subsequent
Acquisitions").
In October 1998, the Company changed its year end from September 30 to
December 31. A Transition Report on Form 10-Q was filed for the three-month
transition period ended December 31, 1998. The accompanying unaudited interim
financial statements are prepared pursuant to the Rules and Regulations for
reporting on Form 10-Q. Accordingly, certain information and footnotes required
by generally accepted accounting principles for complete financial statements
are not included herein. The Company believes all adjustments necessary for a
fair presentation of these statements have been included and are of a normal and
recurring nature. There has been no change in the accounting policies of the
Company during the periods presented. The statements should be read in
conjunction with the financial statements and related notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1998 and the Transition Report on Form 10-Q filed for the three-month transition
period ended December 31, 1998.
2. ACQUISITIONS
During the year ended December 31, 1998, the Company completed four
acquisitions in addition to the acquisitions of the Founding Companies. In May
1998, the Company acquired Pace Products, Inc., a distributor of fasteners and
other small parts which also provides inventory procurement and management
services primarily to the telecommunications industry. In June 1998, the Company
acquired D-Bolt Company Inc., a distributor of fasteners and other small parts
primarily to the fabrication, construction and mining industries. In July 1998,
the Company acquired Texas International Aviation, Inc., a distributor of
fasteners and other small parts which provides inventory procurement and
management services primarily to the aerospace industry. In September 1998, the
Company acquired ASI Aerospace Group, Inc., a distributor of fasteners and other
small parts which provides inventory procurement and management services
primarily to the aerospace industry. The consideration paid for the Subsequent
Acquisitions consisted of an aggregate of 1,134,010 shares of common stock and
approximately $77 million in cash. The acquisitions were accounted for using the
purchase method of accounting and the results of operations of the acquired
companies are included from the date of acquisition. The allocations of purchase
price to the Founding Companies' and Subsequent Acquisitions' assets acquired
and liabilities assumed was assigned and recorded based on fair market values.
6
<PAGE>
If all completed acquisitions, including the Founding Companies, were
effective on the first day of the period being reported, the unaudited pro forma
results would have been:
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998
-------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
Revenues ................. $206,153 $218,449
Gross margin ............. 66,110 73,479
Operating income ......... 17,928 26,348
Write-off of debt issuance
costs ................. 2,308 -
Interest expense ......... 11,992 7,912
Net income ............... 1,587 9,905
Net income per share:
Basic ................. $ 0.10 $ 0.59
Diluted ............... $ 0.10 $ 0.59
3. LONG-TERM DEBT
In March 1999, the Company sold $100 million of Senior Subordinated
Notes (the "Notes") due April 1, 2009. The net proceeds of $94.2 million, after
the original issue discount and paying underwriter's commissions, from the
offering of the Notes were used to repay indebtedness under the Company's credit
agreement (the "Bank Credit Facility"). The Notes accrue interest at 12.25%
which is payable on April 1 and October 1 of each year. The Notes are
publicly-registered and subordinated to all existing and future senior
subordinated obligations and will rank senior to all subordinated indebtedness.
The indenture governing the Notes contains covenants that limit the Company's
ability to incur additional indebtedness, pay dividends, make investments and
sell assets. At September 30, 1999, the Company was in compliance with the
covenants. Each of the Company's subsidiaries which are wholly-owned, fully,
unconditionally and jointly and severally guarantees the Notes on a senior
subordinated basis.
Effective September 30, 1999, the Company amended its Bank Credit
Facility to provide a revolving line of credit of up to $100 million (subject to
a borrowing base limitation) to be used for general corporate purposes, future
acquisitions, capital expenditures and working capital. The Bank Credit Facility
is secured by Company stock and assets. Advances under the Bank Credit Facility
bear interest at the banks' prime rate. At the Company's option, the loans may
bear interest based on a designated London interbank offered rate plus a margin
of 200 basis points. Commitment fees of 25 to 37.5 basis points per annum are
payable on the unused portion of the line of credit. The Bank Credit Facility
contains a provision for standby letters of credit up to $20 million. The Bank
Credit Facility prohibits the payment of dividends by the Company, restricts the
Company's incurring or assuming other indebtedness and requires the Company to
comply with certain financial covenants including a minimum net worth and
minimum fixed charge ratio. At September 30, 1999, the Company was in compliance
with the covenants. The Bank Credit Facility will terminate and all amounts
outstanding thereunder, if any, will be due and payable September 30, 2004. At
September 30, 1999, the Company had approximately $29.9 million available under
the Bank Credit Facility.
In connection with the amendment of and reduction in the Bank Credit
Facility and issuance of the Notes in March 1999, the Company recorded a $2.3
million ($.07 impact on earnings per share) noncash charge for the write-off of
debt issuance costs.
7
<PAGE>
4. EARNINGS PER SHARE
Basic and diluted net income per share is computed based on the
following information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
BASIC: (IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income ........................... $ 428 $ 2,512 $ 1,587 $ 4,542
======= ======= ======= =======
Average common shares ................ 16,668 16,568 16,668 12,817
======= ======= ======= =======
DILUTED:
Net income ........................... $ 428 $ 2,512 $ 1,587 $ 4,542
======= ======= ======= =======
Average common shares ................ 16,668 16,568 16,668 12,817
Common share equivalents:
Warrants ......................... -- 18 -- 17
Options .......................... -- -- -- 90
------- ------- ------- -------
Total common share equivalents -- 18 -- 107
------- ------- ------- -------
Average common shares and
Common share equivalents ........... 16,668 16,586 16,668 12,924
======= ======= ======= =======
</TABLE>
5. INCOME TAXES
The provision for income taxes included in the Consolidated Statement of
Operations for the three- and nine-month periods ended September 30, 1999
assumes the application of statutory federal and state income tax rates and the
non-deductibility of goodwill amortization. The provision for income taxes
included in the Consolidated Statement of Operations for the three- and
nine-month periods ended September 30, 1998 reflects the activity of the
accounting acquiror prior to the Initial Acquisitions, the non-deductibility of
goodwill amortization and the non-deductibility of compensation related to
common stock sold to management. Interim period income tax provisions are based
upon estimates of annual effective tax rates and events may occur which will
cause such rates to vary.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings that have arisen in
the ordinary course of business. While it is not possible to predict the outcome
of such proceedings with certainty, in the opinion of the Company, all such
proceedings are either adequately covered by insurance or, if not so covered,
should not ultimately result in any liability which would have a material
adverse effect on the financial position, liquidity or results of operations of
the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
financial statements of the Company and related notes thereto and management's
discussion and analysis of financial condition and results of operations related
thereto which are included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and the Transition Report on Form 10-Q
filed for the three-month transition period ended December 31, 1998. As noted in
the transition report, the Company's year end has been changed to December 31
from September 30. This discussion contains forward-looking statements that are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. Key factors that could cause actual results to differ materially
from expectations include, but are not limited to (i) estimates of costs or
projected or anticipated changes to cost estimates relating to entering new
markets or expanding in existing markets (ii) changes in economic and industry
conditions (iii) changes in regulatory requirements (iv) changes in interest
rates (v) levels of borrowings under the Company's Bank Credit Facility (vi)
accumulation of excess inventories by certain customers in the aerospace
industry and (vii) volume or price adjustments with respect to sales to major
customers. These and other risks and assumptions are described in the Company's
reports that are available from the United States Securities and Exchange
Commission.
RESULTS OF OPERATIONS
Quarterly results may be materially affected by the timing and magnitude
of acquisitions, assimilation costs, costs of opening new facilities, gain or
loss of a material customer and variation in product mix. Accordingly, the
operating results for any three-month period are not necessarily indicative of
the results that may be achieved for any subsequent three- or nine-month period
or for a full year.
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
The following table sets forth certain selected financial data and the
related amounts as a percentage of revenues for the periods indicated:
THREE MONTH PERIOD ENDED
SEPTEMBER 30,
---------------------------------------
1999 1998
----------------- ------------------
(DOLLARS IN THOUSANDS)
Revenues .......................... $68,406 100.0% $60,292 100.0%
Cost of sales .................... 46,834 68.5 39,704 65.9
------- ----- ------- -----
Gross profit ... 21,572 31.5 20,588 34.1
Operating expenses ................ 15,157 22.1 12,977 21.5
Goodwill amortization ............. 868 1.3 622 1.0
------- ----- ------- -----
Operating income $ 5,547 8.1% $ 6,989 11.6%
======= ===== ======= =====
REVENUES
Revenues increased $8.1 million, or 13.4%, to $68.4 million for the
three months ended September 30, 1999 from $60.3 million for the three months
ended September 30, 1998. The increase in revenues was attributable primarily to
the Subsequent Acquisitions and, to a lesser extent, internal
9
<PAGE>
revenue growth of 12.1% experienced by the Initial Acquisitions. The internal
revenue growth resulted from increased revenues in the industrial business
offset by a decline in our aerospace business.
COST OF SALES
Cost of sales increased $7.1 million, or 17.9%, to $46.8 million for the
three months ended September 30, 1999 from $39.7 million for the three months
ended September 30, 1998. As a percentage of revenues, cost of sales increased
from 65.9% in the three months ended September 30, 1998 to 68.5% in the three
months ended September 30, 1999. The increase in cost of sales as a percentage
of revenues was a result of lower margins historically attained by the
Subsequent Acquisitions and lower margins on new business with an existing
customer in our industrial business.
OPERATING EXPENSES
Operating expenses increased $2.2 million, or 16.9%, to $15.2 million
for the three months ended September 30, 1999 from $13.0 million for the three
months ended September 30, 1998. As a percentage of revenues, operating expenses
increased to 22.1% for the three months ended September 30, 1999 from 21.5% for
the three months ended September 30, 1998. The increase was primarily
attributable to additional costs associated with additional sales to an existing
customer in our industrial business and a full quarter of operating expenses of
a company acquired late in the third quarter of 1998.
OPERATING INCOME
Due to the factors discussed above, operating income decreased $1.5
million to $5.5 million for the three months ended September 30, 1999 from $7.0
million for the three months ended September 30, 1998. As a percentage of
revenues, operating income decreased to 8.1% for the three months ended
September 30, 1999 from 11.6% for the three months ended September 30, 1998.
NON-OPERATING COSTS AND EXPENSES
Interest expense for the three months ended September 30, 1999 totaled
$4.5 million compared to $1.5 million for the three months ended September 30,
1998. The increase in interest expense primarily resulted from additional debt
incurred for the Subsequent Acquisitions and, to a lesser extent, the higher
rate of interest on the Senior Subordinated Notes issued in March 1999.
PROVISION FOR INCOME TAXES
The provision for income taxes for the three months ended September 30,
1999 was $0.6 million (an effective rate of 58.2%) compared with $3.0 million
(an effective rate of 54.7%) for the three months ended September 30, 1998. The
higher effective tax rate for the quarter ended September 30, 1999 primarily
related to the increase in non-deductible goodwill amortization that resulted
from the Subsequent Acquisitions.
10
<PAGE>
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
The following table sets forth certain selected financial data and the
related amounts as a percentage of revenues for the periods indicated:
NINE MONTH PERIOD ENDED
SEPTEMBER 30,
-----------------------------------------
1999 1998
------------------- --------------------
(DOLLARS IN THOUSANDS)
Revenues .......................... $ 206,153 100.0% $126,576 100.0%
Cost of sales .................... 140,043 67.9 82,471 65.2
-------- ----- -------- -----
Gross profit .......... 66,110 32.1 44,105 34.8
Operating expenses ................ 45,591 22.1 31,127 24.5
Goodwill amortization ............. 2,591 1.3 1,091 0.9
-------- ----- -------- -----
Operating income ...... $ 17,928 8.7% $ 11,887 9.4%
======== ===== ======== =====
REVENUES
Revenues increased $79.6 million, or 62.9%, to $206.2 million for the
nine months ended September 30, 1999 from $126.6 million for the nine months
ended September 30, 1998. The increase in revenues was attributable primarily to
the Subsequent Acquisitions and, to a lesser extent, internal revenue growth of
7.8% experienced by the Initial Acquisitions. The modest internal revenue growth
resulted from increased revenues in the industrial business offset by a decline
in our aerospace business and lower pricing to a major industrial customer.
COST OF SALES
Cost of sales increased $57.5 million, or 69.7%, to $140.0 million for
the nine months ended September 30, 1999 from $82.5 million for the nine months
ended September 30, 1998. As a percentage of revenues, cost of sales increased
from 65.2% in the nine months ended September 30, 1998 to 67.9% in the nine
months ended September 30, 1999. The increase in cost of sales as a percentage
of revenues was a result of lower margins historically attained by the
Subsequent Acquisitions as compared to the Initial Acquisitions and lower
margins on new business with an existing customer in our industrial business.
OPERATING EXPENSES
Operating expenses increased $14.5 million, or 46.6%, to $45.6 million
for the nine months ended September 30, 1999 from $31.1 million for the nine
months ended September 30, 1998. As a percentage of revenues, operating expenses
decreased to 22.1% for the nine months ended September 30, 1999 from 24.5% for
the nine months ended September 30, 1998. The decrease was primarily
attributable to lower operating expenses as a percentage of revenues
historically attained by the Subsequent Acquisitions and the reduced number of
employees in our aerospace business partially offset by additional costs
associated with additional sales to an existing customer in our industrial
business.
OPERATING INCOME
Due to the factors discussed above, operating income increased $6.0
million to $17.9 million for the nine months ended September 30, 1999 from $11.9
million for the nine months ended September 30, 1998. As a percentage of
revenues, operating income decreased to 8.7% for the nine months ended September
30, 1999 from 9.4% for the nine months ended September 30, 1998.
11
<PAGE>
NON-OPERATING COSTS AND EXPENSES
The write-off of debt issuance costs during the nine months ended
September 30, 1999 resulted from the amendment of the Company's Bank Credit
Facility in connection with the Senior Subordinated Notes issued in March 1999.
Interest expense for the nine months ended September 30, 1999 totaled $12.0
million compared to $2.2 million for the nine months ended September 30, 1998.
The increase in interest expense primarily resulted from additional debt
incurred for the Subsequent Acquisitions and, to a lesser extent, the higher
rate of interest on the Senior Subordinated Notes issued in March 1999.
PROVISION FOR INCOME TAXES
The provision for income taxes for the nine months ended September 30,
1999 was $2.1 million (an effective rate of 57.0%) compared with $5.3 million
(an effective rate of 53.7%) for the nine months ended September 30, 1998. The
higher effective tax rate for the nine months ended September 30, 1999 primarily
related to the increase in non-deductible goodwill amortization that resulted
from the Subsequent Acquisitions.
PRO FORMA FINANCIAL INFORMATION
The Company includes pro forma financial information in its earnings
releases. The pro forma financial information for the three- and nine- months
ended September 30, 1999 and 1998 includes the results of Pentacon combined with
the Founding Companies as if the Initial Acquisitions had occurred at the
beginning of each respective three- and nine-month period. The pro forma
financial information includes the effects of (i) the Initial Acquisitions (ii)
the Offering (iii) certain reductions in salaries and benefits to the former
owners of the Founding Companies to which they agreed prospectively (iv) certain
reductions in lease expense paid to the former owners of the Founding Companies
to which they agreed prospectively (v) elimination of non-recurring, non-cash
compensation charges related to common stock issued to management (vi)
amortization of goodwill resulting from the Initial Acquisitions and (vii)
advances under the Bank Credit Facility (see Note 3 to the Financial Statements)
including decreases in interest expense resulting from the repayment or
refinancing of the Founding Companies' debt and (viii) adjustments to the
provisions for federal and state income taxes. Subsequent Acquisitions are
included in the pro forma financial information only for those periods
subsequent to the dates of acquisition and, as a result, the pro forma financial
information may not be comparable to and may not be indicative of the Company's
post-acquisition results of operations because the Founding Companies were not
under common control or management.
The pro forma results of operations for the three-month periods ended
September 30, 1999 and 1998 were the same as the historical results of
operations discussed previously. The following table sets forth certain pro
forma financial data and the related amounts as a percentage of pro forma
revenues for the periods indicated:
PRO FORMA
NINE MONTH PERIOD ENDED
SEPTEMBER 30,
-----------------------------------------
1999 1998
------------------- -------------------
(DOLLARS IN THOUSANDS)
Revenues .................... $206,153 100.0% $148,017 100.0%
Cost of sales .............. 140,043 67.9 97,254 65.7
-------- ----- -------- -----
Gross profit ... 66,110 32.1 50,763 34.3
Operating expenses .......... 45,591 22.1 33,725 22.8
Goodwill amortization ....... 2,591 1.3 1,359 0.9
-------- ----- -------- -----
Operating income $ 17,928 8.7% $ 15,679 10.6%
======== ===== ======== =====
12
<PAGE>
The pro forma results of operations for the nine-month period ended
September 30, 1999 were the same as the historical results of operations
discussed previously. As a percentage of pro forma revenues, operating expenses
for the nine-month period ended September 30, 1998 were 22.8% compared to 24.5%
in the historical results of operations. The decrease is primarily due to lower
operating expenses as a percentage of pro forma revenues attained by the Initial
Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $16.1 million of net cash in operating activities
during the nine months ended September 30, 1999; this cash was used primarily
for increases in working capital. Net cash used in investing activities was $4.3
million for capital expenditures. Net cash provided by financing activities was
$20.0 million for the nine months ended September 30, 1999 and primarily
consisted of $392.6 million of borrowings on debt offset by $368.8 million
repayment of debt. At September 30, 1999, the Company had cash of $0.3 million,
working capital of $129.6 million and total debt of $162.5 million.
In March 1999, the Company sold $100 million of Senior Subordinated
Notes due April 1, 2009. The net proceeds of $94.2 million, after the original
issue discount and paying underwriter's commissions, from the offering of the
Notes were used to repay indebtedness under the Company's Bank Credit Facility.
The Notes accrue interest at 12.25% which is payable on April 1 and October 1 of
each year. The Notes are publicly-registered and subordinated to all existing
and future senior subordinated obligations and will rank senior to all
subordinated indebtedness. The indenture governing the Notes contains covenants
that limit the Company's ability to incur additional indebtedness, pay
dividends, make investments and sell assets. At September 30, 1999, the Company
was in compliance with the covenants. Each of the Company's subsidiaries which
are wholly-owned, fully, unconditionally and jointly and severally guarantees
the Notes on a senior subordinated basis.
Effective September 30, 1999, the Company amended its Bank Credit
Facility to provide a revolving line of credit of up to $100 million (subject to
a borrowing base limitation) to be used for general corporate purposes, future
acquisitions, capital expenditures and working capital. The Bank Credit Facility
is secured by Company stock and assets. Advances under the Bank Credit Facility
bear interest at the banks' prime rate. At the Company's option, the loans may
bear interest based on a designated London interbank offered rate plus a margin
of 200 basis points. Commitment fees of 25 to 37.5 basis points per annum are
payable on the unused portion of the line of credit. The Bank Credit Facility
contains a provision for standby letters of credit up to $20 million. The Bank
Credit Facility prohibits the payment of dividends by the Company, restricts the
Company's incurring or assuming other indebtedness and requires the Company to
comply with certain financial covenants including a minimum net worth and
minimum fixed charge ratio. At September 30, 1999, the Company was in compliance
with the covenants. The Bank Credit Facility will terminate and all amounts
outstanding thereunder, if any, will be due and payable September 30, 2004. At
September 30, 1999, the Company had approximately $29.9 million available under
the Bank Credit Facility.
In connection with the amendment of and reduction in the Bank Credit
Facility and issuance of the Notes in March 1999, the Company recorded a $2.3
million ($.07 impact on earnings per share) noncash charge for the write-off of
debt issuance costs.
The Company currently operates in a decentralized information systems
environment and uses a variety of software, computer systems and related
technologies for accounting and reporting purposes and for revenue-generating
activities. The Pentacon companies which primarily serve the aerospace industry
have migrated to a common information system which will facilitate product
ordering, pricing and reporting among the companies. The total expenditures were
$3.1 million for these information systems, the majority of which has been
capitalized as computer hardware and software and is depreciated over the
13
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estimated useful life of the assets. Funding for these expenditures came from
operating cash flows and the Company's Bank Credit Facility.
YEAR 2000
The Company believes it has substantially resolved issues relating to
the potential impact of the Year 2000 on the processing of date-sensitive
information by the Company's computerized information systems and other
infrastructure that contains embedded technology. The Year 2000 problem is the
result of computer programs being written using two digits (rather than four) to
define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the Year 1900 rather
than the Year 2000, which could result in miscalculations or system failures.
The Company believes that substantially all of its computerized
information systems and other infrastructure that contains embedded technology
are Year 2000 compliant or have been modified so as to be Year 2000 compliant.
Remaining costs of addressing potential problems are not expected to have a
material adverse impact on the Company's financial position, results of
operations or cash flows. However, if the Company, its customers or vendors are
unable to resolve such processing issues in a timely manner, it could have a
significant impact on the Company's ability to conduct its business and result
in a material financial risk.
In addition, the Company is continually attempting to assess the level
of Year 2000 preparedness of its key suppliers, distributors, customers and
service providers. The Company has sent, and will continue to send, letters,
questionnaires and surveys to its significant business partners inquiring about
their Year 2000 efforts. If a significant supplier or customer of the Company
fails to be Year 2000 compliant, the Company could suffer a material loss of
business or incur material expenses.
As of September 30, 1999, the Company has spent $0.4 million in costs
that are directly attributable to addressing Year 2000 issues. Management
currently estimates that the Company will not incur significant additional costs
during 1999 relating to Year 2000 issues. The Company spent approximately $3.1
million to purchase software and hardware and on implementation expenses
associated with the migration to a common information technology system in the
Pentacon companies which primarily serve the aerospace industry. The Company
believes that these costs are not, for the most part, directly related to Year
2000 issues, but are required for the implementation of its new system in the
Pentacon companies which primarily serve the aerospace industry.
The Company has developed contingency plans in the event that third
parties who provide goods or services to the Company fail to address their Year
2000 issues appropriately. These plans include identification of alternative
suppliers and service providers, depletion of existing safety stocks of
inventory and identification of important areas of record retention.
14
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PART II -OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.19 Second Amended and Restated Loan and Security Agreement
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
SIGNATURE
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.
PENTACON, INC.
Dated: November 15, 1999 By: /s/ BRIAN FONTANA
-----------------------------
BRIAN FONTANA
Senior Vice President
& Chief Financial Officer
15
EXHIBIT 10.19
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of September 30, 1999
among
EACH OF THE FINANCIAL INSTITUTIONS PARTY HERETO
as the Lenders
and
BANK OF AMERICA, NATIONAL ASSOCIATION
as the Agent,
and
PENTACON, INC.
and
THE SUBSIDIARIES OF PENTACON, INC. PARTY HERETO
as the Borrowers
<PAGE>
TABLE OF CONTENTS
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ARTICLE 1 INTERPRETATION OF THIS AGREEMENT................................................................................1
Section 1.1...........................................................................................DEFINITIONS 1
Section 1.2......................................................................................ACCOUNTING TERMS 30
Section 1.3...............................................................................INTERPRETIVE PROVISIONS 30
ARTICLE 2 LOANS AND LETTERS OF CREDIT....................................................................................31
Section 2.1........................................................................................TOTAL FACILITY 31
Section 2.2.......................................................................................REVOLVING LOANS 31
Section 2.3..............................................................................................RESERVED 38
Section 2.4.....................................................................................LETTERS OF CREDIT 38
Section 2.5............................................................................EXISTING LETTERS OF CREDIT 46
Section 2.6.........................................................................................BANK PRODUCTS 46
ARTICLE 3 INTEREST AND FEES..............................................................................................47
Section 3.1..............................................................................................INTEREST 47
Section 3.2.................................................................CONVERSION AND CONTINUATION ELECTIONS 48
Section 3.3.................................................................................MAXIMUM INTEREST RATE 49
Section 3.4..............................................................................................RESERVED 49
Section 3.5.......................................................................................UNUSED LINE FEE 49
Section 3.6..................................................................................LETTER OF CREDIT FEE 49
Section 3.7............................................................................................OTHER FEES 50
Section 3.8...................................................................................INTEREST LIMITATION 50
ARTICLE 4 PAYMENTS AND PREPAYMENTS.......................................................................................51
Section 4.1.......................................................................................REVOLVING LOANS 51
Section 4.2.....................................................REDUCTION OF COMMITMENTS; TERMINATION OF FACILITY 51
Section 4.3..............................................................................................RESERVED 52
Section 4.4..............................................................................................RESERVED 52
Section 4.5...................................................................PREPAYMENTS FROM ASSET DISPOSITIONS 52
Section 4.6.............................................................................PAYMENTS BY THE BORROWERS 53
Section 4.7...........................................................................PAYMENTS AS REVOLVING LOANS 53
Section 4.8..................................................APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS. 53
Section 4.9.......................................................................INDEMNITY FOR RETURNED PAYMENTS 54
Section 4.10...............................................THE AGENT'S AND THE LENDERS'BOOKS AND RECORDS; MONTHLY
STATEMENTS...........................................................................................54
ARTICLE 5 TAXES, YIELD PROTECTION, AND ILLEGALITY........................................................................55
Section 5.1.................................................................................................TAXES 55
Section 5.2............................................................................................ILLEGALITY 56
Section 5.3...............................................................INCREASED COSTS AND REDUCTION OF RETURN 56
Section 5.4........................................................................................FUNDING LOSSES 57
Section 5.5..........................................................................INABILITY TO DETERMINE RATES 57
Section 5.6...............................................................................CERTIFICATES OF LENDERS 58
Section 5.7..............................................................................................SURVIVAL 58
Section 5.8..............................................................CLAIMS UNDER SECTION 5.1 AND SECTION 5.3 58
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Section 5.9........................................................................REPLACEMENT OF AFFECTED LENDER 58
ARTICLE 6 COLLATERAL58
Section 6.1............................................................................GRANT OF SECURITY INTEREST 58
Section 6.2........................................................PERFECTION AND PROTECTION OF SECURITY INTEREST 60
Section 6.3................................................................................LOCATION OF COLLATERAL 62
Section 6.4....................................................TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL 62
Section 6.5............................................................................................APPRAISALS 62
Section 6.6...............................................................ACCESS AND EXAMINATION; CONFIDENTIALITY 63
Section 6.7..................................................................................COLLATERAL REPORTING 64
Section 6.8..............................................................................................ACCOUNTS 64
Section 6.9......................................................................COLLECTION OF ACCOUNTS; PAYMENTS 66
Section 6.10.......................................................................INVENTORY; PERPETUAL INVENTORY 67
Section 6.11............................................................................................EQUIPMENT 67
Section 6.12.............................................................................................RESERVED 68
Section 6.13............................................................DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER 68
Section 6.14........................................................................................RIGHT TO CURE 68
Section 6.15....................................................................................POWER OF ATTORNEY 68
Section 6.16..........................................THE AGENT'S AND THE LENDERS'RIGHTS, DUTIES, AND LIABILITIES 69
Section 6.17................................................................SITE VISITS, OBSERVATIONS AND TESTING 69
Section 6.18.......................................................................GUARANTIES; LOAN PARTY JOINDER 70
Section 6.19.................................VOTING RIGHTS, DISTRIBUTIONS, ETC. IN RESPECT OF INVESTMENT PROPERTY 70
ARTICLE 7 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES..............................................................72
Section 7.1.....................................................................................BOOKS AND RECORDS 72
Section 7.2.................................................................................FINANCIAL INFORMATION 72
Section 7.3................................................................................NOTICES TO THE LENDERS 75
Section 7.4.....................................................................REVISIONS OR UPDATES TO SCHEDULES 77
ARTICLE 8 GENERAL WARRANTIES AND REPRESENTATIONS.........................................................................77
Section 8.1.................................AUTHORIZATION, VALIDITY, AND ENFORCEABILITY OF THIS AGREEMENT AND THE
LOAN DOCUMENTS; NO CONFLICTS.........................................................................77
Section 8.2............................................................VALIDITY AND PRIORITY OF SECURITY INTEREST 78
Section 8.3........................................................................ORGANIZATION AND QUALIFICATION 78
Section 8.4....................................................................CORPORATE NAME; PRIOR TRANSACTIONS 78
Section 8.5...........................................................................SUBSIDIARIES AND AFFILIATES 78
Section 8.6..................................................................FINANCIAL STATEMENTS AND PROJECTIONS 78
Section 8.7........................................................................................CAPITALIZATION 79
Section 8.8..............................................................................................SOLVENCY 79
Section 8.9..................................................................................................DEBT 79
Section 8.10........................................................................................DISTRIBUTIONS 79
Section 8.11....................................................................................TITLE TO PROPERTY 79
Section 8.12..................................................................................REAL ESTATE; LEASES 79
Section 8.13...................................................................................PROPRIETARY RIGHTS 79
Section 8.14..........................................................................................TRADE NAMES 80
Section 8.15...........................................................................................LITIGATION 80
Section 8.16...............................................................................RESTRICTIVE AGREEMENTS 80
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Section 8.17.......................................................................................LABOR DISPUTES 80
Section 8.18...................................................................................ENVIRONMENTAL LAWS 80
Section 8.19..................................................................................NO VIOLATION OF LAW 81
Section 8.20...........................................................................................NO DEFAULT 81
Section 8.21.....................................................................................ERISA COMPLIANCE 82
Section 8.22................................................................................................TAXES 82
Section 8.23...................................................................................REGULATED ENTITIES 82
Section 8.24..................................................................USE OF PROCEEDS; MARGIN REGULATIONS 83
Section 8.25...................................................COPYRIGHTS, PATENTS, TRADEMARKS, AND LICENSES, ETC 83
Section 8.26...........................................................................NO MATERIAL ADVERSE CHANGE 83
Section 8.27......................................................................................FULL DISCLOSURE 83
Section 8.28..................................................................................MATERIAL AGREEMENTS 83
Section 8.29........................................................................................BANK ACCOUNTS 83
Section 8.30...........................................................................GOVERNMENTAL AUTHORIZATION 83
Section 8.31..................................................................................INVESTMENT PROPERTY 84
Section 8.32....................................................................................COMMON ENTERPRISE 84
Section 8.33......................................................LOAN PARTIES; CERTAIN UNRESTRICTED SUBSIDIARIES 84
ARTICLE 9 AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................................85
Section 9.1...........................................................................TAXES AND OTHER OBLIGATIONS 85
Section 9.2...........................................................................EXISTENCE AND GOOD STANDING 85
Section 9.3...........................................COMPLIANCE WITH LAW AND AGREEMENTS; MAINTENANCE OF LICENSES 85
Section 9.4...............................................................................MAINTENANCE OF PROPERTY 85
Section 9.5.............................................................................................INSURANCE 86
Section 9.6..........................................................................................CONDEMNATION 87
Section 9.7....................................................................................ENVIRONMENTAL LAWS 87
Section 9.8.................................................................................COMPLIANCE WITH ERISA 88
Section 9.9..........................................................MERGERS, CONSOLIDATIONS, SALES, ACQUISITIONS 88
Section 9.10................................................DISTRIBUTIONS; CAPITAL CHANGE; RESTRICTED INVESTMENTS 89
Section 9.11.....................................................TRANSACTIONS AFFECTING COLLATERAL OR OBLIGATIONS 89
Section 9.12...........................................................................................GUARANTIES 89
Section 9.13.................................................................................................DEBT 89
Section 9.14...........................................................................................PREPAYMENT 89
Section 9.15.........................................................................TRANSACTIONS WITH AFFILIATES 90
Section 9.16.................................................................INVESTMENT BANKING AND FINDER'S FEES 90
Section 9.17...................................................................................BUSINESS CONDUCTED 90
Section 9.18................................................................................................LIENS 90
Section 9.19......................................................................SALE AND LEASEBACK TRANSACTIONS 90
Section 9.20.....................................................................................NEW SUBSIDIARIES 91
Section 9.21..........................................................................................FISCAL YEAR 91
Section 9.22.................................................................................CAPITAL EXPENDITURES 91
Section 9.23..........................................................................OPERATING LEASE OBLIGATIONS 91
Section 9.24..........................................................................FIXED CHARGE COVERAGE RATIO 91
Section 9.25..........................................................................ADJUSTED TANGIBLE NET WORTH 91
Section 9.26......................................................................................USE OF PROCEEDS 91
Section 9.27...................................................................................FURTHER ASSURANCES 92
ARTICLE 10 CONDITIONS OF LENDING..........................................................................................92
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Section 10.1..........................................CONDITIONS PRECEDENT TO MAKING OF LOANS ON THE CLOSING DATE 92
Section 10.2....................................................................CONDITIONS PRECEDENT TO EACH LOAN 96
ARTICLE 11 DEFAULT REMEDIES...............................................................................................97
Section 11.1....................................................................................EVENTS OF DEFAULT 97
Section 11.2.............................................................................................REMEDIES 100
ARTICLE 12 TERM AND TERMINATION..........................................................................................102
Section 12.1.................................................................................TERM AND TERMINATION 102
ARTICLE 13 AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS...................................................102
Section 13.1......................................................................NO WAIVERS; CUMULATIVE REMEDIES 102
Section 13.2...............................................................................AMENDMENTS AND WAIVERS 102
Section 13.3..........................................................................ASSIGNMENTS; PARTICIPATIONS 103
ARTICLE 14 THE AGENT.....................................................................................................105
Section 14.1........................................................................APPOINTMENT AND AUTHORIZATION 105
Section 14.2.................................................................................DELEGATION OF DUTIES 106
Section 14.3...............................................................................LIABILITY OF THE AGENT 106
Section 14.4................................................................................RELIANCE BY THE AGENT 107
Section 14.5....................................................................................NOTICE OF DEFAULT 107
Section 14.6......................................................................................CREDIT DECISION 107
Section 14.7......................................................................................INDEMNIFICATION 108
Section 14.8.....................................................................THE AGENT IN INDIVIDUAL CAPACITY 108
Section 14.9......................................................................................SUCCESSOR AGENT 108
Section 14.10.....................................................................................WITHHOLDING TAX 109
Section 14.11............................................................................................RESERVED 110
Section 14.12..................................................................................COLLATERAL MATTERS 110
Section 14.13.............................................RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS 111
Section 14.14...............................................................................AGENCY FOR PERFECTION 112
Section 14.15................................................................PAYMENTS BY THE AGENT TO THE LENDERS 112
Section 14.16............................................CONCERNING THE COLLATERAL AND THE RELATED LOAN DOCUMENTS 112
Section 14.17..........................................FIELD AUDIT AND EXAMINATION REPORTS; DISCLAIMER BY LENDERS 112
Section 14.18..............................................................................RELATION AMONG LENDERS 113
ARTICLE 15 MISCELLANEOUS.................................................................................................113
Section 15.1.................................................CUMULATIVE REMEDIES; NO PRIOR RECOURSE TO COLLATERAL 113
Section 15.2.........................................................................................SEVERABILITY 114
Section 15.3...................................................GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS 114
Section 15.4.................................................................................WAIVER OF JURY TRIAL 115
Section 15.5...........................................................SURVIVAL OF REPRESENTATIONS AND WARRANTIES 115
Section 15.6........................................................................OTHER SECURITY AND GUARANTIES 115
Section 15.7....................................................................................FEES AND EXPENSES 115
Section 15.8..............................................................................................NOTICES 116
Section 15.9....................................................................................WAIVER OF NOTICES 117
Section 15.10......................................................................................BINDING EFFECT 117
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Section 15.11..........................................INDEMNITY OF THE AGENT AND THE LENDERS BY THE LOAN PARTIES 117
Section 15.12.............................................................................LIMITATION OF LIABILITY 118
Section 15.13.....................................................................................FINAL AGREEMENT 119
Section 15.14........................................................................................COUNTERPARTS 119
Section 15.15............................................................................................CAPTIONS 119
Section 15.16....................................................................................RIGHT OF SET-OFF 119
Section 15.17.........................................................................JOINT AND SEVERAL LIABILITY 119
Section 15.18.............................................CONTRIBUTION AND INDEMNIFICATION AMONG THE LOAN PARTIES 120
Section 15.19......................................................AGENCY OF THE PARENT FOR EACH OTHER LOAN PARTY 121
Section 15.20.............................................................................ADDITIONAL LOAN PARTIES 121
Section 15.21..................................EXPRESS WAIVERS BY LOAN PARTIES IN RESPECT OF CROSS GUARANTIES AND
CROSS COLLATERALIZATION............................................................................122
Section 15.22.........................................AMENDMENT AND RESTATEMENT; NON-ASSUMPTION BY NEW BORROWERS;
DEEMED ALLOCATION OF PAYMENTS AND PROCEEDS.........................................................123
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<PAGE>
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Second Amended and Restated Loan and Security Agreement, dated as of
September 30, 1999, among the financial institutions listed on the signature
pages hereof (such financial institutions, together with their respective
successors and assigns, are referred to hereinafter each individually as a
"LENDER" and collectively as the "LENDERS"), Bank of America, National
Association ("the BANK") with an office located at 901 Main Street, 6th Floor,
Dallas, Texas 75202, as agent for the Lenders (in its capacity as agent, the
"AGENT"), and Pentacon, Inc., a Delaware corporation, Pentacon Aerospace Group,
Inc., a Nevada corporation, Pentacon Industrial Group, Inc., a Nevada
corporation, AXS Solutions, Inc., a Delaware corporation, Capitol Bolt & Supply,
Inc., a Texas corporation, Maumee Industries, Inc., an Indiana corporation, Pace
Products, Inc., a Texas corporation, Sales Systems, Limited, a Pennsylvania
corporation, Alatec Products, Inc., a California corporation, Alatec Cable
Harness & Assembly Division, Inc., a California corporation, Alatec Fastener and
Component Group, Inc., a California corporation, Alatec Race, Inc., a California
corporation, Trace Alatec Supply Company, Inc., a California corporation, Texas
International Aviation, Inc., a Texas corporation, West Coast Aero Products
Holding Corp., a Delaware corporation, ASI Aerospace Group, Inc., a Delaware
corporation, and Pollard Acquisition Corp., a Delaware corporation (each a
"BORROWER" and collectively , the "BORROWERS").
W I T N E S S E T H
A. The Loan Parties have requested the Lenders to make available to the
Borrowers a revolving line of credit in an amount of $100,000,000 for loans and
letters of credit which the Borrowers will use for acquisitions, working capital
needs, and general business purposes;
B. The Lenders have agreed to make available to the Borrowers a
revolving credit facility and letters of credit upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Lenders, the Agent, and the Loan
Parties hereby agree as follows.
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
Section 1.1 DEFINITIONS. As used herein:
"ACCOUNT" means, with respect to a Person, any of such Person's now owned
or hereafter acquired or arising accounts, and any other rights to payment for
the sale or lease of goods or rendition of services, whether or not they have
been earned by performance, and "ACCOUNTS" means, with respect to any such
Person, all of the foregoing.
"ACCOUNT DEBTOR" means each Person obligated on an Account.
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 1
<PAGE>
"ACH TRANSACTIONS" means any cash management or related services including
the automated clearing house transfer of funds by the Bank for the account of
any Loan Party pursuant to agreement or overdrafts.
"ADJUSTED TANGIBLE ASSETS" means, as applied to any Person, all of such
Person's assets except: (a) deferred assets, other than prepaid insurance and
prepaid taxes; (b) patents, copyrights, trademarks, trade names, franchises,
goodwill, and other similar intangibles; (c) Restricted Investments; (d)
unamortized debt discount and expense; (e) assets constituting Intercompany
Accounts; and (f) fixed assets to the extent of any write-up in the book value
thereof resulting from a revaluation effective after the Closing Date.
"ADJUSTED TANGIBLE NET WORTH" means, as applied to any Person, at any date
and determined in accordance with GAAP: (a) the book value (after deducting
related depreciation, obsolescence, amortization, valuation, and other proper
reserves) at which the Adjusted Tangible Assets would be shown on a balance
sheet of such Person at such date, LESS (b) the amount at which such Person's
liabilities would be shown on such balance sheet, including as liabilities all
reserves for contingencies and other potential liabilities which would be
required to be shown on such balance sheet, PLUS (c) the principal amount
outstanding under the Subordinated Notes, all as determined in accordance with
GAAP.
"ADJUSTED TANGIBLE NET WORTH REQUIREMENT" means, as of the end of each
fiscal quarter ending after the Closing Date, an amount equal to $72,050,000,
PLUS the cumulative amount of all Adjusted Tangible Net Worth Requirement
Increases, PLUS the principal amount outstanding under the Subordinated Notes.
"ADJUSTED TANGIBLE NET WORTH REQUIREMENT INCREASE" means an amount,
determined as of the end of any fiscal quarter for the Parent and its
Subsidiaries on a consolidated basis, commencing with the fiscal quarter ending
September 30,1999, equal to the sum of (a) seventy-five percent (75.0%) of the
amount (not less than zero) of Net Income for such fiscal quarter, PLUS (b) the
net amount of all equity proceeds received during such fiscal quarter.
"AFFILIATE" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person or which owns, directly or indirectly, five percent (5%) or more of
the outstanding equity interest of such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise.
"AGENT" means the Bank, solely in its capacity as administrative agent for
the Lenders, and any successor agent.
"AGENT ADVANCES" has the meaning specified in SECTION 2.2(I).
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 2
<PAGE>
"AGENT'S LIENS" means the Liens in the Collateral granted to the Agent,
for the benefit of the Lenders, the Bank, and the Agent pursuant to this
Agreement and the other Loan Documents.
"AGENT RELATED PERSONS" means the Agent, together with its Affiliates, and
the officers, directors, employees, agents, and attorneys-in-fact of the Agent
and its Affiliates.
"AGGREGATE REVOLVER OUTSTANDINGS" means, at any time: the sum of (a) the
unpaid balance of Revolving Loans, (b) the aggregate amount of Pending Revolving
Loans, (c) one hundred percent (100%) of the aggregate undrawn amount of all
outstanding Letters of Credit, and (d) the aggregate amount of any unpaid
reimbursement obligations in respect of Letters of Credit.
"AGREEMENT" means this Loan and Security Agreement.
"ANNIVERSARY DATE" means each anniversary of the Closing Date.
"APPLICABLE MARGIN" means
(a) with respect to Base Rate Revolving Loans and all other
Obligations (other than LIBOR Rate Loans), zero percent (0.00%);
(b) with respect to LIBOR Revolving Loans, two percent (2.00%).
"ASSIGNEE" has the meaning specified in SECTION 13.3(A).
"ASSIGNMENT AND ACCEPTANCE" has the meaning specified in SECTION 13.3(A).
"ATTORNEY COSTS" means and includes all fees, expenses, and disbursements
of any law firm or other counsel engaged by the Agent.
"AVAILABILITY" means, at any time, (a) the Borrowing Base MINUS (b) the
Aggregate Revolver Outstandings.
"BANK" means Bank of America, National Association, a national banking
association, or any successor entity thereto.
"BANK PRODUCTS" means any one or more of the following types of services
or facilities extended to any Loan Party by the Bank or any Affiliate of the
Bank in reliance on the Bank's agreement to indemnify such Affiliate: (a) credit
cards; (b) ACH Transactions; (c) Interest Rate Protection Agreements; and (d)
foreign exchange contracts.
"BANK PRODUCT RESERVES" means all reserves which the Agent from time to
time establishes in its sole discretion for the Bank Products then provided and
outstanding.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
ss.101 ET SEQ.).
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 3
<PAGE>
"BASE RATE" means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by the Bank in Charlotte, North
Carolina as its "prime rate" (the "prime rate" being a rate set by the Bank
based upon various factors including the Bank's costs and desired return,
general economic conditions, and other factors, and is used as a prime point for
pricing some loans, which may be priced at, above, or below such announced
rate). Any change in the prime rate announced by the Bank shall take effect at
the opening of business on the day specified in the public announcement of such
change. Each Interest Rate based upon the Base Rate shall be adjusted
simultaneously with any change in the Base Rate.
"BASE RATE LOANS" means the Base Rate Revolving Loans.
"BASE RATE REVOLVING LOAN" means a Revolving Loan during any period in
which it bears interest based on the Base Rate.
"BLOCKED ACCOUNT AGREEMENT" means an agreement among one or more of the
Loan Parties, the Agent and a Clearing Bank, in form and substance satisfactory
to the Agent, concerning the collection of payments which represent the proceeds
of Accounts or of any other Collateral.
"BORROWER" and "BORROWERS" have the meanings specified for such terms in
the introductory paragraph of this Agreement.
"BORROWING" means a borrowing hereunder consisting of Revolving Loans made
on the same day by the Lenders to the Borrowers (or by the Bank in the case of a
Borrowing funded by Non-Ratable Loans) or by the Agent in the case of a
Borrowing consisting of an Agent Advance.
"BORROWING BASE" means, at any time, an amount equal to the lesser of
(a) the Maximum Revolver Amount or
(b) the sum of
(i) eighty-five percent (85.0%) of the Net Amount of
Eligible Accounts, PLUS
(ii) sixty percent (60.0%) of the value of Eligible Industrial
Group Inventory, PLUS
(iii) sixty-five percent (65.0%) of the value of Eligible
Aerospace Group Inventory (Category I), PLUS
(iv) thirty percent (30.0%) of the value of Eligible Aerospace
Group Inventory (Category II), MINUS
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(v) the sum of
(A) reserves for accrued and unpaid interest on the
Obligations,
(B) the Environmental Compliance Reserve,
(C) the Bank Product Reserve and
(D) all other reserves which the Agent deems necessary
in the exercise of its reasonable credit judgment to maintain
with respect to any Borrower, including reserves for any
amounts which the Agent or any Lender may be obligated to pay
in the future for the account of any Loan Party.
"BORROWING BASE CERTIFICATE" means a certificate by a Responsible Officer
of each of the Borrowers, substantially in the form of EXHIBIT B (or another
form acceptable to the Agent) setting forth the calculation of the Borrowing
Base, including a calculation of each component thereof (including, to the
extent a Borrower has received notice of any such reserve from the Agent, any of
the reserves included in such calculation pursuant to CLAUSE (B)(V) of the
definition of Borrowing Base), as of the close of business no more than five (5)
Business Days prior to the date of such certificate, all in such detail as shall
be satisfactory to the Agent. All calculations of the Borrowing Base in
connection with the preparation of any Borrowing Base Certificate shall
originally be made by the Borrowers and certified to the Agent; PROVIDED, that
the Agent shall have the right to review and adjust, in the exercise of its
reasonable credit judgment, any such calculation (a) to reflect its reasonable
estimate of declines in value of any of the Collateral described therein, and
(b) to the extent that such calculation is not in accordance with this
Agreement.
"BUSINESS DAY" means (a) any day that is not a Saturday, Sunday, or a day
on which banks in Dallas, Texas or Charlotte, North Carolina are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings, and payments in connection with the LIBOR Rate or LIBOR Rate Loans,
any day that is a Business Day pursuant to CLAUSE (A) above and that is also a
day on which trading in Dollars is carried on by and between banks in the London
interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request, or directive
of any central bank or other Governmental Authority, or any other law, rule, or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"CAPITAL EXPENDITURES" means all payments due (whether or not paid) in
respect of the cost of any fixed asset or improvement, or replacement,
substitution, or addition thereto, which has a useful life of more than one (1)
year, including, without limitation, those costs arising in connection with the
direct or indirect acquisition of such asset by way of increased product or
service charges or in connection with a Capital Lease.
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"CAPITAL LEASE" means any lease of property which, in accordance with
GAAP, should be reflected as a capital lease on a balance sheet.
"CAPITAL STOCK" means any and all corporate stock, units, shares,
partnership interests, membership interests, equity interests, rights,
securities, or other equivalent evidences of ownership (however designated)
issued by any Person.
"CASH PURCHASE CONSIDERATION" means, as of any date of determination and
with respect to any acquisition by a Loan Party, the purchase price to be paid
for the Capital Stock issued by the Person being acquired or the assets being
acquired, including all cash consideration paid (whether classified as purchase
price, noncompete payments, consulting payments, or otherwise and without regard
to whether such amount is paid at closing or paid over time) and the Dollar
value of all other assets, other than Capital Stock of the Parent, to be
transferred by the purchaser in connection with such acquisition to the seller
or sellers, all valued in accordance with the applicable agreement entered into
between the Person being acquired or selling such assets and/or the seller or
sellers and the purchaser, and including (without duplication) the amount of any
Debt incurred, assumed, or acquired by any Loan Party in connection with such
acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (a)
except as allowed by SECTION 9.9, the adoption of a plan relating to the
liquidation or dissolution of the Parent or any other Borrower; (b) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) of a direct or indirect
majority in interest (more than fifty percent (50.0%)) of the voting power of
the voting stock of the Parent by way of merger or consolidation or otherwise;
(c) the first day on which a majority of the members of the Management Group of
the Parent, any other Borrower, or any general partner of a Borrower are not
Continuing Directors; (d) except as allowed by SECTION 9.9, any Borrower (other
than the Parent) shall cease to be a Wholly-Owned Subsidiary of the Parent.
"CLEARING BANK" means the Bank or any other banking institution with whom
a Payment Account has been established pursuant to a Blocked Account Agreement.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute, and the regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in SECTION 6.1.
"COMMITMENT" means, at any time with respect to a Lender, the principal
amount set forth beside such Lender's name under the heading "COMMITMENT" on the
signature pages of this Agreement or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder, or the most
recent Assignment and Acceptance such Lender is a party to, in accordance with
the provisions of SECTION 13.3, as such Commitment may be adjusted from time to
time in accordance with the provisions of SECTION 13.3, and
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"COMMITMENTS" means, collectively, the aggregate amount of the Commitments of
all of the Lenders.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste, in each case to the
extent regulated under any applicable Environmental Law.
"CONTINUING DIRECTORS" means, as of any date of determination, any duly
appointed member of the Management Group of the Parent, any other Borrower or
any general partner of any other Borrower, who (a) was a member of such
Management Group on the Closing Date or (b) was nominated for election or
elected to such Management Group with the affirmative vote of a majority of the
Management Group who were members of such Management Group at the time of such
nomination or election.
"CONVERSION/CONTINUATION DATE" means the effective date of (a) any
conversion of LIBOR Rate Loans to Base Rate Loans or of Base Rate Loans to LIBOR
Rate Loans or (b) any continuation of LIBOR Rate Loans as LIBOR Rate Loans.
"COPYRIGHT, PATENT, AND TRADEMARK AGREEMENTS" means each Copyright
Security Agreement, Patent Security Agreement, and Trademark Security Agreement
executed and delivered by a Loan Party to the Agent to evidence and perfect the
Agent's security interest in such Borrower's present and future copyrights,
patents, trademarks, and related licenses and rights, for the benefit of the
Agent and the Lenders.
"CREDIT SUPPORT" has the meaning specified in SECTION 2.4(A).
"DEBT" means, with respect to a Person without duplication, all
liabilities, obligations, and indebtedness of such Person to any other Person,
of any kind or nature, now or hereafter owing, arising, due, or payable,
howsoever evidenced, created, incurred, acquired, or owing, whether primary,
secondary, direct, contingent, fixed, or otherwise, and including, without in
any way limiting the generality of the foregoing: (a) liabilities and
obligations to trade creditors; (b) in the case of a Loan Party, all
Obligations; (c) all obligations and liabilities of any Person, whether or not
owed by such Person, secured by any Lien on such Person's property, even though
such Person shall not have assumed or become liable for the payment thereof;
PROVIDED, HOWEVER, that all such obligations and liabilities which are limited
in recourse to such property shall be included in Debt only to the extent of the
book value of such property as would be shown on a balance sheet of such Person
prepared in accordance with GAAP; (d) all obligations or liabilities created or
arising under any Capital Lease or conditional sale or other title retention
agreement with respect to property used or acquired by such Person, even if the
rights and remedies of the lessor, seller, or lender thereunder are limited to
repossession of such property; PROVIDED, HOWEVER, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such property as would be shown on
a balance sheet of such Person prepared in accordance with GAAP; and (e) all
obligations and liabilities under Guaranties.
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"DEBT FOR BORROWED MONEY" means, as to any Person, Debt for borrowed money
or as evidenced by notes, bonds, debentures, or similar evidences of any such
Debt of such Person, the deferred and unpaid purchase price of any property or
business (other than trade accounts payable incurred in the ordinary course of
business and constituting current liabilities) and all obligations under Capital
Leases.
"DEFAULT" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"DEFAULTING LENDER" has the meaning specified in SECTION 2.2(G)(II).
"DEFAULT RATE" means a fluctuating per annum interest rate at all times
equal to the sum of (a) the otherwise applicable Interest Rate PLUS (b) two
percent (2.00%). Each Default Rate shall be adjusted simultaneously with any
change in the applicable Interest Rate. In addition, with respect to Letters of
Credit, the Default Rate shall mean an increase in the Letter of Credit Fee by
two percent (2.00%).
"DISTRIBUTION" means, in respect of any Person: (a) the payment or making
of any dividend or other distribution of property in respect of its Capital
Stock (or any options or warrants for therefor), other than distributions in its
Capital Stock (or any options or warrants therefor) of the same class; or (b)
the redemption or other acquisition by such Person of any Capital Stock (or any
options or warrants therefor).
"DOL" means the United States Department of Labor or any successor
department or agency.
"DOLLAR" and "$" means dollars in the lawful currency of the United
States.
"EBITDA" means, for any period, the sum of Net Income, PLUS, the sum of
the following to the extent included in the determination of Net Income: (a) the
amount, if any, by which Interest Expense exceeds interest income; PLUS (b)
income and franchise taxes; PLUS (c) depreciation and amortization expense.
"ELIGIBLE ACCOUNTS" means the Accounts of a Borrower which the Agent in
the exercise of its reasonable commercial discretion determines to be Eligible
Accounts. Without limiting the discretion of the Agent to establish other
criteria of ineligibility, Eligible Accounts shall not, unless the Agent in its
sole discretion elects, include any Account:
(a) with respect to which more than ninety (90) days have elapsed
since the date of the original invoice therefor or it is more than sixty
(60) days past due;
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(b) with respect to which any of the representations, warranties,
covenants, and agreements contained in SECTION 6.8 are not or have ceased
to be complete and correct or have been breached;
(c) with respect to which, in whole or in part, a check, promissory
note, draft, trade acceptance, or other instrument for the payment of
money has been received, presented for payment, and returned uncollected
for any reason;
(d) which represents a progress billing (as hereinafter defined) or
as to which such Borrower has extended the time for payment without the
consent of the Agent; for the purposes hereof, "progress billing" means
any invoice for goods sold or leased or services rendered under a contract
or agreement pursuant to which the Account Debtor's obligation to pay such
invoice is conditioned upon such Borrower's completion of any further
performance under the contract or agreement;
(e) with respect to which any one or more of the following events
has occurred to the Account Debtor on such Account: (i) death or judicial
declaration of incompetency of an Account Debtor who is an individual;
(ii) the filing by or against the Account Debtor of a request or petition
for liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, winding-up, or other relief under the
bankruptcy, insolvency, or similar laws of the United States, any state or
territory thereof, or any foreign jurisdiction, now or hereafter in
effect; (iii) the making of any general assignment by the Account Debtor
for the benefit of creditors; (iv) the appointment of a receiver or
trustee for the Account Debtor or for any of the assets of the Account
Debtor, including, without limitation, the appointment of or taking
possession by a "custodian," as defined in the Bankruptcy Code; (v) the
institution by or against the Account Debtor of any other type of
insolvency proceeding (under the Bankruptcy Code or otherwise) or of any
formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of, the Account
Debtor; (vi) the sale, assignment, or transfer of all or any material part
of the assets of the Account Debtor; (vii) the nonpayment generally by the
Account Debtor of its debts as they become due; (viii) or the cessation of
the business of the Account Debtor as a going concern;
(f) if fifty percent (50.0%) or more of the aggregate Dollar amount
of outstanding Accounts owed at such time by the Account Debtor thereon is
classified as ineligible under the other criteria set forth herein or
otherwise established by the Agent;
(g) owed by an Account Debtor which: (1) does not maintain its chief
executive office in the United States, Canada, England, Ireland, Northern
Ireland, or Scotland; or (2) is not organized under the laws of the United
States, Canada, England, Ireland, Northern Ireland, or Scotland or any
political subdivision, state, or province thereof; or (3) is the
government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof;
except to the extent that such Account is secured or payable by a letter
of credit satisfactory to the Agent in its discretion; PROVIDED that the
Agent may, in its discretion, approve up to an aggregate of
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$5,000,000 of such Accounts (other than such Accounts which are
disqualified by CLAUSE (3) preceding) and the Accounts described in each
proviso in CLAUSE (I) and CLAUSE (M) following to be included as Eligible
Accounts;
(h) owed by an Account Debtor which is an Affiliate or employee of
such Borrower;
(i) except as provided in CLAUSE (L) below, with respect to which
either the perfection, enforceability, or validity of the Agent's Lien in
such Account, or the Agent's right or ability to obtain direct payment to
the Agent of the proceeds of such Account, is governed by any federal,
state, or local statutory requirements other than those of the UCC;
PROVIDED that the Agent may, in its discretion, approve up to an aggregate
of $5,000,000 of such Accounts and the Accounts described in each proviso
in CLAUSE (G) preceding and CLAUSE (M) following to be included as
Eligible Accounts or any other amount of such Accounts, if any, agreed to
pursuant to SECTION 13.2;
(j) owed by an Account Debtor to which a Loan Party is indebted in
any way, or which is subject to any right of set-off or recoupment by the
Account Debtor, unless the Account Debtor has entered into an agreement
acceptable to the Agent to waive set-off rights; or if the Account Debtor
thereon has disputed liability or made any claim with respect to any other
Account due from such Account Debtor; but in each such case only to the
extent of such indebtedness, set-off, recoupment, dispute, or claim;
(k) with respect to which such Borrower has deemed such Account as
uncollectible or has any reason to believe that such Account is
uncollectible;
(l) owed by the government of the United States, or any department,
agency, public corporation, or other instrumentality thereof, unless the
Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. ss. 3727
eT Seq.), and any other steps necessary to perfect the Agent's LieN
therein, have been complied with to the Agent's satisfaction with respect
to such Account;
(m) owed by any state, municipality, or other political subdivision
of the United States, or any department, agency, public corporation, or
other instrumentality thereof and as to which the Agent determines that
its Lien therein is not or cannot be perfected; PROVIDED that the Agent
may, in its discretion, approve up to an aggregate of $5,000,000 of such
Accounts and the Accounts described in each proviso in CLAUSE (G) and
CLAUSE (I) preceding to be included as Eligible Accounts;
(n) which represents a sale on a bill-and-hold, guaranteed sale,
sale and return, sale on approval, consignment, or other repurchase or
return basis;
(o) which is evidenced by a promissory note or other instrument or
by chattel paper;
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(p) with respect to which the Agent believes, in the exercise of its
reasonable judgment, that the prospect of collection of such Account is
impaired or that the Account may not be paid by reason of the Account
Debtor's financial inability to pay;
(q) with respect to which the Account Debtor is located in any state
requiring the filing of a Notice of Business Activities Report or similar
report in order to permit such Borrower to seek judicial enforcement in
such State of payment of such Account, unless such Borrower has qualified
to do business in such state or has filed a Notice of Business Activities
Report or equivalent report for the then current year;
(r) which arises out of a sale not made in the ordinary course of
such Borrower's business;
(s) with respect to which the goods giving rise to such Account have
not been shipped and delivered to, or have been rejected or objected to,
by the Account Debtor or the services giving rise to such Account have not
been performed by such Borrower, and, if applicable, accepted by the
Account Debtor, or the Account Debtor revokes its acceptance of such goods
or services;
(t) owed by an Account Debtor which is obligated to such Borrower
respecting Accounts the aggregate unpaid balance of which exceeds
twenty-five percent (25.0%) of the aggregate unpaid balance of all
Accounts owed to such Borrower at such time by all of such Borrower's
Account Debtors, but only to the extent of such excess;
(u) which arises out of an enforceable contract or order which, by
its terms, forbids, restricts, or makes void or unenforceable the granting
of a Lien by such Borrower to the Agent with respect to such Account; or
(v) which is not subject to a first priority and perfected security
interest in favor of the Agent for the benefit of the Lenders.
If any Account at any time ceases to be an Eligible Account, then such Account
shall promptly be excluded from the calculation of Eligible Accounts.
"ELIGIBLE AEROSPACE GROUP INVENTORY" means Inventory of a Borrower which
the Agent, in its reasonable discretion, determines to meet all of the following
requirements:
(a) such Inventory meets all of the requirements of CLAUSES (A)
through (F) and CLAUSES (H) through (L) of the definition of Eligible
Industrial Group Inventory; and
(b) such Inventory is owned by and carried on the books of Pentacon
Aerospace Group, Inc. or any of its Subsidiaries which is a Borrower.
If any Inventory at any time ceases to be Eligible Aerospace Group Inventory,
such Inventory shall promptly be excluded from the calculation of Eligible
Aerospace Group Inventory.
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"ELIGIBLE AEROSPACE GROUP INVENTORY (CATEGORY I)" means Eligible Aerospace
Group Inventory, valued at the lower of cost or market, equal to the number of
units of such Inventory of that stock keeping unit ("SKU") part number, not in
excess of the number of units actually on hand, (a) which have been sold by a
Borrower during the immediately preceding twenty-four (24) month period
(including any portion of such period occurring prior to the date any such
Borrower became a borrower under this Agreement) or (b) in the Agent's
discretion, which have been recently purchased by a Borrower in connection with
fulfillment of existing contracts of sale.
"ELIGIBLE AEROSPACE GROUP INVENTORY (CATEGORY II)" means Eligible
Aerospace Group Inventory, valued at the lower of cost or market, equal to the
number of units of such Inventory of that stock keeping unit ("SKU") part
number, not in excess of the number of units actually on hand and reduced by the
number of units of such Inventory that is Eligible Aerospace Group Inventory
(Category I) on the date of determination, which have been sold by a Borrower
during the period beginning twenty-four (24) months after the date of
determination thereof and ending forty-eight (48) months after the date of
determination thereof (including any portion of such period occurring prior to
the date any such Borrower became a borrower under this Agreement).
"ELIGIBLE ASSIGNEE" means (a) a commercial bank, commercial finance
company, or other asset based lender, having total assets in excess of
$1,000,000,000; (b) any Lender listed on a signature page of this Agreement; (c)
any Affiliate of any Lender; and (d) if an Event of Default exists, any Person
reasonably acceptable to the Agent.
"ELIGIBLE INDUSTRIAL GROUP INVENTORY" means Inventory of a Borrower,
valued at the lower of cost or market, which the Agent, in its reasonable
discretion, determines to meet all of the following requirements:
(a) such Inventory is owned such Borrower and is in the possession
and control of such Borrower and not any third party;
(b) such Inventory is subject to the Agent's Liens, which are
perfected as to such Inventory, and is subject to no other Lien whatsoever
other than Permitted Liens of the type and to the limited extent provided
in CLAUSE (E) of the definition of Permitted Liens;
(c) such Inventory consists of finished goods or raw materials;
(d) such Inventory does not consist of work-in-process, chemicals,
supplies, packing and shipping materials, or advertising or marketing
materials (including samples);
(e) such Inventory is in good condition, not unmerchantable, and
meets all standards imposed by any Governmental Authority having
regulatory authority over such goods, their use, or sale;
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(f) such Inventory is currently either usable or salable, at prices
approximating at least cost, in the normal course of such Borrower's
business,
(g) such Inventory is not slow moving or stale,
(h) such Inventory is not obsolete or returned or repossessed or
used goods taken in trade;
(i) such Inventory is located within the United States or Canada;
(j) if such Inventory is located in a warehouse or other facility
leased by such Borrower and designated as a "Primary Location" on SCHEDULE
6.3, the warehouseman or the lessor has delivered to the Agent a waiver
and consent in form and substance satisfactory to the Agent (subject to
the delivery requirements of SECTION 10.1(A)(XV));
(k) if such Inventory contains or bears any Proprietary Rights
licensed to a Borrower by any Person, the Agent shall be satisfied that it
may sell or otherwise dispose of such Inventory in accordance with ARTICLE
11 without infringing the rights of the licensor of such Proprietary
Rights or violating any contract with such licensor (and without payment
of any royalties other than any royalties due with respect to the sale or
disposition of such Inventory pursuant to the existing license agreement),
and, if the Agent deems it necessary, the applicable Borrower shall
deliver to the Agent a consent or sublicense agreement from such licensor
in form and substance acceptable to the Agent;
(l) such Inventory is not determined by the Agent in its reasonable
discretion, to be ineligible for any other reason;
(m) such Inventory is owned by and carried on the books of Pentacon
Industrial Group, Inc. or any of its Subsidiaries which is a Borrower; and
(n) such Inventory has been subject to (i) a purchase of that stock
keeping unit ("SKU") part number by a Borrower during the past eighteen
(18) months and (ii) a sale of that Inventory's SKU part number to a
customer by a Borrower during the past three (3) years (in each case
including any portion of any such period occurring prior to the date any
such Borrower became a borrower under this Agreement).
If any Inventory at any time ceases to be Eligible Industrial Group Inventory,
such Inventory shall promptly be excluded from the calculation of Eligible
Industrial Group Inventory.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"ENVIRONMENTAL COMPLIANCE ISSUES" has the meaning specified in SECTION
9.7(A).
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"ENVIRONMENTAL COMPLIANCE RESERVE" means any reserve which the Agent,
after the Closing Date, establishes in its reasonable discretion from time to
time for amounts that are reasonably likely to be expended by a Loan Party in
order for such Loan Party and its operations and property (a) to comply with any
notice from a Governmental Authority asserting material non-compliance with
Environmental Laws, or (b) to correct any such material non-compliance
identified in a report delivered to the Agent and the Lenders pursuant to
SECTION 9.7.
"ENVIRONMENTAL LAWS" means all federal, state, or local laws, statutes,
common law duties, rules, regulations, ordinances, and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations, and
permits of, and agreements with, any Governmental Authority, in each case
relating to environmental, health, safety, and land use matters.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental Authority
for (a) any liability under Environmental Laws, or (b) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"EQUIPMENT" means, with respect to a Person, all of such Person's now
owned and hereafter acquired machinery, equipment, furniture, furnishings,
fixtures, and other tangible personal property (except Inventory), including
motor vehicles with respect to which a certificate of title has been issued,
aircraft, dies, tools, jigs, and office equipment, as well as all of such types
of property leased by such Person and all of such Person's rights and interests
with respect thereto under such leases (including, without limitation, options
to purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties, and rights with
respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with a Loan Party within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA EVENT" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by a Loan Party or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by a Loan Party or any ERISA
Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan
is in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings
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by the PBGC to terminate a Pension Plan or Multi-employer Plan; (e) the
occurrence of an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multi-employer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than for
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Loan
Party or any ERISA Affiliate.
"EVENT OF DEFAULT" has the meaning specified in SECTION 11.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and regulations
promulgated thereunder.
"EXISTING LETTERS OF CREDIT" means those "Letters of Credit" (as defined
by the Original Agreement) issued pursuant to the Original Agreement and
outstanding on the Closing Date, as listed on SCHEDULE 1.1A ("Existing Letters
of Credit").
"EXISTING OBLIGATIONS" has the meaning specified for such term within the
definition of "Obligations" as provided in this SECTION 1.1.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"FINANCIAL STATEMENTS" means, according to the context in which it is
used, the financial statements referred to in SECTION 8.6 or any other financial
statements required to be given to the Lenders pursuant to this Agreement.
"FISCAL YEAR" means the Parent's fiscal year for financial accounting
purposes. The current Fiscal Year of the Parent will end on December 31, 1999.
"FIXED ASSETS" means, with respect to a Person, the Equipment and Real
Estate of such Person.
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"FIXED CHARGE COVERAGE RATIO" means, for any period, determined for the
Parent and its Subsidiaries on a consolidated basis in accordance with GAAP, the
ratio of (a) EBITDA, MINUS (i) the remainder of (A) Capital Expenditures, MINUS
(B) the gross amount of assets sold, MINUS (C) the principal amount of Purchase
Money Indebtedness incurred in connection with the Capital Expenditures included
in CLAUSE (A) preceding, MINUS (ii) the cash amount of Distributions paid (other
than Distributions paid to the Parent or another Loan Party) during such period
to (b) the sum of (i) current maturities of long term debt, PLUS (ii) Interest
Expense.
"FUNDING DATE" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the
Closing Date.
"GENERAL INTANGIBLES" means, with respect to a Person, all of such
Person's now owned or hereafter acquired general intangibles, choses in action
and causes of action and all other intangible personal property of such Person
of every kind and nature (other than Accounts), including, without limitation,
all contract rights, Proprietary Rights, corporate or other business records,
inventions, designs, blueprints, plans, specifications, patents, patent
applications, trademarks, service marks, trade names, trade secrets, goodwill,
copyrights, computer software, customer lists, registrations, licenses,
franchises, tax refund claims, any funds which may become due to such Person in
connection with the termination of any Plan or other employee benefit plan or
any rights thereto and any other amounts payable to such Person from any Plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such Person
is beneficiary, and any letter of credit, guarantee, claim, security interest,
or other security held by or granted to such Person.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"GUARANTY" means, with respect to any Person, all obligations of such
Person which in any manner directly or indirectly guarantee or assure, or in
effect guarantee or assure, the payment or performance of any indebtedness,
dividend, or other obligations of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including any such obligations
incurred through an agreement, contingent, or otherwise: (a) to purchase the
guaranteed obligations or any property constituting security therefor; (b) to
advance or supply funds for the purchase or payment of the
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<PAGE>
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity securities
or other property or services.
"GUARANTY AGREEMENT" means a Parent Guaranty or a Subsidiary Guaranty, as
the case may be.
"INTERCOMPANY ACCOUNTS" means all assets and liabilities, however arising,
which are due to any Loan Party from, which are due from any Loan Party to, or
which otherwise arise from any transaction by any Loan Party with, any Affiliate
of such Loan Party.
"INTEREST EXPENSE" means, for any period, the interest expense for such
period, determined on a consolidated basis in accordance with GAAP.
"INTEREST PERIOD" means, as to any LIBOR Rate Loan, the period commencing
on the Funding Date of such Loan or on the Conversion/Continuation Date on which
the Loan is converted into or continued as a LIBOR Rate Loan, and ending on the
date one, two, or three months thereafter as selected by the Borrowers in a
Notice of Borrowing, in the form attached hereto as EXHIBIT D, or Notice of
Conversion/Continuation, in the form attached hereto as EXHIBIT E; provided
that:
(a) if any Interest Period would otherwise end on a day that is not
a Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Rate Loan that begins
on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(C) no Interest Period shall extend beyond the Stated Termination
Date.
"INTEREST RATE" means each or any of the interest rates, including the
Default Rate, set forth in SECTION 3.1.
"INTEREST RATE PROTECTION AGREEMENT" means (a) any and all rate swap
transactions, basis swaps, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, or any other similar transactions or any combination of any of
the foregoing (including any options to enter into any of the foregoing),
whether or not any such transaction is governed by or subject to any master
agreement, or (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed by,
any form of
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master agreement published by the International Swaps and Derivatives
Associations, Inc., or any other master agreement (any such master agreement,
together with any related schedules, as amended, restated, extended,
supplemented, or otherwise modified in writing from time to time, a "Master
Agreement), including but not limited to any such obligations or liabilities
under any Master Agreement.
"INVENTORY" means, with respect to a Person, all of such Person's now
owned and hereafter acquired inventory, goods, and merchandise, wherever
located, to be furnished under any contract of service or held for sale or
lease, all returned goods, raw materials, other materials, and supplies of any
kind, nature, or description which are used or consumed in such Person's
business or used in connection with the packing, shipping, advertising, selling,
or finishing of such goods, merchandise, and such other personal property, and
all documents of title or other documents representing them.
"INVESTMENT PROPERTY" means, with respect to a Person, all of such
Person's right, title, and interest in and to any and all: (a) securities
whether certificated or uncertificated; (b) securities entitlements; (c)
securities accounts; (d) commodity contracts; or (e) commodity accounts.
"IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.
"LATEST PROJECTIONS" means: (a) on the Closing Date and thereafter until
the Agent receives new projections pursuant to SECTION 7.2(F), the projections
of the financial condition, results of operations, and cash flow, in each case
for the Loan Parties for the period commencing on January 1, 1998, and ending on
December 31, 2004, and delivered to the Agent prior to the Closing Date; and (b)
thereafter, the projections most recently received by the Agent pursuant to
SECTION 7.2(F).
"LENDER" and "LENDERS" have the meanings specified in the introductory
paragraph hereof and shall include the Agent to the extent of any Agent Advance
outstanding and the Bank to the extent of any Non-Ratable Loan outstanding;
PROVIDED that no such Agent Advance or Non-Ratable Loan shall be taken into
account in determining any Lender's Pro Rata Share.
"LETTER OF CREDIT" means a letter of credit issued or caused to be issued
for the account of a Loan Party pursuant to SECTION 2.4.
"LETTER OF CREDIT FEE" has the meaning specified in SECTION 3.6.
"LETTER OF CREDIT FEE PERCENTAGE" means one and three-quarters percent
(1.75%) per annum.
"LETTER OF CREDIT ISSUER" means the Bank, any Affiliate of the Bank, or
any other financial institution that issues any Letter of Credit pursuant to
this Agreement.
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"LIBOR INTEREST PAYMENT DATE" means, with respect to a LIBOR Rate Loan,
the last day of each Interest Period applicable to such Loan.
"LIBOR RATE" means, for any Interest Period, with respect to LIBOR Rate
Loans, the rate of interest per annum determined pursuant to the following
formula:
LIBOR Rate = OFFSHORE BASE RATE
------------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"OFFSHORE BASE RATE" means the rate per annum appearing on
Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If
for any reason such rate is not available, the Offshore Base Rate
shall be, for any Interest Period, the rate per annum appearing on
Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; PROVIDED, HOWEVER, if more
than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates. If
for any reason none of the foregoing rates is available, the
Offshore Base Rate shall be, for any Interest Period, the rate per
annum determined by the Agent as the rate of interest at which
dollar deposits in the approximate amount of the LIBOR Rate Loan
comprising part of such Borrowing would be offered by the Agent's
London Branch to major banks in the offshore dollar market at their
request at or about 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to
such Interest Period.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day during any
Interest Period, the reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in effect on such day
applicable to the Bank under regulations issued from time to time by
the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"). The Offshore Rate for
each outstanding LIBOR Rate Loan shall be adjusted automatically as
of the effective date of any change in the Eurodollar Reserve
Percentage.
"LIBOR RATE LOANS" means the LIBOR Revolving Loans.
"LIBOR REVOLVING LOAN" means a Revolving Loan during any period in which
it bears interest based on the LIBOR Rate.
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"LIEN" means: (a) any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment, or bailment for security purposes; (b) to the extent not included
under CLAUSE (A), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease, or other title exception
or encumbrance affecting property; and (c) any contingent or other agreement to
provide any of the foregoing.
"LOAN ACCOUNT" means the loan account of the Borrowers, which account
shall be maintained by the Agent.
"LOAN DOCUMENTS" means collectively this Agreement, the Revolving Notes,
the Copyright, Patent, and Trademark Agreements, the Mortgages, the Guaranty
Agreements and each other instrument, agreement, certificate or document
executed by any Loan Party in connection with this Agreement, the Obligations or
the Collateral whether prior to, on or after the Closing Date, and any and all
renewals, extensions, amendments, modifications or restatements of any of the
foregoing.
"LOAN PARTY" means, respectively, each Borrower, any Subsidiary of the
Parent which is not a Borrower or an Unrestricted Subsidiary (if any), and their
respective successors and assigns, and "LOAN PARTIES" means all of such Persons,
collectively.
"LOANS" means, collectively, all loans and advances provided for in
ARTICLE 2.
"MAJORITY LENDERS" means, at any time, the Lenders whose Pro Rata Shares
aggregate more than fifty-one percent (51.0%) as such percentage is determined
under the definition of Pro Rata Share set forth herein.
"MANAGEMENT GROUP" means, as of any date of determination, the board of
directors, board of managers, or similar constituency having management
authority in respect of an entity under any Requirement of Law.
"MARGIN STOCK" means "margin stock" as such term is defined in Regulation
T, U, or X of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise), or prospects of any Borrower or of the Loan Parties
taken as a whole, or the Collateral; (b) a material impairment of the ability of
any Loan Party to perform under any Loan Document to which it is a party and to
avoid any Event of Default; or (c) a material adverse effect upon the legality,
validity, binding effect, or enforceability against any Loan Party of any Loan
Document to which it is a party.
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"MAXIMUM RATE" means, at any time, the maximum rate of interest the
Lenders may lawfully contract for, charge or receive in respect of the
Obligations as allowed by Requirements of Law. For purposes of determining the
Maximum Rate under the Requirements of Law of the State of Texas, the applicable
rate ceiling shall be (a) the weekly rate ceiling described in and computed in
accordance with the provisions of Section 303.003 of the Texas Finance Code, as
amended or (b) if the parties subsequently contract as allowed by Requirements
of Law, the quarterly ceiling or the annualized ceiling computed pursuant to
Section 303.008 of the Texas Finance Code, as amended; PROVIDED, however, that
at any time the weekly rate ceiling, the quarterly ceiling or the annualized
ceiling shall be less than 18% per annum or more than 24% per annum, the
provisions of Section 303.009(a) and Section 303.009(b) of the Texas Finance
Code, as amended, shall control for purposes of such determination, as
applicable.
"MAXIMUM REVOLVER AMOUNT" means $100,000,000.
"MORTGAGES" means: (a) each Deed of Trust, Security Agreement, and
Assignments of Leases and Rents executed by a Loan Party and delivered to the
Agent in connection with this Agreement; and (b) all other real property
mortgages, leasehold mortgages, assignments of leases, mortgage deeds, deeds of
trust, deeds to secure debt, security agreements, and other similar instruments
hereafter entered into which provide the Agent a lien, for the benefit of the
Agent and the Lenders, on or other interest in any portion of the Premises or
the Real Estate or which relate to any such Lien or interest.
"MULTI-EMPLOYER PLAN" means a "multi-employer plan" as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding six (6) years contributed to by a Loan Party or any ERISA
Affiliate.
"NEGATIVE PLEDGE" means any agreement, contract, or other arrangement
whereby any Loan Party is prohibited from, or would otherwise be in default as a
result of, creating, assuming, incurring, or suffering to exist, directly or
indirectly, any Lien on any of its assets in favor of the Agent under the Loan
Documents.
"NET AMOUNT OF ELIGIBLE ACCOUNTS" means, at any time, the gross amount of
Eligible Accounts less sales, excise, or similar taxes, and less returns,
discounts, claims, credits, and allowances of any nature at any time issued,
owing, granted, outstanding, available, or claimed.
"NET INCOME" means, 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 without
limitation, reserves for deferred taxes), and all other proper deductions, all
determined in accordance with GAAP, PROVIDED that there shall be excluded:
(a) the net income (or net loss) of any Person accrued prior to the
date it becomes a Subsidiary of, or is merged into or consolidated with,
the Person whose Net Income is being determined or a consolidated
Subsidiary of such Person;
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LOAN AND SECURITY AGREEMENT - PAGE 21
<PAGE>
(b) any net gains or losses on the sale or other disposition, not in
the ordinary course of business, of investments and other capital assets,
PROVIDED that there shall also be excluded any related charges for taxes
thereon;
(c) any net gain arising from the collection of the proceeds of any
insurance policy;
(d) any write-up or write-down of any asset; and
(e) any other extraordinary item, as defined by GAAP.
"NEWLY OBLIGATED PARTY" has the meaning specified for such term within the
definition of "Obligations" as provided in this SECTION 1.1.
"NON-RATABLE LOAN" and "NON-RATABLE LOANS" have the meanings specified in
SECTION 2.2(H).
"NOTICE OF BORROWING" has the meaning specified in SECTION 2.2(B).
"NOTICE OF CONVERSION/CONTINUATION" has the meaning specified in
SECTION 3.2(B).
"OBLIGATIONS" means all present and future loans, advances, liabilities,
obligations, covenants, duties, and debts owing by the Loan Parties, or any of
them, to the Agent and/or any Lender, arising under or pursuant to this
Agreement or any of the other Loan Documents, whether or not evidenced by any
note, or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification, or otherwise, whether direct or indirect (including those
acquired by assignment from others, and any participation by the Agent and/or
any Lender in any Loan Party's debts owing to others), absolute or contingent,
due or to become due, primary or secondary, as principal or guarantor, and
including all principal, interest, charges, expenses, fees, attorneys' fees,
filing fees, and any other sums chargeable to any Loan Party hereunder or under
any of the other Loan Documents. "Obligations" includes, without limitation, (a)
all debts, liabilities, and obligations now or hereafter arising from or in
connection with the Letters of Credit and (b) all debts, liabilities, and
obligations now or hereafter arising from or in connection with Bank Products;
PROVIDED, however, that notwithstanding the forgoing, in the case of and with
regard to or in connection with any Newly Obligated Party (defined hereinbelow),
the term "Obligations," wherever in any manner used in the Loan Documents,
excludes Existing Obligations (defined hereinbelow). As used herein, (A) "NEWLY
OBLIGATED PARTY" means (i) each Borrower who, as of the Closing Date, is not a
borrower or guarantor under the Original Loan Documents and is otherwise not
obligated for payment of the "Obligations" defined thereby and (ii) each Person,
if any, who becomes party to this Agreement as a Borrower effective as of any
date after the Closing Date, and (B) "EXISTING OBLIGATIONS" means the Original
Obligations and, additionally in the case of a Newly Obligated Party described
in CLAUSE (A)(II) preceding, any other Obligations which are outstanding and
unpaid as of the time such Newly Obligated Party becomes a Borrower.
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - PAGE 22
<PAGE>
"ORIGINAL AGREEMENT" means that certain Amended and Restated Credit
Agreement, dated as of September 3, 1998, among Pentacon, Inc., Bank of America,
National Association (successor in interest to Bank of America, National
Association, formerly NationsBank, N.A.), the Lenders party thereto, and
NationsBanc Montgomery Securities LLC as amended.
"ORIGINAL LOAN DOCUMENTS" means the "Loan Documents", as defined in the
Original Agreement.
"ORIGINAL OBLIGATIONS" means all indebtedness, liabilities, and
obligations (including, without all indebtedness and liabilities evidenced by
the "Notes" (as defined in the Original Agreement)) existing under the Original
Agreement as of the Closing Date.
"OTHER TAXES" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges, or similar levies (excluding, in
the case of each Lender and the Agent, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by each Lender's or the Agent's
net income) which arise from any payment made hereunder or from the execution,
delivery, or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"PARENT" means Pentacon, Inc., a Delaware corporation.
"PARENT GUARANTY" means a Guaranty Agreement executed by the Parent
pursuant to SECTION 6.18.
"PARTICIPANT" means any Person who shall have been granted the right by
any Lender to participate in the financing provided by such Lender under this
Agreement, and who shall have entered into a participation agreement in form and
substance satisfactory to such Lender.
"PAYMENT ACCOUNT" means each bank account established pursuant to SECTION
6.9, to which the funds of the Borrowers (including proceeds of Accounts and
other Collateral) are deposited or credited, and which is maintained in the name
of the Agent or the Borrowers, or any of them, as the Agent may determine, on
terms acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any Governmental
Authority succeeding to the functions thereof.
"PENDING REVOLVING LOANS" means, at any time, the aggregate principal
amount of all Revolving Loans requested in any Notice of Borrowing received by
the Agent which have not yet been advanced.
"PENSION PLAN" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which any Loan Party sponsors, maintains, or to
which it makes, is making, or is obligated to make contributions, or in the case
of a Multiple-employer Plan has made contributions at any time during the
immediately preceding five (5) plan years.
SECOND AMENDED AND RESTATED
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<PAGE>
"PERMITTED ACQUISITIONS" means any acquisition of the Capital Stock of a
Person or any acquisition of property which constitutes a significant or
material portion of an existing business of a Person, in each case, in a
transaction that satisfies each of the following requirements:
(a) both before and after giving effect to such acquisition and the
Loans (if any) requested to be made in connection therewith, no Default
exists or will exist or would result therefrom;
(b) as soon as available, but not less than five (15) Business Days
prior to such acquisition, the Parent has provided to the Lenders a copy
of the information provided to the board of directors of the Loan Party
making such acquisition;
(c) the Cash Purchase Consideration paid in connection with such
acquisition does not exceed $10,000,000, and the Cash Purchase
Consideration paid in connection with all acquisitions in the prior four
fiscal quarters (including the current fiscal quarter) does not exceed
$40,000,000;
(d) if such acquisition is an acquisition of the Capital Stock of a
Person, the acquisition is structured so that the acquired Person shall
become a Wholly-Owned Subsidiary of the Parent (and a Loan Party pursuant
to the terms of this Agreement), and if such acquisition is an acquisition
of assets, the acquisition is structured so that a Loan Party shall
acquire such assets;
(e) no Loan Party shall, as a result of or in connection with any
such acquisition, assume or incur any direct or contingent liabilities
(whether relating to environmental, tax, litigation, or other matters)
that could reasonably be expected, as of the date of such acquisition, to
result in the existence or occurrence of a Material Adverse Effect;
(f) the Fixed Charge Coverage Ratio, without giving effect to such
acquisition, shall be greater than or equal to 1.20 to 1.00 for the most
recently completed twelve (12) month period;
(g) the Fixed Charge Coverage Ratio, determined on a pro forma
projected basis, including any projected impact from the proposed
acquisition, for the following twelve (12) month period shall be greater
than or equal to 1.20 to 1.00; and
(h) the Borrower making such acquisition shall certify (and provide
the Agent with a pro forma calculation in form and substance reasonably
satisfactory to the Agent) to the Agent and the Lenders that, after giving
effect to completion of such acquisition, Availability is not less than
$15,000,000 on a pro forma basis which includes all consideration given in
connection with such acquisition, other than Capital Stock of a Loan Party
delivered to the seller(s) in such acquisition, as having been paid in
cash at the time of making such acquisition.
SECOND AMENDED AND RESTATED
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"PERMITTED LIENS" means:
(a) the Agent's Liens;
(b) Liens, if any, which are described on SCHEDULE 1.1B ("Permitted
Liens") on the Closing Date and Liens resulting from the refinancing of
the related Debt, PROVIDED that such refinancing is on the same or
substantially similar terms, the Debt secured thereby shall not be
increased, and the Liens shall not cover any additional property;
(c) Liens for taxes, fees, assessments, or other charges of a
Governmental Authority not delinquent in an amount not to exceed
$2,000,000; PROVIDED that the payment of such taxes, fees, assessments, or
other charges which are due and payable is being contested in good faith
and by appropriate proceedings diligently pursued and as to which adequate
financial reserves have been established in accordance with GAAP on the
appropriate Loan Party's books and records and a stay of enforcement of
any such Lien is in effect;
(d) Liens consisting of deposits made in the ordinary course of
business in connection with, or to secure payment of, obligations under
worker's compensation, unemployment insurance, social security, and other
similar laws, or to secure the performance of bids, tenders, or contracts
(other than for the repayment of borrowed money) or to secure indemnity,
performance, or other similar bonds for the performance of bids, tenders,
or contracts (other than for the repayment of borrowed money) or to secure
statutory obligations (other than liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance, or other similar bonds;
(e) Liens securing the claims or demands of materialmen, mechanics,
repairmen, carriers, warehousemen, landlords, and other like Persons,
PROVIDED that if any such Lien arises from the nonpayment of such claims
or demands when due, such claims or demands do not exceed $1,000,000 in
the aggregate;
(f) Liens constituting encumbrances in the nature of reservations,
exceptions, encroachments, easements, rights of way, covenants running
with the land, and other similar title exceptions or encumbrances
affecting any Real Estate; PROVIDED that they do not in the aggregate
materially detract from the value of such Real Estate or materially
interfere with its use in the ordinary conduct of a Loan Party's business;
(g) Liens arising from judgments and attachments in connection with
court proceedings; PROVIDED that the attachment or enforcement of such
Liens would not result in an Event of Default hereunder and such Liens are
being contested in good faith by appropriate proceedings, adequate
reserves have been set aside and no material Property is subject to a
material risk of loss or forfeiture, and the claims in respect of such
Liens are fully covered by insurance (subject to ordinary and customary
deductibles); and
SECOND AMENDED AND RESTATED
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<PAGE>
(h) Liens which constitute purchase money Liens and secure Debt
permitted under CLAUSES (D) and (F) of SECTION 9.13;
PROVIDED that none of such Liens listed in CLAUSE (B) through CLAUSE (H) (other
than such Liens of a type and to the extent provided by CLAUSE (E)) preceding
may attach to any Accounts or Inventory owned by any Loan Party, and none of
such Liens listed in CLAUSE (E) preceding shall be a "Permitted Lien" to the
extent that any such Lien attaches to any Accounts or Inventory owned by any
Loan Party and the aggregate amount of claims or demands under CLAUSE (E)
exceeds $3,000,000.
"PERMITTED RENTALS" has the meaning specified in SECTION 9.23.
"PERMITTED SUBORDINATED DEBT" means (a) the Debt evidenced by the
Subordinated Notes, (b) unsecured Debt owing by a Loan Party to a Loan Party or
to an Unrestricted Subsidiary, PROVIDED that such Debt is subordinated to
payment of the Obligations on terms substantially the same as are provided by
the Subsidiary Guaranty or, if otherwise, is approved in writing by the Agent
and the Majority Lenders and (c) other Debt of a Loan Party which has maturities
and terms, and which is subordinated to payment of the Obligations in a manner
approved in writing by the Majority Lenders, and in each such case any renewals,
modifications, or amendments thereof which are approved in writing by the
Majority Lenders; PROVIDED that for any such Debt included under this CLAUSE
(b), (i) such Debt shall not exceed $25,000,000 in the aggregate outstanding at
any time, (ii) such Debt must have a maturity date which is later than the
Stated Termination Date, (iii) the proceeds of such Debt must be used by a Loan
Party to make a prepayment of the principal amount outstanding under the
Revolving Loans, and (iv) the incurrence of such Debt will not cause the
Parent's Fixed Charge Coverage Ratio to exceed 1.20 to 1.00 at the time of its
incurrence.
"PERSON" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, Governmental Authority, or any other entity.
"PLAN" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Loan Party sponsors or maintains or to which any Loan Party
makes, is making, or is obligated to make contributions and includes any Pension
Plan.
"PREMISES" means the land identified by address on SCHEDULE 8.12, together
with all buildings, improvements, and fixtures thereon and all tenements,
hereditaments, and appurtenances belonging or in any way appertaining thereto,
which constitutes all of the real property in which any Borrower has any fee
title interest.
"PRO RATA SHARE" means, with respect to a Lender, a fraction (expressed as
a percentage), the numerator of which is the amount of such Lender's Commitment
and the denominator of which is the sum of the amounts of all of the Lenders'
Commitments, or if no Commitments are outstanding, a fraction (expressed as a
percentage), the numerator of which is the amount of
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Obligations owed to such Lender and the denominator of which is the aggregate
amount of the Obligations owed to the Lenders.
"PROPRIETARY RIGHTS" means, with respect to a Person, all of such Person's
now owned and hereafter arising or acquired: licenses, franchises, permits,
patents, patent rights, copyrights, works which are the subject matter of
copyrights, trademarks, service marks, trade names, trade styles, patent,
trademark and service mark applications, and all licenses and rights related to
any of the foregoing, including those patents, trademarks, service marks, trade
names, and copyrights set forth on SCHEDULE 8.13, and all other rights under any
of the foregoing, all extensions, renewals, reissues, divisions, continuations,
and continuations-in-part of any of the foregoing, and all rights to sue for
past, present, and future infringement of any of the foregoing.
"REAL ESTATE" means, with respect to a Person, all of such Person's
present and future interests, as owner, lessee, or otherwise, in the Premises,
including any interest arising from an option to purchase or lease the Premises
or any portion thereof.
"RELEASE" means a release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, or migration of a Contaminant
into the indoor or outdoor environment or into or out of any Real Estate or
other property, including the movement of Contaminants through or in the air,
soil, surface water, groundwater, or Real Estate or other property.
"RENTALS" has the meaning specified in SECTION 9.23.
"REPORTABLE EVENT" means, any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"REQUIRED LENDERS" means at any time Lenders whose Pro Rata Shares
aggregate more than sixty-six and two thirds percent (66_%), as such percentage
is determined under the definition of Pro Rata Share set forth herein.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject. In
respect of contracts relating to interest or finance charges that are made or
performed in the State of Texas, "Requirement of Law" means the laws of the
United States, including without limitation 12 USC ss.ss. 85 and 86(a), as
amenDeD from time to time, and any other statute of the United States now or at
any time hereafter prescribing the maximum rates of interest on loans and
extensions of credit, and the laws of the State of Texas, including, without
limitation, Section 306 of the Texas Finance Code, if applicable, and if Section
306 of the Texas Finance Code is not applicable, Section 303 of the Texas
Finance Code, and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit; PROVIDED that the parties hereto agree pursuant to Texas Finance Code
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Section 346.004 that the provisions of Chapter 346 of the Texas Finance Code
shall not apply to Revolving Loans, this Agreement or any other Loan Documents.
"RESPONSIBLE OFFICER" means, with respect to a Loan Party, the chief
executive officer or the president of such Loan Party; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of Parent; or with respect to the preparation of any Borrowing Base
Certificate, the chief financial officer or the treasurer of each Borrower; and
in each case any other officer having substantially the same authority and
responsibility.
"RESTRICTED INVESTMENT" means, as to any Loan Party, any acquisition of
property by such Loan Party in exchange for cash or other property, whether in
the form of an acquisition of stock, debt, or other indebtedness or obligation,
or the purchase or acquisition of any other property, or a loan, advance,
capital contribution, or subscription, except the following: (a) acquisitions of
Equipment to be used in the business of such Loan Party so long as the
acquisition costs thereof constitute Capital Expenditures permitted hereunder;
(b) acquisitions of Inventory in the ordinary course of business of such Loan
Party; (c) acquisitions of current assets acquired in the ordinary course of
business of such Loan Party; (d) direct obligations of the United States, or any
agency thereof, or obligations guaranteed by the United States; PROVIDED that
such obligations mature within one year from the date of acquisition thereof;
(e) acquisitions of certificates of deposit maturing within one (1) year from
the date of acquisition, bankers' acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States or any state thereof
having capital and surplus aggregating at least $100,000,000; (f) acquisitions
of commercial paper given a rating of "A2" or better by Standard & Poor's
Corporation or "P2" or better by Moody's Investors Service, Inc. and maturing
not more than ninety (90) days from the date of creation thereof; (g) Interest
Rate Protection Agreements; (h) investments in mutual funds substantially all of
the assets of which are comprised of securities of the types described in
CLAUSES (D), (E), and (F) preceding, (i) Permitted Acquisitions; (j) other
investments (including joint ventures) not listed in CLAUSE (A) through CLAUSE
(I) preceding in an amount not to exceed $5,000,000.
"REVOLVING LOANS" has the meaning specified in SECTION 2.2 and includes
each Agent Advance and Non-Ratable Loan.
"REVOLVING NOTE" means a Revolving Note made by the Borrowers payable to
the order of a Lender evidencing the obligation of the Borrowers to pay the
aggregate unpaid principal amount of the Revolving Loans made to each of the
Borrowers by such Lender (and any promissory note or notes that may be issued
from time to time in substitution, renewal, extension, replacement, or exchange
thereof whether payable to such Lender or to a different Lender in connection
with a Person becoming a Lender after the Agreement Date or otherwise)
substantially in the form of EXHIBIT A, with all of the blanks properly
completed, either as originally executed or as such promissory note may be
renewed, extended, modified, amended, supplemented, or restated from time to
time.
"SETTLEMENT" and "SETTLEMENT DATE" have the meanings specified in SECTION
2.2(J)(I).
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"SOLVENT" means when used with respect to any Person that at the time of
determination:
(a) the assets of such Person, at a fair valuation, are in excess of
the total amount of its debts (including contingent liabilities);
(b) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become absolute
and matured;
(c) it is then able and expects to be able to pay its debts
(including contingent debts and other commitments) as they mature; and
(d) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"STATED TERMINATION DATE" means September 30, 2004.
"SUBORDINATED NOTES" means those certain 12 1/4% Senior Subordinated NotEs
due 2009 issued pursuant to that certain Indenture dated as of March 30, 1999,
by and among the Parent, the guarantors named therein, and State Street Bank and
Trust Company as trustee, as amended.
"SUBSIDIARY" of a Person means any corporation, association, partnership,
joint venture, or other business entity of which more than fifty percent (50.0%)
of the voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of a Borrower.
"SUBSIDIARY GUARANTY" means a Guaranty Agreement executed by a Subsidiary
of the Parent pursuant to SECTION 6.18.
"TAXES" means any and all present or future taxes, levies, imposts,
deductions, charges, or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by the Agent's or
each Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Lender or the Agent, as the case may be,
is organized or maintains a lending office.
"TERMINATION DATE" means the earliest to occur of (a) the Stated
Termination Date, (b) the date the Total Facility is terminated either by the
Borrowers pursuant to SECTION 4.2 or by the
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Majority Lenders pursuant to SECTION 11.2, and (c) the date this Agreement is
otherwise terminated for any reason whatsoever.
"TOTAL FACILITY" has the meaning specified in SECTION 2.1.
"UCC" means the Uniform Commercial Code (or any successor statute) of the
State of Texas or of any other state the laws of which are required by Section
9-103 thereof to be applied in connection with the issue of perfection of
security interests.
"UNITED STATES" means the United States of America.
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"UNRESTRICTED SUBSIDIARY" means (i) Pentacon International Sales, Inc., a
Virgin Island corporation, (ii) in each case until it shall become a party to
this Agreement as a Loan Party, each of JIT Holdings, Inc., a Texas limited
partnership, Pentacon Properties, L.P., a Texas limited partnership, Pentacon
U.S.A., L.P., a Texas limited partnership and Pentacon Delaware, Inc., a
Delaware corporation and (iii) any Subsidiary of the Parent created after the
Closing Date and designated as an "Unrestricted Subsidiary" in accordance with
SECTION 9.20, and "UNRESTRICTED SUBSIDIARIES" means two or more of any such
Persons, collectively.
"UNUSED LETTER OF CREDIT SUBFACILITY" means an amount equal to $20,000,000
MINUS the sum of (a) the aggregate undrawn amount of all outstanding Letters of
Credit PLUS (b) the aggregate unpaid reimbursement obligations with respect to
all Letters of Credit.
"UNUSED LINE FEE" has the meaning specified in SECTION 3.5.
"WHOLLY-OWNED SUBSIDIARY" when used to determine the relationship of a
Subsidiary to a Person, means a Subsidiary all of the issued and outstanding
Capital Stock (other than directors' qualifying shares) of which shall at the
time be owned by such Person or one or more of such Person's Wholly-Owned
Subsidiaries or by such Person and one or more of such Person's Wholly-Owned
Subsidiaries.
Section 1.2 ACCOUNTING TERMS. Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied and using the same method for inventory valuation as
used in the preparation of the Financial Statements.
Section 1.3 INTERPRETIVE PROVISIONS.
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(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule, and Exhibit references
are to this Agreement unless otherwise specified.
(i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices, and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding"
and the word "through" means "to and including."
(c) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing, or interpreting the statute or regulation.
(d) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests, or measurements to regulate the same or
similar matters. All such limitations, tests, and measurements are
cumulative and shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the
Lenders and the Loan Parties, and are the products of all parties.
Accordingly, they shall not be construed against the Agent, the Lenders,
or the Loan Parties merely because of the Agent's, the Lenders' or the
Loan Parties' involvement in their preparation.
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ARTICLE 2
LOANS AND LETTERS OF CREDIT
Section 2.1 TOTAL FACILITY. Subject to all of the terms and conditions of this
Agreement, the Lenders severally agree to make available a total credit facility
of $100,000,000 (the "TOTAL FACILITY") for use by any one or more of the
Borrowers from time to time during the term of this Agreement. The Total
Facility shall be composed of a revolving line of credit consisting of Revolving
Loans and Letters of Credit up to the Borrowing Base, as described in Section
2.2 and SECTION 2.4. Subject to the terms and conditions of this Agreement, the
Borrowers may borrow, prepay, and reborrow sums available under the Total
Facility as Revolving Loans hereunder.
Section 2.2 REVOLVING LOANS.
AMOUNTS. Subject to the satisfaction of the conditions precedent set forth in
ARTICLE 10, each Lender severally, but not jointly, agrees, upon a Borrower's
request from time to time on any Business Day during the period from the Closing
Date to the Termination Date, to make revolving loans (the "REVOLVING LOANS") to
the Borrowers in amounts not to exceed (except for the Bank with respect to
Non-Ratable Loans and except for the Agent with respect to Agent Advances) such
Lender's Pro Rata Share of the Borrowing Base. The Lenders, however, in their
unanimous discretion, may elect to make Revolving Loans or issue or arrange to
have issued Letters of Credit in excess of the Availability on one or more
occasions, but if they do so, neither the Agent nor the Lenders shall be deemed
thereby to have changed the limits of the Borrowing Base or to be obligated to
exceed such limits on any other occasion. If the Aggregate Revolver Outstandings
exceed the Borrowing Base, the Lenders may refuse to make or otherwise restrict
the making of Revolving Loans as the Lenders determine until such excess has
been eliminated, subject to the Agent's authority, in its sole discretion, to
make Agent Advances pursuant to the terms of SECTION 2.2(I).
PROCEDURE FOR BORROWING.
Each Borrowing shall be made upon a Borrower's irrevocable written notice
delivered to the Agent in the form of a notice of borrowing (a "NOTICE OF
BORROWING"), which must be received by the Agent prior to 11:00 a.m. (Dallas,
Texas time) (y) three (3) Business Days prior to the requested Funding Date, in
the case of LIBOR Rate Loans and (z) no later than 11:00 a.m. on the requested
Funding Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing (which, if a LIBOR
Rate Loan, shall be in an amount that is not less
than $500,000 or an integral multiple of $100,000
in excess thereof);
(B) the requested Funding Date, which shall be a
Business Day;
(C) whether the Revolving Loans requested are to be Base
Rate Revolving Loans or LIBOR Revolving Loans;
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(D) the duration of the Interest Period if the requested
Revolving Loans are to be LIBOR Revolving Loans; and
(E) the account (as acceptable to the Agent pursuant to
SECTION 2.2(C)) to which the proceeds of such Borrowing are to
be deposited or wire transfer instructions satisfactory to the
Agent with respect to any Borrowing which is to be funded
directly to any Person not a Borrower hereunder;
PROVIDED, HOWEVER, that with respect to any Borrowing to be made on
the Closing Date (if any), such Borrowing will consist of Base Rate
Revolving Loans.
With respect to any request for Base Rate Revolving Loans, in lieu of delivering
the above-described Notice of Borrowing a Borrower may give the Agent telephonic
notice of such request by the required time, with such telephonic notice to be
confirmed in writing no later than the Business Day following the giving of such
telephonic notice but the Agent shall be entitled to rely on such telephonic
notice in making such Revolving Loans.
RELIANCE UPON AUTHORITY. On or prior to the Closing Date and thereafter prior to
any change with respect to any of the information contained in the following
CLAUSES (I) and (II), the Borrowers shall deliver to the Agent a writing setting
forth (i) the account, such account being acceptable to the Agent, to which the
Agent is authorized by the Borrowers to transfer the proceeds of the Revolving
Loans requested pursuant to this SECTION 2.2, and (ii) the names of the
individuals authorized to request Revolving Loans on behalf of each Borrower,
and shall provide the Agent with a specimen signature of each such individual.
The Agent shall be entitled to rely conclusively on any such individual's
authority to request Revolving Loans on behalf of a Borrower, the proceeds of
which are to be transferred to the account specified by the Borrowers pursuant
to the immediately preceding sentence, until the Agent receives written notice
to the contrary. The Agent shall have no duty to verify the identity of any
individual representing him or herself as one of the officers authorized by any
Borrower to make such requests on its behalf.
NO LIABILITY. The Agent shall not incur any liability to the Borrowers as a
result of acting upon any notice referred to in SECTION 2.2(B) and Section
2.2(c), which notice the Agent believes in good faith to have been given by an
officer duly authorized by a Borrower to request Revolving Loans on its behalf
or for otherwise acting in good faith under this SECTION 2.2, and the crediting
of Revolving Loans to a Borrower's deposit account, or wire transfer to such
Person as a Borrower shall direct, shall conclusively establish the obligation
of the Borrowers to repay such Revolving Loans as provided herein.
NOTICE IRREVOCABLE. Any Notice of Borrowing (or telephonic notice in lieu
thereof) made pursuant to SECTION 2.2(B) shall be irrevocable and such Borrower
shall be bound to borrow the funds requested therein in accordance therewith.
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THE AGENT'S ELECTION. Promptly after receipt of a Notice of Borrowing (or
telephonic notice in lieu thereof) pursuant to SECTION 2.2(B), the Agent shall
elect, in its discretion, (i) to have the terms of SECTION 2.2(G) apply to such
requested Borrowing, or (ii) to request the Bank to make a Non-Ratable Loan
pursuant to the terms of SECTION 2.2(H) in the amount of the requested
Borrowing; PROVIDED, HOWEVER, that if the Bank declines in its sole discretion
to make a Non-Ratable Loan pursuant to SECTION 2.2(H), the Agent shall elect to
have the terms of SECTION 2.2(G) apply to such requested Borrowing.
MAKING OF REVOLVING LOANS.
In the event that the Agent shall elect to have the terms of this SECTION 2.2(G)
apply to a requested Borrowing as described in SECTION 2.2(F), then promptly
after receipt of a Notice of Borrowing or telephonic notice pursuant to SECTION
2.2(B), the Agent shall notify the Lenders by telecopy, telephone, or other
similar form of transmission, of the requested Borrowing. Each Lender shall make
the amount of such Lender's Pro Rata Share of the requested Borrowing available
to the Agent in immediately available funds, to such account of the Agent as the
Agent may designate, not later than 2:00 p.m., (Dallas, Texas time) on the
Funding Date applicable thereto. After the Agent's receipt of the proceeds of
such Revolving Loans, upon satisfaction of the applicable conditions precedent
set forth in ARTICLE 10, the Agent shall make the proceeds of such Revolving
Loans available to the applicable Borrower or Borrowers on the applicable
Funding Date by transferring same day funds equal to the proceeds of such
Revolving Loans received by the Agent to the account designated pursuant to
SECTION 2.2(C)(I) or disbursing such funds in such other manner as the Borrower
requesting such Borrowing may direct to the Agent; PROVIDED, HOWEVER, that the
amount of Revolving Loans so made on any date shall in no event result in
Availability of less than zero Dollars ($0.00).
Unless the Agent receives notice from a Lender on or prior to the Closing Date
or, with respect to any Borrowing after the Closing Date, at least one Business
Day prior to the date of such Borrowing, that such Lender will not make
available as and when required hereunder to the Agent for the account of the
Borrowers the amount of that Lender's Pro Rata Share of the Borrowing, the Agent
may assume that each Lender has made such amount available to the Agent in
immediately available funds on the Funding Date and the Agent may (but shall not
be so required), in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent any Lender
shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
applicable Borrower or Borrowers such amount, that Lender shall on the Business
Day following such Funding Date make such amount available to the Agent,
together with interest at the Federal Funds Rate for each day during such
period. A notice by the Agent submitted to any Lender with respect to amounts
owing under this subsection shall be conclusive, absent manifest error. If such
amount is so made available, such payment to the Agent shall constitute such
Lender's Revolving Loan for all purposes of this Agreement. If such amount is
not made available to the Agent on the Business Day following the Funding Date,
the Agent will notify the Borrowers of such failure to fund and, upon demand by
the Agent, the Borrowers shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the
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Interest Rate applicable at the time to the Revolving Loans comprising such
Borrowing. The failure of any Lender to make any Revolving Loan on any Funding
Date (any such Lender, prior to the cure of such failure, being hereinafter
referred to as a "DEFAULTING Lender") shall not relieve any other Lender of any
obligation hereunder to make a Revolving Loan on such Funding Date, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Loan to be made by such other Lender on any Funding Date.
The Agent shall not be obligated to transfer to a Defaulting Lender any payments
made by any Borrower to the Agent for the Defaulting Lender's benefit; nor shall
a Defaulting Lender be entitled to the sharing of any payments hereunder.
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
the Agent. The Agent may hold and, in its discretion, re-lend to any Borrower
the amount of all such payments received or retained by it for the account of
such Defaulting Lender. Any amounts so re-lent to a Borrower shall bear interest
at the rate applicable to Base Rate Revolving Loans and for all other purposes
of this Agreement shall be treated as if they were Revolving Loans, PROVIDED,
HOWEVER, that for purposes of voting or consenting to matters with respect to
the Loan Documents and determining Pro Rata Shares, such Defaulting Lender shall
be deemed not to be a "Lender". Until a Defaulting Lender cures its failure to
fund its Pro Rata Share of any Borrowing (A) such Defaulting Lender shall not be
entitled to any portion of the Unused Line Fee and (B) the Unused Line Fee shall
accrue in favor of the Lenders which have funded their respective Pro Rata
Shares of such requested Borrowing and shall be allocated among such performing
Lenders ratably based upon their relative Commitments. This Section shall remain
effective with respect to such Lender until such time as the Defaulting Lender
shall no longer be in default of any of its obligations under this Agreement.
The terms of this Section shall not be construed to increase or otherwise affect
the Commitment of any Lender, or relieve or excuse the performance by any
Borrower of its duties and obligations hereunder.
MAKING OF NON-RATABLE LOANS.
In the event the Agent shall elect, with the consent of the Bank, to have the
terms of this SECTION 2.2(H) apply to a requested Borrowing as described in
SECTION 2.2(F), the Bank shall make a Revolving Loan in the amount of such
Borrowing (any such Revolving Loan made solely by the Bank pursuant to this
SECTION 2.2(H) being referred to as a "NON-RATABLE LOAN" and such Revolving
Loans being referred to collectively as "NON-RATABLE LOANS") available to a
Borrower on the Funding Date applicable thereto by transferring same day funds
to the account of such Borrower, designated pursuant to SECTION 2.2(C). Each
Non-Ratable Loan is a Revolving Loan hereunder and shall be subject to all the
terms and conditions applicable to other Revolving Loans except that all
payments thereon shall be payable to the Bank solely for its own account (and
for the account of the holder of any participation interest with respect to such
Revolving Loan). The Agent shall not request the Bank to make any Non-Ratable
Loan if (A) the Agent shall have received written notice from any Lender that
one or more of the applicable conditions precedent set forth in ARTICLE 10 will
not be satisfied on the requested Funding Date for the applicable Borrowing, or
(B) the requested Borrowing would exceed the Availability on such Funding Date.
The Bank shall not otherwise be required to determine whether the applicable
conditions precedent set forth in ARTICLE 10 have been satisfied or the
requested Borrowing would
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exceed the Availability on the Funding Date applicable thereto prior to making,
in its sole discretion, any Non-Ratable Loan.
The Non-Ratable Loans shall be secured by the Agent's Liens in and to the
Collateral, shall constitute Revolving Loans and Obligations hereunder, and
shall bear interest at the rate applicable to the Revolving Loans from time to
time.
AGENT ADVANCES.
Subject to the limitations set forth in the provisos contained in this SECTION
2.2(I), the Agent is hereby authorized by the Borrowers and the Lenders, from
time to time in the Agent's sole discretion, (A) after the occurrence of a
Default or an Event of Default, or (B) at any time that any of the other
applicable conditions precedent set forth in ARTICLE 10 have not been satisfied,
to make Base Rate Revolving Loans to any Borrower on behalf of the Lenders which
the Agent, in its reasonable business judgment, deems necessary or desirable (1)
to preserve or protect the Collateral, or any portion thereof, (2) to enhance
the likelihood of, or maximize the amount of, repayment of the Loans and other
Obligations, or (3) to pay any other amount chargeable to the Borrowers pursuant
to the terms of this Agreement, including costs, fees, and expenses as described
in SECTION 15.7 (any of the advances described in this SECTION 2.2(I) being
hereinafter referred to as "AGENT ADVANCES"); PROVIDED that the Required Lenders
may at any time revoke the Agent's authorization contained in this Section
2.2(i) to make Agent Advances, any such revocation to be in writing and to
become effective prospectively upon the Agent's receipt thereof;
The Agent Advances shall be repayable on demand and secured by the Agent's Liens
in and to the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to Base Rate Revolving
Loans from time to time. The Agent shall notify the Borrowers and each Lender in
writing of each such Agent Advance; PROVIDED that the failure of the Agent to
provide any such notice to the Borrowers or any Lender shall not affect the
Borrowers' liability for or obligation to repay such Agent Advances or result in
any liability or constitute the breach of any duty or obligation of the Agent
hereunder.
SETTLEMENT. Except as may be specifically provided otherwise by this Section
2.2, it is agreed that each Lender's funded portion of the Revolving Loans is
intended by the Lenders to be equal at all times to such Lender's Pro Rata Share
of the outstanding Revolving Loans. Notwithstanding such agreement, the Agent,
the Bank, and the other Lenders agree (which agreement shall not be for the
benefit of or enforceable by the Borrowers) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Revolving Loans, the Non-Ratable Loans, and the Agent Advances
shall take place on a periodic basis in accordance with the following
provisions:
The Agent shall request settlement (a "SETTLEMENT") with the Lenders on at least
a weekly basis, or on a more frequent basis if so determined by the Agent, (A)
on behalf of the Bank, with respect to each outstanding Non-Ratable Loan, (B)
for itself, with respect to each Agent Advance, and (C) with respect to
collections received, in each case, by notifying the Lenders of
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such requested Settlement by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 11:00 a.m. (Dallas,
Texas time) on the date of such requested Settlement (the "SETTLEMENT DATE").
Each Lender (other than the Bank, in the case of Non-Ratable Loans, and the
Agent, in the case of Agent Advances) shall make the amount of such Lender's Pro
Rata Share of the outstanding principal amount of the Non-Ratable Loans and
Agent Advances with respect to which Settlement is requested available to the
Agent, to such account of the Agent as the Agent may designate, not later than
2:00 p.m. (Dallas, Texas time), on the Settlement Date applicable thereto, which
may occur before or after the occurrence or during the continuation of a Default
or an Event of Default and whether or not the applicable conditions precedent
set forth in ARTICLE 10 have then been satisfied. Such amounts made available to
the Agent shall be applied against the amounts of the applicable Non-Ratable
Loan or Agent Advance and, together with the portion of such Non-Ratable Loan or
Agent Advance representing the Bank's Pro Rata Share thereof, shall constitute
Revolving Loans of the Lenders, respectively. If any such amount is not made
available to the Agent by any Lender on the Settlement Date applicable thereto,
the Agent shall be entitled to recover such amount on demand from such Lender
together with interest thereon at the Federal Funds Rate for the first three (3)
days from and after the Settlement Date and thereafter at the Interest Rate then
applicable to the Revolving Loans.
Notwithstanding the foregoing, not more than one (1) Business Day after demand
is made by the Agent (whether before or after the occurrence of a Default or an
Event of Default and regardless of whether the Agent has requested a Settlement
with respect to a Non-Ratable Loan or Agent Advance), each other Lender (A)
shall irrevocably and unconditionally purchase and receive from the Bank or the
Agent, as applicable, without recourse or warranty, an undivided interest and
participation in such Non-Ratable Loan or Agent Advance equal to such Lender's
Pro Rata Share of such Non-Ratable Loan or Agent Advance and (B) if Settlement
has not previously occurred with respect to such Non-Ratable Loans or Agent
Advances, upon demand by the Bank or the Agent, as applicable, shall pay to the
Bank or the Agent, as applicable, as the purchase price of such participation an
amount equal to one-hundred percent (100%) of such Lender's Pro Rata Share of
such Non-Ratable Loans or Agent Advances. If such amount is not in fact made
available to the Agent by any Lender, the Agent shall be entitled to recover
such amount on demand from such Lender together with interest thereon at the
Federal Funds Rate for the first three (3) days from and after such demand and
thereafter at the Interest Rate then applicable to Base Rate Revolving Loans.
From and after the date, if any, on which any Lender purchases an undivided
interest and participation in any Non-Ratable Loan or Agent Advance pursuant to
CLAUSE (II) preceding, the Agent shall promptly distribute to such Lender at
such address as such Lender may request in writing, such Lender's Pro Rata Share
of all payments of principal and interest and all proceeds of Collateral
received by the Agent in respect of such Non-Ratable Loan or Agent Advance.
Between Settlement Dates, the Agent, to the extent no Agent Advances or
Non-Ratable Loans are outstanding, may pay over to the Bank any payments
received by the Agent, which in accordance with the terms of this Agreement
would be applied to the reduction of the Revolving Loans, for application to the
Bank's Revolving Loans. If, as of any Settlement Date, collections
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received since the then immediately preceding Settlement Date have been applied
to the Bank's Revolving Loans (other than to Non-Ratable Loans or Agent Advances
in which such Lender has not yet funded its purchase of a participation pursuant
to SECTION 2.2(J)(II)), as provided for in the previous sentence, the Bank shall
pay to the Agent for the accounts of the Lenders, to be applied to the
outstanding Revolving Loans of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement Date, its Pro
Rata Share of the Revolving Loans. During the period between Settlement Dates,
the Bank with respect to Non-Ratable Loans, the Agent with respect to Agent
Advances, and each Lender with respect to the Revolving Loans other than
Non-Ratable Loans and Agent Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement on the actual average
daily amount of funds employed by the Bank, the Agent and the other Lenders.
NOTATION. The Agent shall record on its books the principal amount of the
Revolving Loans owing to each Lender, including the Non-Ratable Loans owing to
the Bank, and the Agent Advances owing to the Agent, from time to time. In
addition, each Lender is authorized, at such Lender's option, to note the date
and amount of each payment or prepayment of principal of such Lender's Revolving
Loans in its books and records, including computer records, such books and
records constituting presumptive evidence, absent manifest error, of the
accuracy of the information contained therein.
LENDERS' FAILURE TO PERFORM. All Revolving Loans (other than Non-Ratable Loans
and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Revolving Loans hereunder, nor shall any Commitment of any Lender be
increased or decreased as a result of any failure by any other Lender to perform
its obligation to make any Revolving Loans hereunder, (ii) no failure by any
Lender to perform its obligation to make any Revolving Loans hereunder shall
excuse any other Lender from its obligation to make any Revolving Loans
hereunder, and (iii) the obligations of each Lender hereunder shall be several,
not joint and several.
REVOLVING NOTES. The Borrowers shall execute and deliver to the Agent, on behalf
of each Lender, effective as of the Closing Date and on the date of the
assignment of any portion of any Lender's Revolving Loans, a Revolving Note, to
evidence such Lender's Revolving Loans, in the principal amount equal to the
amount of such Lender's Commitment with respect to the Revolving Loans.
Section 2.3 RESERVED.
Section 2.4 LETTERS OF CREDIT.
AGREEMENT TO ISSUE OR CAUSE TO ISSUE. Subject to the terms and conditions of
this Agreement, and in reliance upon the representations and warranties of the
Borrowers herein set forth, the Agent agrees (i) to issue or cause to be issued
for the account of any of the Borrowers (whether one or more) one or more
commercial/documentary or standby letters of credit ("LETTERS OF CREDIT") and
(ii) to provide credit support or other enhancement to a Letter of Credit Issuer
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acceptable to the Agent, which issues Letters of Credit for the account of a
Borrower (any such credit support or enhancement being herein referred to as a
"CREDIT SUPPORT") in accordance with this SECTION 2.4 from time to time during
the term of this Agreement.
AMOUNTS; OUTSIDE EXPIRATION DATE. The Agent shall not have any obligation to
take steps to issue or cause to be issued any Letter of Credit or to provide
Credit Support for any Letter of Credit at any time if: (i) the maximum undrawn
amount of the requested Letter of Credit is greater than the Unused Letter of
Credit Subfacility at such time; (ii) after taking into account the maximum
undrawn amount of the requested Letter of Credit, (PROVIDED that the requesting
Borrower shall, to the Agent's satisfaction, have made provision for all
commissions, fees, and charges due from such Borrower in connection with the
opening of the requested Letter of Credit) the Availability at such time would
be less than zero dollars ($0.00); or (iii) such Letter of Credit has an
expiration date later than thirty (30) days prior to the Stated Termination Date
or more than twelve (12) months from the date of issuance.
OTHER CONDITIONS. In addition to being subject to the satisfaction of the
applicable conditions precedent contained in ARTICLE 10, the obligation of the
Agent to issue or to cause to be issued any Letter of Credit or to provide
Credit Support for any Letter of Credit is subject to the following conditions
precedent having been satisfied in a manner satisfactory to the Agent:
The Letter of Credit Issuer shall have received, at such times and in such
manner as such Letter of Credit Issuer may prescribe, an application in form and
substance satisfactory to such Letter of Credit Issuer and the Agent for the
issuance of the Letter of Credit and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed Letter of
Credit shall be satisfactory to the Agent and the Letter of Credit Issuer
(PROVIDED that in the event any term of such application or any other document
is inconsistent with the terms of this Agreement, then the terms of this
Agreement shall be controlling); and
As of the date of issuance, no order of any court, arbitrator, or Governmental
Authority shall purport by its terms to enjoin or restrain money center banks
generally from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit, and no law, rule, or regulation applicable to money
center banks generally and no request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed Letter of
Credit Issuer refrain from, the issuance of letters of credit generally or the
issuance of such Letters of Credit.
ISSUANCE OF LETTERS OF CREDIT.
REQUEST FOR ISSUANCE. Any Borrower that wishes to cause the issuance of a Letter
of Credit shall give the Agent two (2) Business Days prior written notice of the
request for the issuance of such Letter of Credit. Such notice shall be
irrevocable and shall specify the original face amount of the Letter of Credit
requested, the effective date (which date shall be a Business Day) of issuance
of such requested Letter of Credit, whether such Letter of Credit may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit is to expire (which date shall be a Business Day), the purpose for which
such Letter of Credit is to be issued, and the beneficiary
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of the requested Letter of Credit and, in addition, shall include as an
attachment the proposed form of the Letter of Credit.
RESPONSIBILITIES OF THE AGENT; ISSUANCE. The Agent shall determine, as of the
Business Day immediately preceding the requested effective date of issuance of
the Letter of Credit set forth in the notice from a Borrower pursuant to SECTION
2.4(D)(I), (A) the amount of the applicable Unused Letter of Credit Subfacility
and (B) the Availability as of such date. If (Y) the undrawn amount of the
requested Letter of Credit is not greater than the Unused Letter of Credit
Subfacility, and (Z) the issuance of such requested Letter of Credit would not
exceed the Availability (PROVIDED that the requesting Borrower shall, to the
Agent's satisfaction, have made provision for all commissions, fees, and charges
due from such Borrower in connection with the opening of the requested Letter of
Credit) the Agent shall, so long as the other conditions hereof are met, cause
the Letter of Credit Issuer to issue the requested Letter of Credit on such
requested effective date of issuance.
NOTICE OF ISSUANCE. On each Settlement Date, the Agent shall give notice to each
Lender of the issuance of all Letters of Credit issued since the last Settlement
Date.
NO EXTENSIONS OR AMENDMENT. The Agent shall not be obligated to cause the Letter
of Credit Issuer to extend or amend any Letter of Credit issued pursuant hereto
unless the requirements of this SECTION 2.4 are met as though a new Letter of
Credit were being requested and issued. With respect to any Letter of Credit
which contains any "evergreen" or automatic renewal provision, each Lender shall
be deemed to have consented to any such extension or renewal unless any such
Lender shall have provided to the Agent, not less than thirty (30) days prior to
the last date on which the applicable issuer can in accordance with the terms of
the applicable Letter of Credit decline to extend or renew such Letter of
Credit, written notice that it declines to consent to any such extension or
renewal; PROVIDED, that if all of the requirements of this SECTION 2.4 are met
and no Default or Event of Default exists, no Lender shall decline to consent to
any such extension or renewal.
PAYMENTS PURSUANT TO LETTERS OF CREDIT.
PAYMENT OF LETTER OF CREDIT OBLIGATIONS. The Borrower for whose account any
Letter of Credit is issued agrees immediately upon demand to reimburse the
Letter of Credit Issuer for any draw under any such Letter of Credit and the
Agent for the account of the Lenders upon any payment pursuant to any related
Credit Support, and to pay the Letter of Credit Issuer the amount of all other
obligations and other amounts payable to such Letter of Credit Issuer under or
in connection with any Letter of Credit immediately when due, irrespective of
any claim, setoff, defense, or other right which such Borrower may have at any
time against such issuer or any other Person.
REVOLVING LOANS TO SATISFY REIMBURSEMENT OBLIGATIONS. In the event that the
Letter of Credit Issuer of any Letter of Credit honors a draw under such Letter
of Credit or the Agent shall have made any payment pursuant to any Credit
Support and the Borrower for whose account such Letter of Credit was issued
shall not have repaid such amount to the Letter of Credit Issuer of
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such Letter of Credit or the Agent, as applicable, pursuant to SECTION
2.4(E)(I), the Agent shall, upon receiving notice of such failure, notify each
Lender of such failure, and each Lender shall unconditionally pay to the Agent,
for the account of the Letter of Credit Issuer or the Agent, as applicable, as
and when provided hereinbelow, an amount equal to such Lender's Pro Rata Share
of the amount of such payment in Dollars and in same day funds. If the Agent so
notifies the Lenders prior to 11:00 a.m. (Dallas, Texas time) on any Business
Day, each Lender shall make available to the Agent the amount of such payment,
as provided in the immediately preceding sentence, on such Business Day. Such
amounts paid by the Lenders to the Agent shall constitute Revolving Loans which
shall be deemed to have been requested by such Borrower pursuant to SECTION 2.2
as set forth in SECTION 4.7.
EXISTING LETTERS OF CREDIT. All amounts payable by any Borrower in respect of
any Existing Letter of Credit are hereby reaffirmed and continued in full force
and effect. All obligations of any Borrower for payment in respect of any
obligations in respect of Existing Letters of Credit, as provided by the
Original Agreement or the other Original Loan Documents, are hereby renewed,
continued, and reaffirmed under the terms of this Agreement and the other Loan
Documents.
PARTICIPATIONS.
PURCHASE OF PARTICIPATIONS. Immediately upon issuance of any Letter of Credit in
accordance with SECTION 2.4(D), each Lender shall be deemed to have irrevocably
and unconditionally purchased and received without recourse or warranty, an
undivided interest and participation equal to such Lender's Pro Rata Share of
the face amount of such Letter of Credit or the Credit Support provided through
the Agent to the Letter of Credit Issuer, if not the Agent, in connection with
the issuance of such Letter of Credit (including all obligations with respect
thereto of the Borrower for whose account such Letter of Credit was issued, with
respect thereto, and any security therefor or guaranty pertaining thereto).
SHARING OF REIMBURSEMENT OBLIGATION PAYMENTS. Whenever the Agent receives a
payment from a Borrower on account of reimbursement obligations in respect of a
Letter of Credit or Credit Support as to which the Agent has previously received
for the account of the Letter of Credit Issuer thereof payment from a Lender
pursuant to SECTION 2.4(E)(II), the Agent shall promptly pay to such Lender such
Lender's Pro Rata Share of such payment from such Borrower in Dollars. Each such
payment shall be made by the Agent on the Business Day on which the Agent
receives immediately available funds paid to such Person pursuant to the
immediately preceding sentence, if received prior to 2:00 p.m. (Dallas, Texas
time) on such Business Day and otherwise on the next succeeding Business Day.
DOCUMENTATION. Upon the request of any Lender, the Agent shall furnish to such
Lender copies of any Letter of Credit or Credit Support for any Letter of
Credit, reimbursement agreements executed in connection therewith, application
for any Letter of Credit or Credit Support for any Letter of Credit provided
through the Agent in connection with the issuance of any Letter of Credit, and
such other documentation as may reasonably be requested by such Lender.
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OBLIGATIONS IRREVOCABLE. The obligations of each Lender to make payments to the
Agent with respect to any Letter of Credit or with respect to any Credit Support
for any Letter of Credit, and the obligations of the Borrower for whose account
such Letter of Credit or Credit Support was issued to make payments to the
Agent, for the account of the Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever, including any of the following
circumstances:
any lack of validity or enforceability of this Agreement or any of the other
Loan Documents;
the existence of any claim, setoff, defense, or other right which such Borrower
may have at any time against a beneficiary named in a Letter of Credit or any
transferee of any Letter of Credit (or any Person for whom any such transferee
may be acting), any Lender, the Agent, the issuer of such Letter of Credit, or
any other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein, or any unrelated transactions
(including any underlying transactions between such Borrower or any other Person
and the beneficiary named in any Letter of Credit);
any draft, certificate, or any other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid, or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
the surrender or impairment of any security for the performance or observance of
any of the terms of any of the Loan Documents; or
the occurrence of any Default or Event of Default.
RECOVERY OR AVOIDANCE OF PAYMENTS. In the event any payment by or on behalf of
any Borrower received by the Agent with respect to any Letter of Credit or
Credit Support provided for any Letter of Credit and distributed by the Agent to
the Lenders on account of their respective participations therein is thereafter
set aside, avoided, or recovered from the Agent in connection with any
receivership, liquidation, or bankruptcy proceeding, the Lenders shall, upon
demand by the Agent, pay to the Agent their respective Pro Rata Shares of such
amount set aside, avoided, or recovered, together with interest at the rate
required to be paid by the Agent upon the amount required to be repaid by it.
COMPENSATION FOR LETTERS OF CREDIT AND CREDIT SUPPORT.
LETTER OF CREDIT FEE. Each Borrower for whose account any Letter of Credit or
Credit Support for any Letter of Credit is issued agrees to pay to the Agent
with respect to each such Letter of Credit or Credit Support, for the account of
the Lenders, the Letter of Credit Fee specified in, and in accordance with the
terms of, SECTION 3.6.
ISSUER FEES AND CHARGES. Each Borrower for whose account any Letter of Credit is
issued shall pay to the Letter of Credit Issuer of any such Letter of Credit, or
to the Agent for the account of the Letter of Credit Issuer of any such Letter
of Credit, solely for such Letter of Credit Issuer's
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account, such fees and other charges as are charged by such Letter of Credit
Issuer for letters of credit issued by it, including its standard fees for
issuing, administering, amending, renewing, paying, and canceling letters of
credit and all other fees associated with issuing or servicing letters of
credit, as and when assessed.
INDEMNIFICATION; EXONERATION; POWER OF ATTORNEY
INDEMNIFICATION. IN ADDITION TO AMOUNTS PAYABLE AS ELSEWHERE PROVIDED IN THIS
SECTION 2.4, EACH LOAN PARTY HEREBY AGREES TO PROTECT, INDEMNIFY, PAY, AND SAVE
THE LENDERS AND THE AGENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS,
LIABILITIES, DAMAGES, LOSSES, COSTS, CHARGES, AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) OTHER THAN ANY SUCH CLAIMS, DEMANDS, LIABILITIES, DAMAGES,
LOSSES, COSTS, CHARGES, AND EXPENSES RESULTING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH LENDER OR THE AGENT, WHICH ANY LENDER OR THE AGENT
(OTHER THAN THE AGENT IN ITS CAPACITY AS THE LETTER OF CREDIT ISSUER) MAY INCUR
OR BE SUBJECT TO AS A CONSEQUENCE, DIRECT OR INDIRECT, OF THE ISSUANCE OF ANY
LETTER OF CREDIT OR THE PROVISION OF ANY CREDIT SUPPORT FOR ANY LETTER OF
CREDIT. THE AGREEMENT IN THIS SECTION 2.4(I)(I) SHALL SURVIVE PAYMENT OF ALL
OBLIGATIONS. NOTHING CONTAINED IN THIS AGREEMENT IS INTENDED TO LIMIT ANY
BORROWER'S RIGHTS, IF ANY, WITH RESPECT TO THE LETTER OF CREDIT ISSUER WHICH
ARISE BY OPERATION OF LAW OR THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS, AS MOST RECENTLY PUBLISHED BY THE INTERNATIONAL CHAMBER OF COMMERCE AT
THE TIME ANY LETTER OF CREDIT IS ISSUED (IF AND TO THE EXTENT APPLICABLE), OR AS
A RESULT OF THE LETTER OF CREDIT APPLICATION AND RELATED DOCUMENTS EXECUTED BY
AND BETWEEN ANY BORROWER AND THE LETTER OF CREDIT ISSUER.
ASSUMPTION OF RISK BY THE LOAN PARTIES. As among the Loan Parties, the Lenders,
and the Agent, the Loan Parties assume all risks of the acts and omissions of,
or misuse of any of the Letters of Credit by, the respective beneficiaries of
such Letters of Credit. In furtherance and not in limitation of the foregoing,
the Lenders and the Agent shall not be responsible for: (A) the form, validity,
sufficiency, accuracy, genuineness, or legal effect of any document submitted by
any Person in connection with the application for and issuance of and
presentation of drafts with respect to any of the Letters of Credit, even if it
should prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent, or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (C) the
failure of the beneficiary of any Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (D) errors,
omissions, interruptions, or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex, or otherwise, whether or not they be in
cipher; (E) errors in interpretation of technical terms; (F) any loss or delay
in the transmission or otherwise of any document required in order
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make a drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; or (H) any consequences arising from causes
beyond the control of the Lenders or the Agent, including any act or omission,
whether rightful or wrongful, of any present or future DE JURE or DE FACTO
Governmental Authority. None of the foregoing shall affect, impair, or prevent
the vesting of any rights or powers of the Agent or any Lender under this
SECTION 2.4(I).
EXONERATION. In furtherance and extension, and not in limitation, of the
specific provisions set forth above, any action taken or omitted by the Agent or
any Lender under or in connection with any of the Letters of Credit or any
related certificates, if taken or omitted in good faith, shall not put the Agent
or any Lender under any resulting liability to any Borrower or relieve any
Borrower of any of its obligations hereunder to any such Person.
INDEMNIFICATION BY LENDERS. The Lenders agree to indemnify the Letter of Credit
Issuer (to the extent not reimbursed by the Borrowers and without limiting the
obligations of the Borrowers hereunder) ratably in accordance with their
respective Pro Rata Shares, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees), or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by, or asserted against the Letter of Credit Issuer in any
way relating to or arising out of any Letter of Credit or the transactions
contemplated thereby or any action taken or omitted by the Letter of Credit
Issuer under any Letter of Credit or any Loan Document in connection therewith;
PROVIDED that no Lender shall be liable for any of the foregoing to the extent
it arises from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to
reimburse the Letter of Credit Issuer promptly upon demand for its Pro Rata
Share of any costs or expenses payable by any Borrower to the Letter of Credit
Issuer, to the extent that the Letter of Credit Issuer is not promptly
reimbursed for such costs and expenses by a Loan Party. The agreement contained
in this section shall survive payment in full of all Obligations.
POWER OF ATTORNEY. In connection with all Inventory financed by Letters of
Credit, each Borrower hereby appoints the Agent, or the Agent's designee, as its
attorney, with full power and authority: (A) to sign and/or endorse such
Borrower's name upon any warehouse or other receipts; (B) to sign such
Borrower's name on bills of lading and other negotiable and non-negotiable
documents; (C) to clear Inventory through customs in the Agent's or such
Borrower's name, and to sign and deliver to customs officials powers of attorney
in such Borrower's name for such purpose; (D) to complete in such Borrower's or
the Agent's name, any order, sale, or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof; and (E) to
do such other acts and things as are necessary in order to enable the Agent to
obtain possession or control of the Inventory and to obtain payment of the
Obligations. Neither the Agent nor its designee, as such Borrower's attorney,
will be liable for any acts or omissions, nor for any error of judgement or
mistakes of fact or law other than for its gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable until all
Obligations have been paid and satisfied.
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ACCOUNT PARTY. Each Borrower hereby authorizes and directs any Letter of Credit
Issuer to name any Loan Party as the "Account Party" therein and to deliver to
the Agent all instruments, documents, and other writings and property received
by the Letter of Credit Issuer pursuant to the Letter of Credit, and to accept
and rely upon the Agent's instructions and agreements with respect to all
matters arising in connection with the Letter of Credit or the application
therefor.
CONTROL OF INVENTORY. In connection with all Inventory financed by Letters of
Credit, each Borrower for whose account such Letter of Credit was issued will,
at the Agent's request, instruct all suppliers, carriers, forwarders,
warehouses, or others receiving or holding cash, checks, Inventory, documents,
or instruments in which the Agent holds a security interest to deliver them to
the Agent and/or subject to the Agent's order, and if they shall come into such
Borrower's possession, to deliver them, upon request, to the Agent in their
original form. Each such Borrower shall also, at the Agent's request when any
Event of Default exists, designate the Agent as the consignee on all bills of
lading and other negotiable and non-negotiable documents.
SUPPORTING LETTER OF CREDIT; CASH COLLATERAL. If, notwithstanding the provisions
of SECTION 2.4(B) and SECTION 12.1 any Letter of Credit or Credit Support for
any Letter of Credit is outstanding upon the termination of this Agreement, then
upon such termination the Borrower for whose account such Letter of Credit or
such Credit Support was issued shall deposit with the Agent, for the ratable
benefit of the Agent and the Lenders, with respect to each Letter of Credit or
such Credit Support then outstanding, as the Majority Lenders in their
discretion shall specify, either (i) a standby letter of credit (a "SUPPORTING
LETTER OF CREDIT") in form and substance satisfactory to the Agent, issued by an
issuer satisfactory to the Agent in an amount equal to the greatest amount for
which such Letter of Credit or such Credit Support may be drawn plus any fees
and expenses associated with such Letter of Credit or such Credit Support, under
which Supporting Letter of Credit the Agent is entitled to draw amounts
necessary to reimburse the Agent and the Lenders for payments to be made by the
Agent and the Lenders under such Letter of Credit or such Credit Support and any
fees and expenses associated with such Letter of Credit or such Credit Support,
or (ii) cash in amounts necessary to reimburse the Agent and the Lenders for
payments made by the Agent or the Lenders under such Letter of Credit or such
Credit Support and any fees and expenses associated with such Letter of Credit
or such Credit Support. Such Supporting Letter of Credit or deposit of cash
shall be held by the Agent, for the ratable benefit of the Agent and the
Lenders, as security for, and to provide for the payment of, the aggregate
undrawn amount of such Letters of Credit or such Credit Support remaining
outstanding and shall be returned to the applicable Borrower upon the expiration
of such Letter of Credit or such Credit Support, PROVIDED that no Default or
Event of Default exists.
Section 2.5 EXISTING LETTERS OF CREDIT. On and after the Closing Date, the
Existing Letters of Credit, if any, and related payment obligations (a) shall be
deemed to have been issued under, and the payment obligations in respect thereof
shall be governed by and have the benefits of, this Agreement and the other Loan
Documents, PROVIDED that in the event any provision of any agreement between
such Borrower and the issuing bank of any Existing Letter of Credit is
inconsistent with this Agreement, the terms of this Agreement shall control and
(b) shall be deemed included as a Letter of Credit under the terms of this
Agreement.
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Section 2.6 BANK PRODUCTS. Any Loan Party may request and the Bank may, in its
sole and absolute discretion, arrange for such Loan Party to obtain from the
Bank or the Bank's Affiliates Bank Products although no Loan Party is required
to do so. Each Borrower agrees to indemnify and hold the Bank and the Lenders
harmless from any and all obligations now or hereafter owing to any other Person
by the Bank or any of the Lenders or the Bank's Affiliates arising from or
related to such any Loan Party's use of Bank Products. Each Borrower
acknowledges and agrees that the obtaining of Bank Products from the Bank or the
Bank's Affiliates (a) is in the sole and absolute discretion of the Bank or the
Bank's Affiliates, and (b) is subject to all rules and regulations of the Bank
or the Bank's Affiliates.
ARTICLE 3
INTEREST AND FEES
Section 3.1 INTEREST.
INTEREST RATES. All outstanding Obligations shall bear interest on the unpaid
principal amount thereof (including, to the extent permitted by law, on accrued
interest thereon not paid when due) from the date made until paid in full in
cash at a rate determined by reference to the Base Rate or the LIBOR Rate and
SECTIONS 3.1(A)(I) or (II), as applicable, but not to exceed the Maximum Rate
described in SECTION 3.3. Subject to the provisions of SECTION 3.2, any of the
Loans may be converted into, or continued as, Base Rate Loans or LIBOR Rate
Loans in the manner provided in SECTION 3.2. If at any time Loans are
outstanding with respect to which notice has not been delivered to the Agent in
accordance with the terms of this Agreement specifying the basis for determining
the interest rate applicable thereto, then those Loans shall be Base Rate Loans
and shall bear interest at a rate determined by reference to the Base Rate until
notice to the contrary has been given to the Agent in accordance with this
Agreement and such notice has become effective. Except as otherwise provided
herein, the outstanding Obligations shall bear interest as follows:
For all Base Rate Revolving Loans and other Obligations (other than LIBOR Rate
Loans) at a fluctuating per annum rate equal to the lesser of (A) the Base Rate
plus the Applicable Margin or (B) the Maximum Rate; and
For all LIBOR Revolving Loans at a per annum rate equal to the lesser of (A) the
LIBOR Rate PLUS the Applicable Margin or (B) the Maximum Rate.
Each change in the Base Rate shall be reflected in the interest rate
described in CLAUSE (I) above as of the effective date of such change.
Subject to SECTION 3.8, all interest charges shall be computed on the
basis of a year of 360 days and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year).
Interest accrued on all Loans will be payable in arrears (A) with respect
to Base Rate Loans, on the next Business Day following the last day of
each calendar month and (B) with respect to LIBOR Rate Loans, on the last
day of each corresponding Interest Period.
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DEFAULT RATE. If any Default or Event of Default occurs and is continuing and
the Majority Lenders in their discretion so elect, then, while any such Default
or Event of Default is outstanding, all of the Obligations shall bear interest
at a rate per annum equal to the lesser of (i) the Default Rate applicable
thereto or (ii) the Maximum Rate.
Section 3.2 CONVERSION AND CONTINUATION ELECTIONS.
A Borrower may, upon irrevocable written notice to the Agent in accordance with
SECTION 3.2(B):
elect, as of any Business Day, in the case of Base Rate Loans to convert any
such Loans (or any part thereof in an amount not less than $500,000, or that is
in an integral multiple of $100,000 in excess thereof) into LIBOR Rate Loans; or
elect, as of the last day of the applicable Interest Period, to continue any
LIBOR Rate Loans having Interest Periods expiring on such day (or any part
thereof in an amount not less than $500,000, or that is in an integral multiple
of $100,000 in excess thereof);
PROVIDED, that if at any time the aggregate amount of LIBOR Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion
of part thereof to be less than $500,000, such LIBOR Rate Loans shall
automatically convert into Base Rate Loans.
The Borrowers shall deliver a notice of conversion/continuation ("NOTICE OF
CONVERSION/CONTINUATION") to be received by the Agent not later than 11:00 a.m.
(Dallas, Texas time) at least three (3) Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as LIBOR Rate Loans and specifying:
the proposed Conversion/Continuation Date;
the aggregate amount of Loans to be converted or renewed;
the type of Loans resulting from the proposed conversion or continuation; and
the duration of the requested Interest Period.
If upon the expiration of any Interest Period applicable to LIBOR Rate Loans,
the Borrowers have failed to select timely a new Interest Period to be
applicable to LIBOR Rate Loans or if any Default or Event of Default then
exists, the Borrowers shall be deemed to have elected to convert such LIBOR Rate
Loans into Base Rate Loans effective as of the expiration date of such Interest
Period.
The Agent will promptly notify each Lender of its receipt of a Notice of
Conversion/Continuation. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the Notice of Conversion/Continuation was given held by each
Lender.
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During the existence of a Default or Event of Default, the Borrowers may not
elect to have a Loan converted into or continued as a LIBOR Rate Loan.
After giving effect to any conversion or continuation of Loans, there may not be
more than six (6) different Interest Periods in effect hereunder.
Section 3.3 MAXIMUM INTEREST RATE. If the Interest Rate, absent such limitation,
would have exceeded the Maximum Rate, then the Interest Rate shall be the
Maximum Rate, and, if in the future, the Interest Rate would otherwise be less
than the Maximum Rate, then the Interest Rate shall remain at the Maximum Rate
until such time as the amount of interest paid hereunder equals the amount of
interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations, the
total amount of interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would, but for this SECTION 3.3,
have been paid or accrued if the Interest Rate otherwise set forth in this
Agreement had at all times been in effect, then the Borrowers shall, to the
extent permitted by applicable law, pay the Agent, for the account of the
Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of
interest which would have been paid or accrued if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have been paid
or accrued had the interest rate otherwise set forth in this Agreement, at all
times, been in effect over (b) the amount of interest actually paid or accrued
under this Agreement.
Section 3.4 RESERVED.
Section 3.5 UNUSED LINE FEE. Until the Loans have been paid in full and the
Agreement terminated, the Borrowers agree to pay, on the first day of each month
and on the Termination Date, to the Agent, for the account of the Lenders, in
accordance with their respective Pro Rata Shares, an unused line fee (the
"UNUSED LINE FEE") equal to the sum of (a) three-eighths of one percent (0.375%)
per annum times the amount by which the Borrowing Base exceeded the sum of the
average daily outstanding amount of Revolving Loans and the average daily
undrawn amount of all outstanding Letters of Credit, PLUS (b) an amount, not
less than zero, equal to one-quarter of one percent (0.25%) per annum times the
remainder of the Commitments MINUS the amount of the Borrowing Base, each such
component of the Unused Line Fee calculated for the immediately preceding month
or shorter period if calculated on the Termination Date. Subject to SECTION 3.8,
the Unused Line Fee shall be computed on the basis of a 360-day year for the
actual number of days elapsed. For purposes of calculating the Unused Line Fee
pursuant to this SECTION 3.5, any payment received by the Agent in immediately
available funds (if received prior to 2:00 p.m. Dallas, Texas time) shall be
deemed to be credited to the Borrowers' Loan Account on the date such payment is
received by the Agent and all other payments shall be deemed to be credited to
the Borrowers' Loan Account on the Business Day following receipt thereof.
Section 3.6 LETTER OF CREDIT FEE. The Borrowers agree to pay to the Agent, for
the account of the Lenders, in accordance with their respective Pro Rata Shares,
for each Letter of Credit, a fee (the "LETTER OF CREDIT FEE") equal to the
Letter of Credit Fee Percentage per annum of the
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undrawn amount of each Letter of Credit, PLUS all out-of-pocket costs, fees, and
expenses incurred by the Agent in connection with the application for,
processing of, issuance of, or amendment to any Letter of Credit, which costs,
fees, and expenses could include a "fronting fee" of one-eighth of one percent
(0.125%) per annum payable to such issuer. The Letter of Credit Fee shall be
payable monthly in arrears on the first day of each month following any month in
which a Letter of Credit was issued and/or in which a Letter of Credit remains
outstanding. The Letter of Credit Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed.
Section 3.7 OTHER FEES. The Borrowers agree to pay all other fees and expenses
set forth in the certain letter agreement, dated as of the Closing Date among
the Agent and the Borrowers.
Section 3.8 INTEREST LIMITATION. The Agent, the Lenders and the Loan Parties
each acknowledges, agrees and declares that it is its intention to expressly
comply with all Requirements of Law in respect of limitations on the amount or
rate of interest that can legally be contracted for, charged or received under
or in connection with the Loan Documents. Notwithstanding anything to the
contrary contained in any Loan Document (even if any such provision expressly
declares that it controls all other provision of the Loan Documents), in no
contingency or event whatsoever shall the amount of interest (including the
aggregate of all charges, fees, benefits or other compensation which constitutes
interest under any Requirement of Law) under the Loan Documents paid by any
Borrower, received by the Agent, the Letter of Credit Issuer or any Lender,
agreed to be paid by any Borrower, or requested or demanded to be paid by the
Agent, the Letter of Credit Issuer or any Lender, exceed the Maximum Rate, and
all provisions of the Loan Documents in respect of the contracting for,
charging, or receiving compensation for the use, forbearance, or detention of
money shall be limited as provided by this SECTION 3.8. In the event any such
interest is paid to the Agent, the Letter of Credit Issuer or any Lender by the
Borrowers, or any of them, in an amount or at a rate which would exceed the
Maximum Rate, the Agent, the Letter of Credit Issuer or such Lender, as the case
may be, shall automatically apply such excess to any unpaid amount of the
Obligations other than interest, in inverse order of maturity, or if the amount
of such excess exceeds said unpaid amount, such excess shall be paid to the
paying Borrowers or Borrower, as applicable. All interest paid, or agreed to be
paid, by any Borrower, or taken, reserved or received by the Agent, the Letter
of Credit Issuer or any Lender, shall be amortized, prorated, spread, and
allocated in respect of the Obligations throughout the full term of this
Agreement. Notwithstanding any provision contained in any of the Loan Documents,
or in any other related documents executed pursuant hereto, neither the Agent,
the Letter of Credit Issuer nor any Lender shall ever be entitled to charge,
receive, take, reserve, collect, or apply as interest any amount which, together
with all other interest under the Loan Documents would result in a rate of
interest under the Loan Documents in excess of the Maximum Rate and, in the
event the Agent, the Letter of Credit Issuer or any Lender ever charges,
receives, takes, reserves, collects, or applies any amount in respect of the
Borrowers, or any of them, that otherwise would, together with all other
interest under the Loan Documents, be in excess of the Maximum Rate, such amount
shall automatically be deemed to be applied in reduction of the unpaid principal
balance of the Obligations and, if such principal balance is paid in full, any
remaining excess shall forthwith be paid to the applicable Borrowers or
Borrower. The Borrowers, the Agent, the Letter of Credit Issuer and the
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Lenders shall, to the maximum extent permitted under any Requirement of Law, (i)
characterize any non-principal payment as a standby fee, commitment fee,
prepayment charge, delinquency charge, expense or reimbursement for a
third-party expense rather than as interest and (ii) exclude prepayments,
acceleration and the effect thereof. Nothing in any Loan Document shall be
construed or so operate as to require or obligate the Borrowers, or any of them,
to pay any interest, fees, costs, or charges greater than is permitted by any
Requirement of Law. Subject to the foregoing, the Borrowers hereby agree that
the actual effective rate of interest from time to time existing under the Loan
Documents, including all amounts agreed to by the Borrowers or charged or
received by the Agent, the Letter of Credit Issuer or the Lenders pursuant to
and in accordance with the Loan Documents, which may be deemed to be interest
under any Requirement of Law, shall be deemed to be a rate which is agreed to
and stipulated by the Borrowers and the Lenders in accordance with Requirements
of Law.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
Section 4.1 REVOLVING LOANS. The Borrowers shall repay the outstanding principal
balance of the Revolving Loans, plus all accrued but unpaid interest thereon, on
the Termination Date. The Borrowers may prepay Revolving Loans at any time, and
reborrow subject to the terms of this Agreement; PROVIDED, however, that with
respect to any LIBOR Revolving Loans prepaid prior to the expiration date of the
Interest Period applicable thereto, the Borrowers promise to pay to the Agent,
for account of the Lenders, the amounts described in SECTION 5.4. In addition,
and without limiting the generality of the foregoing, upon demand the Borrowers
promise to pay to the Agent, for the account of the Lenders, the amount, if any
and without duplication, by which the Aggregate Revolver Outstandings less the
aggregate amount of Pending Revolving Loans exceeds the Borrowing Base.
Section 4.2 REDUCTION OF COMMITMENTS; TERMINATION OF FACILITY.
The Borrowers may reduce the Maximum Revolver Amount to an amount, not less than
$80,000,000, as may be designated by the Borrowers at any time effective upon
five (5) days prior written notice thereof to the Agent and the Lenders,
provided, that any such reduction (i) shall be in an amount of at least
$5,000,000 or any integral multiple of $1,000,000 in excess thereof and (ii)
shall be permanent. The Lenders shall have no obligation at any time to increase
the Maximum Revolver Amount following any such reduction. No notice of reduction
shall be effective to reduce the Maximum Revolver Amount to an amount less than
$80,000,000.
The Borrowers may terminate this Agreement upon at least thirty (30) Business
Days notice to the Agent and the Lenders, upon (i) the payment in full of all
outstanding Revolving Loans, together with accrued and unpaid interest thereon,
and the cancellation and return of all outstanding Letters of Credit (or,
alternatively, with respect to each such Letter of Credit, the furnishing to the
Agent, for the benefit of the Lenders of a Supporting Letter of Credit or cash
deposit, in each case in amounts and in the manner required by SECTION 2.4(J)),
(ii) the payment of the early termination fee set forth in the next sentence,
(iii) the payment in full in cash of all
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other Obligations together with accrued and unpaid interest thereon, and (iv)
with respect to any LIBOR Rate Loans prepaid in connection with such termination
prior to the expiration date of the Interest Period applicable thereto, the
payment of the amounts described in SECTION 5.4. If this Agreement is terminated
at any time prior to the Stated Termination Date, whether pursuant to this
Section or pursuant to SECTION 11.2, the Borrowers shall pay to the Agent, for
the account of the Lenders, an early termination fee determined in accordance
with the following table:
PERIOD DURING WHICH EARLY EARLY TERMINATION FEE
TERMINATION OCCURS
- -------------------------------------- --------------------------------------
On or prior to the first Anniversary one-half of one percent (0.50%) of the
Date average daily balance of outstanding
Loans and average daily undrawn amount
of Letters of Credit outstanding
during the 180 days (or lesser period
if within 180 days of the Closing
Date) prior to the date of termination
- -------------------------------------- --------------------------------------
After the first Anniversary Date but one-quarter of one percent (0.25%) of
on or prior to the second Anniversary the average daily balance of
Date outstanding Loans and average daily
undrawn amount of Letters of Credit
outstanding during the 180 days prior
to the date of termination
- -------------------------------------- --------------------------------------
After the second Anniversary Date n/a
Notwithstanding the foregoing, no such early termination fee shall be payable in
the event this Agreement is terminated in connection with (x) refinancing the
Obligations in a transaction in which the Bank or any of its Affiliates provides
or arranges replacement financing or (y) the Parent raising new equity capital
through the sale of Capital Stock the proceeds of which are used to repay the
Obligations.
Section 4.3 RESERVED.
Section 4.4 RESERVED.
Section 4.5 PREPAYMENTS FROM ASSET DISPOSITIONS. All proceeds or other cash
payments received by any Loan Party pursuant to any transaction of merger,
reorganization, consolidation, transfer, sale, assignment, lease, or other
disposition allowed by SECTION 6.11, SECTION 9.9(D) (other than the sale of
Inventory in the ordinary course of business), and SECTION 9.19 net of related
actual transaction costs and expenses, shall be paid to the Agent, promptly upon
such
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receipt, for application to the Obligations in such manner as the Agent shall
determine in its sole discretion.
Section 4.6 PAYMENTS BY THE BORROWERS.
All payments to be made by the Borrowers shall be made without setoff,
recoupment, or counterclaim. Except as otherwise expressly provided herein, all
payments by the Borrowers shall be made to the Agent for the account of the
Lenders at the Agent's address set forth in SECTION 15.8, and shall be made in
Dollars and in immediately available funds, no later than 2:00 p.m. (Dallas,
Texas time) on the date specified herein. Any payment received by the Agent
later than 2:00 p.m. (Dallas, Texas time) shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
Subject to the provisions set forth in the definition of "Interest Period",
whenever any payment is due on a day other than a Business Day, such payment
shall be due on the following Business Day, and such extension of time shall in
such case be included in the computation of interest or fees, as the case may
be.
Unless the Agent receives notice from the Borrowers prior to the date on which
any payment is due to the Lenders that the Borrowers will not make such payment
in full as and when required, the Agent may assume that the Borrowers have made
such payment in full to the Agent on such date in immediately available funds
and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrowers have not made
such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
Section 4.7 PAYMENTS AS REVOLVING LOANS. All payments of principal, interest,
reimbursement obligations in connection with Letters of Credit and Credit
Support for Letters of Credit, fees, premiums, and other sums payable hereunder,
including all reimbursement for expenses pursuant to SECTION 15.7, may, at the
option of the Agent, in its sole discretion, subject only to the terms of this
SECTION 4.7, be paid from the proceeds of Revolving Loans made hereunder,
whether made following a request by Borrowers, or any of them, pursuant to
SECTION 2.2 or a deemed request as provided in this SECTION 4.7. The Borrowers
hereby irrevocably authorize the Agent to charge the Loan Account for the
purpose of paying principal, interest, reimbursement obligations in connection
with Letters of Credit, fees, premiums, and other sums payable hereunder,
including reimbursing expenses pursuant to SECTION 15.7, and agrees that all
such amounts charged shall constitute Revolving Loans (including Non-Ratable
Loans and Agent Advances) and that all such Revolving Loans so made shall be
deemed to have been requested pursuant to SECTION 2.2.
Section 4.8 APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS. Except as
otherwise expressly provided herein, aggregate principal and interest payments
shall be apportioned ratably among the Lenders (according to the unpaid
principal balance of the Loans to which such
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payments relate held by each Lender) and payments of the fees shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to the Agent and all such payments not relating to principal or
interest of specific Loans, or not constituting payment of specific fees, and
all proceeds of Accounts or other Collateral received by the Agent, shall be
applied, ratably, subject to the provisions of this Agreement, FIRST, to pay any
fees, indemnities, or expense reimbursements including any amounts relating to
Bank Products then due to the Agent from the Borrowers; SECOND, to pay any fees
or expense reimbursements then due to the Lenders from the Borrowers; THIRD, to
pay interest due in respect of all Revolving Loans, including Non-Ratable Loans
and Agent Advances; FOURTH, to pay or prepay principal of the Non-Ratable Loans
and Agent Advances; FIFTH, to pay or prepay principal of the Revolving Loans
(other than Non-Ratable Loans and Agent Advances) and unpaid reimbursement
obligations in respect of Letters of Credit; and SIXTH, to the payment of any
other Obligation due to the Agent or any Lender by the Borrowers.
Notwithstanding anything to the contrary contained in this Agreement, unless so
directed by a Borrower, or unless an Event of Default is outstanding, neither
the Agent nor any Lender shall apply any payments which it receives to any LIBOR
Revolving Loan, except (a) on the expiration date of the Interest Period
applicable to any such LIBOR Rate Loan, or (b) in the event, and only to the
extent, that there are no outstanding Base Rate Revolving Loans. The Agent shall
promptly distribute to each Lender, pursuant to the applicable wire transfer
instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided for in SECTION
2.2(J). The Agent and the Lenders shall have the continuing and exclusive right
to apply and reverse and reapply any and all such proceeds and payments to any
portion of the Obligations.
Section 4.9 INDEMNITY FOR RETURNED PAYMENTS. If after receipt of any payment
which is applied to the payment of all or any part of the Obligations, the Agent
or any Lender is for any reason compelled to surrender such payment or proceeds
to any Person because such payment or application of proceeds is invalidated,
declared fraudulent, set aside, determined to be void or voidable as a
preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Agent or such Lender
and the Borrowers shall be liable to pay to the Agent and the Lenders, and each
Borrower hereby does indemnify the Agent and the Lenders and hold the Agent and
the Lenders harmless for the amount of such payment or proceeds surrendered. The
provisions of this SECTION 4.9 shall be and remain effective notwithstanding any
contrary action which may have been taken by the Agent or any Lender in reliance
upon such payment or application of proceeds, and any such contrary action so
taken shall be without prejudice to the Agent's and the Lenders' rights under
this Agreement and shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The provisions of
this SECTION 4.9 shall survive the termination of this Agreement.
Section 4.10 THE AGENT'S AND THE LENDERS' BOOKS AND RECORDS; MONTHLY STATEMENTS.
The Borrowers agree that the Agent's and each Lender's books and records showing
the Obligations and the transactions pursuant to this Agreement and the other
Loan Documents shall be admissible in any action or proceeding arising
therefrom, and shall constitute rebuttably presumptive proof thereof,
irrespective of whether any Obligation is also evidenced by a
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promissory note or other instrument. The Agent will provide to the Borrowers a
monthly statement of Loans, payments, and other transactions pursuant to this
Agreement. Such statement shall be deemed correct, accurate, and binding on the
Borrowers and an account stated (except for reversals and reapplications of
payments made as provided in SECTION 4.8 and corrections of errors discovered by
the Agent), unless a Borrower notifies the Agent in writing to the contrary
within thirty (30) days after such statement is rendered. In the event a timely
written notice of objections is given by a Borrower, only the items to which
exception is expressly made will be considered to be disputed.
ARTICLE 5
TAXES, YIELD PROTECTION, AND ILLEGALITY
Section 5.1 TAXES.
Any and all payments by or on behalf of the Borrowers, or any of them, to each
Lender or the Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for any Taxes. In
addition, the Borrowers shall pay all Other Taxes.
The Borrowers agree to indemnify and hold harmless each Lender and the Agent for
the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section) paid by the
Lender or the Agent and any liability (including penalties, interest, additions
to tax, and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within thirty (30) days after the date the Lender
or the Agent makes written demand therefor.
If the Borrowers shall be required by law to deduct or withhold any Taxes or
Other Taxes from or in respect of any sum payable hereunder to any Lender or the
Agent, then:
the sum payable shall be increased as necessary so that after making all
required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section) such Lender or the
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
the Borrowers shall make such deductions and withholdings;
the Borrowers shall pay the full amount deducted or withheld to the relevant
taxing authority or other authority in accordance with any Requirement of Law;
and
the Borrowers shall also pay to each Lender, or the Agent for the account of
such Lender, at the time interest is paid, all additional amounts which the
respective Lender specifies as necessary to preserve the after-tax yield the
Lender would have received if such Taxes or Other Taxes had not been imposed.
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Within thirty (30) days after the date of any payment by the Borrowers of Taxes
or Other Taxes, the Borrowers shall furnish the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
If the Borrowers are required to pay additional amounts to any Lender or the
Agent pursuant to SECTION 5.1(C), then such Lender shall use reasonable efforts
(consistent with legal and regulatory restrictions) to change the jurisdiction
of its lending office so as to eliminate any such additional payment by the
Borrowers which may thereafter accrue, if such change in the judgment of such
Lender is not otherwise disadvantageous to such Lender.
Section 5.2 ILLEGALITY.
If any Lender determines that the introduction of any Requirement of Law, or any
change in any Requirement of Law, or in the interpretation or administration of
any Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable lending office to make LIBOR Rate Loans, then, on notice thereof by
that Lender to the Borrowers through the Agent, any obligation of that Lender to
make LIBOR Rate Loans shall be suspended until the Lender notifies the Agent and
the Borrowers that the circumstances giving rise to such determination no longer
exist.
If a Lender determines that it is unlawful to maintain any LIBOR Rate Loan, the
Borrowers shall, upon receipt of notice of such fact and demand from such Lender
(with a copy to the Agent), prepay in full such LIBOR Rate Loans of that Lender
then outstanding, together with accrued and unpaid interest thereon and amounts
required under SECTION 5.4, either on the last day of the Interest Period
thereof, if the Lender may lawfully continue to maintain such LIBOR Rate Loans
to such day, or immediately, if the Lender may not lawfully continue to maintain
such LIBOR Rate Loans. If the Borrowers are required to so prepay any LIBOR Rate
Loan, then concurrently with such prepayment, the Borrowers shall borrow from
the affected Lender, in the amount of such prepayment, a Base Rate Loan.
Section 5.3 INCREASED COSTS AND REDUCTION OF RETURN.
If any Lender determines that due to either (i) the introduction of or any
change in the interpretation of any law or regulation or (ii) the compliance by
that Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Lender of agreeing to make or making, funding,
or maintaining any LIBOR Rate Loans, then the Borrowers shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent to
the Agent), pay to the Agent, for the account of such Lender, additional amounts
as are sufficient to compensate such Lender for such increased costs.
If any Lender shall have determined that (i) the introduction of any Capital
Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii)
any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other
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Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance by the Lender or any corporation or other entity
controlling the Lender with any Capital Adequacy Regulation, affects or would
affect the amount of capital required or expected to be maintained by the Lender
or any corporation or other entity controlling the Lender and (taking into
consideration such Lender's or such corporation's or other entity's policies
with respect to capital adequacy and such Lender's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitments, loans, credits, or obligations under this Agreement, then, upon
demand of such Lender to the Borrowers through the Agent, the Borrowers shall
pay to the Lender, from time to time as specified by the Lender, additional
amounts sufficient to compensate the Lender for such increase.
Section 5.4 FUNDING LOSSES. The Borrowers shall reimburse each Lender and hold
each Lender harmless from any loss or expense which the Lender may sustain or
incur as a consequence of:
the failure of the Borrowers to make on a timely basis any payment of principal
of any LIBOR Rate Loan;
the failure of the Borrowers to borrow, continue, or convert a Loan after the
Borrowers have given (or are deemed to have given) a Notice of Borrowing or a
Notice of Conversion/ Continuation;
the prepayment or other payment (including after acceleration thereof) of any
LIBOR Rate Loan on a day that is not the last day of the relevant Interest
Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained.
Section 5.5 INABILITY TO DETERMINE RATES. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Rate Loan, or
that the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR Rate Loan does not adequately and fairly reflect the cost to the Lenders
of funding such Loan, the Agent will promptly so notify the Borrowers and each
Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate
Loans hereunder shall be suspended until the circumstances giving rise to such
suspension no longer exist. Upon receipt of a notice pursuant to the first
sentence of this Section, the Borrowers may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by any of them. If the
Borrowers do not revoke any such Notice of Borrowing or Notice of
Conversion/Continuation, the Lenders shall make, convert, or continue the Loans,
as proposed by the Borrowers, in the amount specified in the applicable Notice
of Borrowing or Notice of Conversion/Continuation submitted by the Borrowers,
but such Loans shall be made, converted, or continued as Base Rate Loans instead
of LIBOR Rate Loans.
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Section 5.6 CERTIFICATES OF LENDERS. Any Lender claiming reimbursement or
compensation under this ARTICLE 5 shall deliver to the Borrowers (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Lender hereunder and such certificate shall be conclusive and binding on
the Borrowers in the absence of manifest error.
Section 5.7 SURVIVAL. The agreements and obligations of the Borrowers in this
ARTICLE 5 shall survive the payment of all other Obligations.
Section 5.8 CLAIMS UNDER SECTION 5.1 AND SECTION 5.3. Each Lender shall notify
the Borrowers and the Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Lender to payment of any amount
under SECTION 5.1 or SECTION 5.3 and will designate a different lending office
if such designation will avoid the need for, or reduce the amount of, such
payment and will not, in the judgment of such Lender be otherwise
disadvantageous to it.
Section 5.9 REPLACEMENT OF AFFECTED LENDER. Within thirty (30) days after
receipt by the Borrowers of written notice and demand from any Lender for any
payment under the terms of SECTION 5.1, SECTION 5.2, or SECTION 5.3 then,
subject to this SECTION 5.9, the Borrowers may, at their option, notify the
Agent and such Lender (the "AFFECTED LENDER") of their intention to obtain, at
the Borrowers' sole expense, a replacement Lender ("REPLACEMENT LENDER") to
purchase the Affected Lender's Revolving Loans and its obligations under the
Loan Documents. Subject to this SECTION 5.9, the Borrowers shall, within thirty
(30) days following the delivery of such notice from the Borrowers, cause the
Replacement Lender to purchase (and the Affected Lender hereby agrees to sell
and convey to such Replacement Lender) the Revolving Loans and other obligations
of the Affected Lender and assume the Affected Lender's Commitment and
obligations hereunder in accordance with the terms of an Assignment and
Acceptance for cash in an aggregate amount equal to the aggregate unpaid
principal of the Revolving Loans and other Obligations held by such Affected
Lender, all unpaid interest and fees accrued thereon or with respect thereto,
and all other Obligations owed to such Affected Lender, including amounts owed
under SECTION 5.1 or SECTION 5.3 (but excluding any amount pursuant to SECTION
4.2). Notwithstanding the foregoing, (a) the Borrowers shall continue to be
obligated to pay to the Affected Lender in full all amounts then demanded and
due under SECTION 5.1 or SECTION 5.3 in accordance with the terms of this
Agreement, (b) neither the Agent nor any Lender shall have any obligation to
find a Replacement Lender, (c) the Replacement Lender must be acceptable to the
Agent in its reasonable discretion, and (d) the Bank may not be replaced under
this SECTION 5.9 without its consent.
ARTICLE 6
COLLATERAL
Section 6.1 GRANT OF SECURITY INTEREST.
As security for all Obligations (excluding Existing Obligations in the case of
property owned by a Newly Obligated Party) each Loan Party hereby assigns and
grants to the Agent, for the benefit
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of the Agent and the Lenders, a continuing security interest in, lien on,
assignment of, and right of set-off against, all of the following property and
assets of such Loan Party, whether now owned or existing or hereafter acquired
or arising, regardless of where located:
all Accounts (including any credit enhancement therefor);
all Inventory;
all contract rights, letters of credit, chattel paper, instruments, notes,
documents, and documents of title;
all General Intangibles; PROVIDED that no Lien shall attach to any license
included in Proprietary Rights which has been purchased or granted to a Loan
Party, but only to the extent that such Lien would invalidate any Loan Party's
rights in or title to such license;
all Equipment;
all Investment Property; PROVIDED that, with respect to the Capital Stock of any
Subsidiary which is not organized under the laws of the United States or any
state thereof, such pledge shall be limited to sixty-five percent (65.0%) of the
Capital Stock of such Subsidiary;
all money, cash, cash equivalents, securities, and other property of any kind of
such Loan Party held directly or indirectly by the Agent or any Lender;
all of such Loan Party's deposit accounts, credits, and balances with and other
claims against the Agent or any Lender or any of their Affiliates or any other
financial institution with which such Borrower maintains deposits, including any
Payment Accounts;
all books, records, and other property related to or referring to any of the
foregoing, including books, records, account ledgers, data processing records,
computer software and other property, and General Intangibles (except as limited
by CLAUSE (IV) preceding) at any time evidencing or relating to any of the
foregoing; and
all accessions to, substitutions for, and replacements, products, and proceeds
of any of the foregoing, including, but not limited to, proceeds of any
insurance policies, claims against third parties, and condemnation or
requisition payments with respect to all or any of the foregoing.
All of the foregoing, together with all Real Estate covered by the
Mortgage(s), and all other property of such Loan Party in which the Agent
or any Lender may at any time be granted a Lien, is herein collectively
referred to as the "COLLATERAL."
As security for all Obligations (excluding Existing Obligations in the case of
property owned by a Newly Obligated Party), each Loan Party shall execute and
deliver to the Agent one or more Mortgages to grant to the Agent, for the
ratable benefit of the Agent and the Lenders, a
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continuing mortgage lien on all of such Loan Party's Real Estate and Premises in
which such Loan Party has any fee ownership interest.
All of the Obligations (excluding Existing Obligations in the case of property
owned by a Newly Obligated Party) shall be secured by all of the Collateral.
Each Loan Party that is a Borrower acknowledges and expressly agrees with the
Agent and each Lender that the grant by such Borrower of the Agent's Lien in the
Collateral of such Borrower as security for the Obligations of the other Loan
Parties is required solely as a condition to, and is given solely as inducement
for and in consideration of, credit or accommodations extended or to be extended
under the Loan Documents to any or all of the other Loan Parties and is not
required or given as a condition of extensions of credit to such Borrower.
Section 6.2 PERFECTION AND PROTECTION OF SECURITY INTEREST.
Each Loan Party shall, at its expense, perform all steps requested by the Agent
at any time to perfect, maintain, protect, and enforce the Agent's Liens,
including: (i) executing, delivering, and/or filing and recording of the
Mortgage(s), the Copyright, Patent, and Trademark Agreements, and executing and
filing financing or continuation statements, and amendments thereof, in form and
substance satisfactory to the Agent; (ii) delivering to the Agent the originals
of all instruments, documents, and chattel paper, and all other Collateral of
which the Agent determines it should have physical possession in order to
perfect and protect the Agent's security interest therein, duly pledged,
endorsed, or assigned to the Agent without restriction; (iii) delivering to the
Agent (A) warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued and (B) if requested by
the Agent, certificates of title covering any portion of the collateral for
which certificates of title have been issued; (iv) when an Event of Default
exists, transferring Inventory to warehouses or other locations designated by
the Agent; (v) placing notations on its books of account to disclose the Agent's
security interest; (vi) delivering to the Agent all letters of credit on which
it is named beneficiary; and (vii) taking such other steps as are deemed
necessary or desirable by the Agent to maintain and protect the Agent's Liens.
To the extent permitted by any Requirement of Law, the Agent may file, without
any Loan Party's signature, one or more financing statements disclosing the
Agent's Liens. Each Loan Party agrees that a carbon, photographic, photostatic,
or other reproduction of this Agreement or of a financing statement executed and
delivered by such Loan Parties is sufficient as a financing statement.
If any Collateral is at any time in the possession or control of any
warehouseman, bailee, or any Loan Party's agents or processors, then such Loan
Party shall notify the Agent thereof and shall, at the request of the Agent,
notify such Person of the Agent's security interest in such Collateral and
instruct such Person to hold all such Collateral for the Agent's account subject
to the Agent's instructions. If at any time any Collateral is located on any
operating facility of a Loan Party which is not owned by such Loan Party, then
such Loan Party shall, at the request of the Agent, use its best efforts to
obtain written subordinations, in form and substance satisfactory to the Agent,
of all present and future Liens to which the owner or lessor of such premises
may be entitled to assert against the Collateral; PROVIDED that, in the event
any Loan Party is unable to obtain any such written subordination, the Agent
may, in its discretion establish a reserve with
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respect to any such Collateral or, if such Collateral is either Accounts or
Inventory, exclude such Accounts or Inventory from the calculation of the
Borrowing Base.
From time to time, each Loan Party shall, upon the Agent's request, execute and
deliver confirmatory written instruments pledging to the Agent, for the ratable
benefit of the Agent and the Lenders, the Collateral with respect to such Loan
Party, but the failure to do so shall not affect or limit any security interest
or any other rights of the Agent or any Lender in and to the Collateral with
respect to such Loan Party. So long as this Agreement is in effect and until all
Obligations have been fully satisfied, the Agent's Liens shall continue in full
force and effect in all Collateral (whether or not deemed eligible for the
purpose of calculating the Availability or as the basis for any advance, loan,
extension of credit, or other financial accommodation).
To the extent any Loan Party is or becomes the issuer of any Investment Property
that is Collateral, each such Loan Party (in such capacity, an "ISSUER") agrees
as follows with respect to such Investment Property:
(i) All such Investment Property issued by such Issuer, all
warrants, and all non-cash dividends and other non-cash
distributions in respect thereof at any time registered in the name
of, or otherwise deliverable to, any Loan Party, shall be delivered
directly to the Agent, for the account of such Loan Party, at the
Agent's address for notices set forth in SECTION 15.8.
(ii) Upon written notice from the Agent, all cash dividends,
cash distributions, and other cash or cash equivalents in respect of
such Investment Property at any time payable or deliverable to any
Loan Party shall be delivered directly to the Agent, for the account
of the Agent and the Lenders, at the address for notices set forth
in SECTION 15.8.
(iii) Such Issuer will not acknowledge any transfer or
encumbrance in respect of such Investment Property to or in favor of
any Person other than the Agent or a Person designated by the Agent
in writing.
(iv) With respect to any of such Investment Property at any
time constituting an uncertificated security as defined by the UCC,
the Issuer will comply with instructions originated by the Agent
without further consent by the registered owner thereof.
Section 6.3 LOCATION OF COLLATERAL. Each Loan Party represents and warrants to
the Agent and the Lenders that: (a) SCHEDULE 6.3 is a correct and complete list
of such Loan Party's chief executive office, the location of its books and
records, the locations of the Collateral, and the locations of all of its other
places of business; and (b) SCHEDULE 6.3 correctly identifies any of such
facilities and locations that are not owned by such Loan Party and sets forth
the names of the owners and lessors or sublessors of and, to the best of such
Loan Party's knowledge, the holders of any mortgages on, such facilities and
locations. Each Loan Party covenants and agrees that it will not (x) maintain
any Collateral at any location other than those locations listed
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for such Loan Party on SCHEDULE 6.3, (y) otherwise change or add to any of such
locations, or (z) change the location of its chief executive office from the
location identified in SCHEDULE 6.3, unless it gives the Agent at least ten (10)
days prior written notice thereof and executes any and all financing statements
and other documents that the Agent requests to maintain perfection in such
Collateral. In the event any Loan Party requests to change or add any location
of Collateral and has provided the Agent with all financing statements and other
documents requested by the Agent in connection therewith, the Loan Parties shall
prepare and deliver to the Agent a revised SCHEDULE 6.3 which shall, upon the
Agent's written consent, be adopted as SCHEDULE 6.3 for all purposes following
the date of such written consent. Without limiting the foregoing, each Loan
Party represents that all of its Inventory (other than Inventory in transit and
Inventory located at a customer's location) is, and covenants that all of its
Inventory will be, located either (A) on premises owned by such Loan Party, (B)
on premises leased by such Loan Party, PROVIDED that the Agent has, if requested
by the Agent, received an executed landlord waiver from the landlord of such
premises in form and substance satisfactory to the Agent, or (C) in a warehouse
or with a bailee, PROVIDED that the Agent has, if requested by the Agent,
received an executed bailee letter from the applicable Person in form and
substance satisfactory to the Agent.
Section 6.4 TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL. Each Loan Party
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) all of the Collateral is and will continue to be owned
by such Loan Party free and clear of all Liens whatsoever, except for Permitted
Liens; (b) the Agent's Liens in the Collateral will not be subject to any prior
Lien other than Permitted Liens; (c) such Loan Party will use, store, and
maintain the Collateral with all reasonable care and will use such Collateral
for lawful purposes only; and (d) such Loan Party will not, without the Agent's
prior written approval, sell or dispose of, or permit the sale or disposition
of, any of the Collateral except for sales of Inventory in the ordinary course
of business and sales of Equipment as permitted by SECTION 6.11 and SECTION
9.19. The inclusion of proceeds in the Collateral shall not be deemed to
constitute the Agent's or any Lender's consent to any sale or other disposition
of the Collateral except as expressly permitted herein.
Section 6.5 APPRAISALS. Not more frequently than once each month whenever a
Default or Event of Default exists, and at such other times not more frequently
than once per year as the Agent requests, the Borrowers shall, at their expense
and upon the Agent's request, provide the Agent with appraisals or updates
thereof of any or all of the Collateral from an appraiser, and prepared on a
basis, satisfactory to the Agent, such appraisals and updates to include,
without limitation, information required by applicable law and regulations and
by the internal policies of the Lenders.
Section 6.6 ACCESS AND EXAMINATION; CONFIDENTIALITY.
The Agent, accompanied by any Lender which so elects, may at all reasonable
times during regular business hours, and at any time when a Default or Event of
Default exists and is continuing, have access to, examine, audit, make extracts
from or copies of, and inspect any or all of the Loan Parties' records, files,
and books of account and the Collateral, and discuss the Loan Parties' affairs
with the Loan Parties' officers and management. The Loan Parties will
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deliver to the Agent any instrument necessary for the Agent to obtain records
from any service bureau maintaining records for the Loan Parties. The Agent may,
and at the direction of the Majority Lenders shall, at any time when a Default
or Event of Default exists, and at the Borrowers' expense, make copies of all of
the Loan Parties' books and records, or require the Loan Parties to deliver such
copies to the Agent. The Agent may, without expense to the Agent, use such of
the Loan Parties' respective personnel, supplies, and premises as may be
reasonably necessary for maintaining or enforcing the Agent's Liens. The Agent
shall have the right, at any time, in the Agent's name or in the name of a
nominee of the Agent, to verify the validity, amount, or any other matter
relating to the Accounts, Inventory, or other Collateral, by mail, telephone, or
otherwise.
The Loan Parties agree that, subject to their prior consent for uses other than
in a traditional tombstone, which consent shall not be unreasonably withheld or
delayed, the Agent and each Lender may use any Loan Party's name in advertising
and promotional material and in conjunction therewith disclose the general terms
of this Agreement. The Agent and each Lender severally agree to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information identified as "confidential" or "secret" by any Loan Party and
provided to the Agent or such Lender by or on behalf of such Loan Party, under
this Agreement or any other Loan Document, except to the extent that such
information (i) was or becomes generally available to the public other than as a
result of disclosure by the Agent, the Letter of Credit Issuer, or a Lender, or
(ii) was or becomes available on a nonconfidential basis from a source other
than the Loan Parties. Notwithstanding the foregoing, the Agent and any Lender
may disclose any such information (1) at the request or pursuant to any
requirement of any Governmental Authority to which the Agent or such Lender is
subject or in connection with an examination of the Agent or such Lender by any
such Governmental Authority, (2) pursuant to subpoena or other court process,
(3) when required to do so in accordance with the provisions of any applicable
Requirement of Law; (4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Agent, any Lender or their respective Affiliates may be
party, (5) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document, (6) to the Agent's or
such Lender's independent auditors, accountants, attorneys, and other
professional advisors, (7) to any prospective Participant or Assignee under any
Assignment and Acceptance, actual or potential, provided that such prospective
Participant or Assignee agrees to keep such information confidential to the same
extent required of the Agent and the Lenders hereunder (8) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which any Loan Party is a party or is deemed party with the
Agent or such Lender, and (9) to its Affiliates.
Section 6.7 COLLATERAL REPORTING. The Borrowers shall provide, or cause to be
provided, to the Agent the following documents at the following times in form
satisfactory to the Agent: (a) on or before the fifteenth (15th) day of each
month, for the preceding month end, or more frequently if requested by the Agent
or needed by the Borrowers to redetermine Availability, a schedule of each
Borrower's Accounts created since the last such schedule and a Borrowing Base
Certificate; (b) on a monthly basis, an aging of each Borrower's Accounts,
together with a reconciliation to the previous month's accounts receivable
balance of such Borrower's Accounts and to its general
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ledger; (c) on a monthly basis, an aging of each Borrower's accounts payable;
(d) on a monthly basis for each Borrower, Inventory reports by category, with
additional detail showing additions to and deletions from such Borrower's
Inventory and any Inventory held by such Borrower on consignment or approval;
(e) upon the Agent's request, copies of invoices in connection with each
Borrower's Accounts, customer statements, credit memos, remittance advices, and
reports, deposit slips, and shipping and delivery documents in connection with
each Borrower's Accounts and for Inventory and Equipment acquired by each
Borrower purchase orders and invoices; (f) upon request, a statement of the
balance of each of the Intercompany Accounts; (g) such other reports as to the
Collateral as the Agent shall reasonably request from time to time; and (h) with
the delivery of each of the foregoing, a certificate of the Borrowers executed
by an officer of the Parent on behalf of all of the Borrowers certifying as to
the accuracy and completeness of the foregoing. If any of the Borrowers' records
or reports of the Collateral are prepared by an accounting service or other
agent, each Borrower hereby authorizes such service or agent to deliver such
records, reports, and related documents to the Agent, for distribution to the
Lenders. Each of the items required by CLAUSES (B) through (D) preceding shall
be delivered to the Agent not later than thirty (30) days following the last day
of each calendar month.
Section 6.8 ACCOUNTS. Each Loan Party covenants, agrees, represents, and
warrants, as to itself, as follows:
With respect to such Loan Party's Accounts: (i) each existing Account
represents, and each future Account will represent, a BONA FIDE sale or lease
and delivery of goods by such Loan Party, or rendition of services by such Loan
Party, in the ordinary course of such Loan Party's business; (ii) each existing
Account is, and each future Account will be, for a liquidated amount payable by
the Account Debtor thereon on the terms set forth in the invoice therefor or in
the schedule thereof delivered to the Agent, without any offset, deduction,
defense, or counterclaim except those known to such Loan Party and disclosed to
the Agent and the Lenders pursuant to this Agreement; (iii) no discount, credit,
or allowance will be granted on any Account without the Agent's prior written
consent, except for discounts, credits, and allowances made or given in the
ordinary course of a Loan Party's business when no Event of Default exists
hereunder; (iv) each copy of an invoice delivered to the Agent by such Loan
Party will be a genuine copy of the original invoice sent to the Account Debtor
named therein; and (v) all goods described in any invoice representing a sale of
goods will have been shipped to the Account Debtor and all services of such Loan
Party described in each invoice will have been performed.
Such Loan Party shall not redate any invoice or sale or make sales on extended
dating beyond that customary in such Loan Party's business or extend or modify
any Account. If such Loan Party becomes aware of any matter adversely affecting
the collectibility of any Account or the Account Debtor therefor involving an
amount greater than $500,000, including information regarding the Account
Debtor's creditworthiness, such Loan Party will promptly so advise the Agent.
Such Loan Party shall not accept any note or other instrument (except a check or
other instrument for the immediate payment of money) with respect to any Account
without the Agent's written consent. If the Agent consents to the acceptance of
any such instrument, it shall
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be considered as evidence of the Account and not payment thereof and such Loan
Party will promptly deliver such instrument to the Agent, endorsed by such Loan
Party to the Agent in a manner satisfactory in form and substance to the Agent.
Regardless of the form of presentment, demand, or notice of protest with respect
thereto, such Loan Party shall remain liable thereon until such instrument is
paid in full.
Such Loan Party shall notify the Agent promptly of all disputes and claims in
excess of $500,000 with any Account Debtor, and agrees to settle, contest, or
adjust such dispute or claim at no expense to the Agent or any Lender. No
discount, credit, or allowance shall be granted to any such Account Debtor
without the Agent's prior written consent, except for discounts, credits, and
allowances made or given in the ordinary course of such Loan Party's business
when no Event of Default exists hereunder. The Agent may at all times when an
Event of Default exists hereunder, settle or adjust disputes and claims directly
with Account Debtors of any Loan Party for amounts and upon terms which the
Agent or the Majority Lenders, as applicable, shall consider advisable and, in
all cases with respect to a Borrower, the Agent will credit the Loan Account of
the Borrowers with the net amounts received by the Agent in payment of any
Accounts.
If an Account Debtor returns any Inventory to such Loan Party when no Event of
Default exists, then such Loan Party shall promptly determine the reason for
such return and shall issue a credit memorandum to the Account Debtor in the
appropriate amount. Each such report shall indicate the reasons for the returns
and the locations and condition of the returned Inventory. In the event any
Account Debtor returns Inventory to a Borrower when an Event of Default exists,
such Borrower, upon request of the Agent, shall: (i) hold the returned Inventory
in trust for the Agent; (ii) segregate all returned Inventory from all of its
other property; (iii) dispose of the returned Inventory solely according to the
Agent's written instructions; and (iv) not issue any credits or allowances with
respect thereto without the Agent's prior written consent. All returned
Inventory of any Loan Party shall be subject to the Agent's Liens thereon.
Whenever any Inventory is returned, the related Account shall be deemed
ineligible to the extent of the amount owing by the Account Debtor with respect
to such returned Inventory.
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Section 6.9 COLLECTION OF ACCOUNTS; PAYMENTS.
Until the Agent notifies the Loan Parties to the contrary, the Loan Parties
shall make collection of all Accounts and other Collateral for the Agent, shall
receive all payments as the Agent's trustee, and shall immediately deliver all
payments in their original form duly endorsed in blank into a Payment Account
established for the account of the Loan Parties at a Clearing Bank acceptable to
Agent, subject to a Blocked Account Agreement. If the Agent requests, the Loan
Parties shall establish a lock-box service for collections of Accounts at a
Clearing Bank acceptable to the Agent and subject to a Blocked Account Agreement
and other documentation acceptable to Agent. If such lock-box service is
established, the Loan Parties shall instruct all Account Debtors to make all
payments directly to the address established for such service. If,
notwithstanding such instructions, any Loan Party receives any proceeds of
Accounts, it shall receive such payments as the Agent's trustee, and shall
immediately deliver such payments to the Agent in their original form duly
endorsed in blank or deposit them into a Payment Account, as the Agent may
direct. All collections received in any lock-box or Payment Account or directly
by any Loan Party or the Agent, and all funds in any Payment Account or other
account to which such collections are deposited shall be subject to the Agent's
sole control and withdrawals by any Loan Party shall not be permitted. The Agent
or the Agent's designee may, at any time after the occurrence of an Event of
Default, notify Account Debtors that the Accounts have been assigned to the
Agent and of the Agent's security interest therein, and may collect them
directly and charge the collection costs and expenses to the Loan Account as a
Revolving Loan. So long as an Event of Default has occurred and is continuing,
the Loan Parties, at the Agent's request, shall execute and deliver to the Agent
such documents as the Agent shall require to grant the Agent access to any post
office box in which collections of Accounts are received.
If sales of Inventory are made or services are rendered by any Loan Party for
cash, such Loan Party shall immediately deliver, or cause to be delivered to the
Agent or deposit into a Payment Account, the cash which such Loan Party
receives.
All payments, including immediately available funds received by the Agent at a
bank designated by it, whether or not received by the Agent on account of
Accounts or as proceeds of other Collateral will be the Agent's sole property
for its benefit and the benefit of the Lenders and will be credited to the Loan
Account of the Borrowers (conditional upon final collection) (i) on the same day
received (if received prior to 2:00 p.m. Dallas, Texas time) and if the funds
received are immediately available funds and (ii) after allowing one (1)
Business Day for collection of all other funds; PROVIDED, HOWEVER, that such
payments shall be deemed to be credited to the Loan Account of the Borrowers
immediately upon receipt for purposes of (x) determining Availability, (y)
calculating the Unused Line Fee pursuant to SECTION 3.5, and (z) calculating the
amount of interest accrued thereon solely for purposes of determining the amount
of interest to be distributed by the Agent to the Lenders (but not the amount of
interest payable by the Borrowers).
In the event all of the Obligations are repaid upon the termination of this
Agreement or upon acceleration of the Obligations, other than through the
Agent's receipt of payments on account of the Accounts or proceeds of the other
Collateral, such payment will be credited (conditional upon
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final collection) to the Borrowers' Loan Account one (1) Business Day after the
Agent's receipt of such funds.
Section 6.10 INVENTORY; PERPETUAL INVENTORY. Each Loan Party represents and
warrants to the Agent and the Lenders and agrees with the Agent and the Lenders
that all of the Inventory owned by such Loan Party is and will be held for sale
or lease, or to be furnished in connection with the rendition of services, in
the ordinary course of such Loan Party's business, and is and will be fit for
such purposes. Each Loan Party will keep its Inventory in good and marketable
condition, at its own expense. Each Loan Party agrees that all Inventory
produced in the United States will be produced in accordance with the Federal
Fair Labor Standards Act of 1938, as amended, and all rules, regulations, and
orders thereunder. Each Loan Party will maintain a perpetual inventory reporting
system at all times. As of the last day of the Parent's Fiscal Yar, the Parent
will cause the certified public accountants preparing the Parent's financial
statements required under SECTION 7.2 (A) to conduct a test of the perpetual
inventory records of any combination of the Borrowers owning not less than fifty
percent (50.0%) of the aggregate amount of Inventory owned by the Borrowers and
not less than fifty percent (50.0%) of the aggregate amount of Eligible
Inventory owned by the Borrowers to the extent necessary for such accountants to
render an unqualified opinion on the financial statements prepared as of such
Fiscal Year End. No Borrower will, without the Agent's written consent, sell any
Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on
approval, or other repurchase or return basis. Each Loan Party agrees that it
will keep any Inventory of any other Person which is held by such Loan Party on
a consignment basis separate from such Loan Party's Inventory and at all times
maintain proper operating systems which will insure that such consigned
Inventory and such Loan Party's Inventory are not commingled in any manner.
Section 6.11 EQUIPMENT.
Each Loan Party represents and warrants to the Agent and the Lenders and agrees
with the Agent and the Lenders that all of the Equipment owned by such Loan
Party is and will be used or held for use in such Loan Party's business, and is
and will be fit for such purposes. Each Loan Party shall keep and maintain its
Equipment that is necessary in the operation of its business in good operating
condition and repair (ordinary wear and tear excepted) and shall make all
necessary replacements thereof.
Each Loan Party shall promptly inform the Agent of any material additions to or
deletions from its Equipment. No Loan Party shall permit any Equipment to become
a fixture with respect to real property or to become an accession with respect
to other personal property with respect to which real or personal property the
Agent does not have a Lien. No Loan Party will, without the Agent's prior
written consent, alter or remove any identifying symbol or number on any
Equipment consisting of Collateral.
No Loan Party shall, without the Agent's prior written consent, sell, lease as a
lessor, or otherwise dispose of any Equipment; PROVIDED, HOWEVER, that subject
to SECTION 9.9(D) and SECTION 9.19, the Loan Parties may dispose of Equipment
subject to the conditions set forth in the following sentence. In the event any
of such Equipment is sold, transferred, or otherwise disposed of
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pursuant to the proviso contained in the immediately preceding sentence, (i) if
such sale, transfer, or disposition is effected without replacement of such
Equipment, or such Equipment is replaced by Equipment leased by a Loan Party or
by Equipment purchased by a Loan Party subject to a Lien, then such Loan Party
shall deliver the net cash proceeds of any such sale, transfer, or disposition
to the Agent as provided by SECTION 4.5, which proceeds shall be applied to the
principal balance of the Revolving Loans, or (ii) if such sale, transfer, or
disposition is made in connection with the purchase by such Loan Party of
replacement Equipment, then such Loan Party shall use the proceeds of such sale,
transfer, or disposition to purchase such replacement Equipment and shall upon
the request of the Agent deliver to the Agent written evidence of the use of the
proceeds for such purchase. All replacement Equipment purchased by any Loan
Party shall be free and clear of all Liens except the Agent's Lien and Permitted
Liens.
Section 6.12 RESERVED.
Section 6.13 DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER. Each Loan Party
represents and warrants to the Agent and the Lenders that (a) all documents,
instruments, and chattel paper of such Loan Party describing, evidencing, or
constituting Collateral, and all signatures and endorsements thereon, are and
will be complete, valid, and genuine, and (b) all goods evidenced by such
documents, instruments, and chattel paper are and will be owned by such Loan
Party, free and clear of all Liens other than Permitted Liens.
Section 6.14 RIGHT TO CURE. The Agent may, in its discretion, and shall, at the
direction of the Majority Lenders and upon notice to the affected Loan Parties
(PROVIDED that failure to give such notice shall not affect the Agent's rights
under this SECTION 6.14 and shall not result in any liability or constitute the
breach of any duty or obligation of the Agent hereunder), pay any amount or do
any act required of any Loan Party hereunder or under any other Loan Document in
order to preserve, protect, maintain, or enforce the Obligations, the Collateral
or the Agent's Liens therein, and which any Loan Party fails to pay or do,
including payment of any judgment against any Loan Party, any insurance premium,
any warehouse charge, any finishing or processing charge, any landlord's or
bailee's claim, and any other Lien upon or with respect to the Collateral. All
payments that the Agent makes under this SECTION 6.14 and all out-of-pocket
costs and expenses that the Agent pays or incurs in connection with any action
taken by it hereunder shall be charged to the Borrowers' Loan Account as a
Revolving Loan. Any payment made or other action taken by the Agent under this
SECTION 6.14 shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed thereafter as herein provided.
Section 6.15 POWER OF ATTORNEY. Each Loan Party, as to itself, hereby appoints
the Agent and the Agent's designee as its attorney, with power: (a) to endorse
such Loan Party's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Agent's or any Lender's
possession; (b) to sign such Loan Party's name on any invoice, bill of lading,
warehouse receipt, or other document of title relating to any Collateral, on
drafts against customers, on assignments of Accounts, on notices of assignment,
financing statements, and other public records and to file any such financing
statements by electronic means with or without a signature as authorized or
required by applicable law or filing procedure; (c) so long as any Event of
Default has occurred and is continuing, to notify the post office authorities to
change the
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address for delivery of such Loan Party's mail to an address designated by the
Agent and to receive, open, and dispose of all mail addressed to such Loan
Party; (d) to send requests for verification of Accounts to customers or Account
Debtors; (e) to clear Inventory through customs in such Loan Party's name, the
Agent's name, or the name of the Agent's designee, and to sign and deliver to
customs officials powers of attorney in such Loan Party's name for such purpose;
and (f) to do all things necessary to carry out this Agreement. Each Loan Party
ratifies and approves all acts of such attorney. None of the Lenders or the
Agent nor their attorneys will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law other than any such liability
arising from any such Person's gross negligence or willful misconduct. This
power, being coupled with an interest, is irrevocable until this Agreement has
been terminated and the Obligations have been fully satisfied.
Section 6.16 THE AGENT'S AND THE LENDERS' RIGHTS, DUTIES, AND LIABILITIES. The
Loan Parties assume all responsibility and liability arising from or relating to
the use, sale, or other disposition of the Collateral. The Obligations shall not
be affected by any failure of the Agent or any Lender to take any steps to
perfect the Agent's Liens or to collect or realize upon the Collateral, nor
shall loss of or damage to the Collateral release any Loan Party from any of the
Obligations. Following the occurrence and continuation of an Event of Default,
the Agent may (but shall not be required to), and at the direction of the
Majority Lenders shall, without notice to or consent from any Loan Party, sue
upon or otherwise collect, extend the time for payment of, modify or amend the
terms of, compromise or settle for cash, credit, or otherwise upon any terms,
grant other indulgences, extensions, renewals, compositions, or releases, and
take or omit to take any other action with respect to the Collateral, any
security therefor, any agreement relating thereto, any insurance applicable
thereto, or any Person liable directly or indirectly in connection with any of
the foregoing, without discharging or otherwise affecting the liability of any
Loan Party for the Obligations or under this Agreement or any other agreement
now or hereafter existing between the Agent and/or any Lender and any Loan
Party.
Section 6.17 SITE VISITS, OBSERVATIONS AND TESTING. The Agent and its
representatives will have the right at any reasonable time to enter and visit
the Premises and any other place where any property of any Loan Party is located
for the purposes of observing the Premises, taking and removing soil or
groundwater samples, and conducting tests on any part of the Premises. The Agent
is under no duty, however, to visit or observe the Premises or to conduct tests,
and any such acts by the Agent will be solely for the purposes of protecting the
Agent's Liens and preserving the Agent and the Lenders' rights under this
Agreement. No site visit, observation or testing by the Agent and the Lenders
will result in a waiver of any Default or Event of Default or impose any
liability on the Agent or the Lenders. In no event will any site visit,
observation, or testing by the Agent be a representation that hazardous
substances are or are not present in, on or under the Premises, or that there
has been or will be compliance with any Environmental Law. Neither any Loan
Party nor any other party is entitled to rely on any site visit, observation or
testing by the Agent. The Agent and the Lenders owe no duty of care to protect
the Loan Parties or any other party against, or to inform the Loan Parties or
any other party of, any hazardous substances or any other adverse condition
affecting the Premises. The Agent may in its discretion disclose to the Loan
Parties or to any other party if so required by law any report or findings made
as a result of, or in connection with, any site visit, observation or testing by
the Agent. The Loan
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Parties understand and agree that the Agent makes no warranty or representation
to the Loan Parties or any other party regarding the truth, accuracy, or
completeness of any such report or findings that may be disclosed. The Loan
Parties also understand that depending on the results of any site visit,
observation, or testing by the Agent and disclosed to the Loan Parties, the Loan
Parties may have a legal obligation to notify one or more environmental agencies
of the results, that such reporting requirements are site-specific, and are to
be evaluated by the Loan Parties without advice or assistance from the Agent. In
each instance, the Agent will give the Loan Parties reasonable notice before
entering the Premises or any other place the Agent is permitted to enter under
this SECTION 6.17. The Agent will make reasonable efforts to avoid interfering
with the Loan Parties' use of the Premises or any other property in exercising
any rights provided hereunder.
Section 6.18 GUARANTIES; LOAN PARTY JOINDER. Each Loan Party shall guarantee
payment and performance of the Obligations (other than Obligations owing by
itself in a case where such guaranteeing Loan Party is a Borrower and excluding
Existing Obligations in the case of any such guarantee by a Newly Obligated
Party) pursuant to a Guaranty Agreement in form and substance satisfactory to
the Agent, duly executed by each such Loan Party. Each such guaranteeing Loan
Party that is a Borrower acknowledges and expressly agrees with the Agent and
each Lender that the Guaranty by such Borrower is required solely as a condition
to, and is given solely as inducement for and in consideration of, credit or
accommodations extended or to be extended under the Loan Documents to any or all
of the other Loan Parties and is not required or given as a condition of
extensions of credit to such Borrower. Promptly upon creation or acquisition of
any domestic Subsidiary of a Loan Party, which is not an Unrestricted
Subsidiary, such Loan Party shall cause such new Subsidiary to become a Loan
Party (but unless otherwise agreed by the Agent and the Lenders, not as a
Borrower) and a Guarantor by executing and delivering to the Agent such Loan
Documents and other instruments, certificates, and agreements as the Agent may
request. Upon execution and delivery of such Loan Documents and other
instruments, certificates, and agreements, such newly created or acquired
domestic Subsidiary shall automatically become a Loan Party and thereupon shall
have all of the rights, benefits, duties, and obligations of a Loan Party under
the Loan Documents.
Section 6.19 VOTING RIGHTS, DISTRIBUTIONS, ETC. IN RESPECT OF INVESTMENT
PROPERTY.
So long as no Event of Default shall have occurred and be continuing (i) each
Loan Party shall be entitled to exercise any and all voting and other consensual
rights (including, without limitation, the right to give consents, waivers, and
notifications in respect of any securities) pertaining to its Investment
Property or any part thereof; PROVIDED, HOWEVER, that without the prior written
consent of the Agent and the Majority Lenders, no vote shall be cast or consent,
waiver, or ratification given or action taken which would (A) be inconsistent
with or violate any provision of this Agreement or any other Loan Document or
(B) amend, modify, or waive any material term, provision, or condition of the
certificate of incorporation, bylaws, certificate of formation, or other charter
document or other agreement relating to, evidencing, providing for the issuance
of, or securing any such Investment Property, in any manner that would impair
such Investment Property, the transferability thereof, or the Agent's Liens
therein, and (ii) each Loan Party shall be
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entitled to receive and retain any and all dividends and interest paid in
respect of any of such Investment Property (unless otherwise required by this
Agreement).
Upon the occurrence and during the continuance of an Event of Default, (i) the
Agent may, without notice to any Loan Party, transfer or register in the name of
the Agent or any of its nominees, for the ratable benefit of the Agent and the
Lenders, any or all of the Collateral consisting of Investment Property, the
proceeds thereof (in cash or otherwise), and all liens, security, rights,
remedies, and claims of any Loan Party with respect thereto (as used in this
SECTION 6.19 collectively, the "PLEDGED COLLATERAL") held by the Agent
hereunder, and the Agent or its nominee may thereafter, after delivery of notice
to the applicable Loan Party, exercise all voting and corporate rights at any
meeting of any corporation, partnership, or other business entity issuing any of
the Pledged Collateral and any and all rights of conversion, exchange,
subscription, or any other rights, privileges, or options pertaining to any of
the Pledged Collateral as if it were the absolute owner thereof, including,
without limitation, the right to exchange at its discretion any and all of the
Pledged Collateral upon the merger, consolidation, reorganization,
recapitalization, or other readjustment of any corporation, partnership, or
other business entity issuing any of such Pledged Collateral or upon the
exercise by any such issuer or the Agent of any right, privilege, or option
pertaining to any of the Pledged Collateral, and in connection therewith, to
deposit and deliver any and all of the Pledged Collateral with any committee,
depositary, transfer agent, registrar, or other designated agency upon such
terms and conditions as it may determine, all without liability except to
account for property actually received by it, but the Agent shall have no duty
to exercise any of the aforesaid rights, privileges, or options, and the Agent
shall not be responsible for any failure to do so or delay in so doing, (ii)
after the Agent's giving of the notice specified in CLAUSE (I) of this SECTION
6.19(B), all rights of any Loan Party to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
SECTION 6.19(A)(I) and to receive the dividends, interest, and other
distributions which it would otherwise be authorized to receive and retain
thereunder shall be suspended until such Event of Default shall no longer exist,
and all such rights shall, until such Event of Default shall no longer exist,
thereupon become vested in the Agent which shall thereupon have the sole right
to exercise such voting and other consensual rights and to receive and hold as
Pledged Collateral such dividends, interest, and other distributions, (iii) all
dividends, interest, and other distributions which are received by any Loan
Party contrary to the provisions of this SECTION 6.19(B) shall be received in
trust for the benefit of the Agent, shall be segregated from other funds of such
Loan Party and shall be forthwith paid over to the Agent as Collateral in the
same form as so received (with any necessary endorsement), and (iv) each Loan
Party shall execute and deliver (or cause to be executed and delivered) to the
Agent all such proxies and other instruments as the Agent may reasonably request
for the purpose of enabling the Agent to exercise the voting and other rights
which it is entitled to exercise pursuant to this SECTION 6.19(B) and to receive
the dividends, interest, and other distributions which it is entitled to receive
and retain pursuant to this SECTION 6.19(B). The foregoing shall not in any way
limit the Agent's power and authority granted pursuant to SECTION 6.15.
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ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
Section 7.1 BOOKS AND RECORDS. The Loan Parties shall maintain, at all times,
correct and complete books, records, and accounts in which complete, correct,
and timely entries are made of their respective transactions in accordance with
GAAP applied consistently with the audited Financial Statements required to be
delivered pursuant to SECTION 7.2(A). The Loan Parties shall, by means of
appropriate entries, reflect in such accounts and in all Financial Statements
proper liabilities and reserves for all taxes and proper provision for
depreciation and amortization of property and bad debts, all in accordance with
GAAP. The Loan Parties shall maintain at all times books and records pertaining
to the Collateral in such detail, form, and scope as the Agent shall reasonably
require, including, but not limited to, records of (a) all payments received and
all credits and extensions granted with respect to the Accounts, (b) the return,
rejections, repossession, stoppage in transit, loss, damage, or destruction of
any Inventory, and (c) all other dealings affecting the Collateral.
Section 7.2 FINANCIAL INFORMATION. The Loan Parties shall promptly furnish to
the Agent, all such financial information as the Agent or any Lender (through
the Agent) shall reasonably request, and notify its auditors and accountants
that the Agent, on behalf of the Lenders, is authorized to obtain such
information directly from them. Without limiting the foregoing, the Loan Parties
will furnish, or cause to be furnished, to the Agent, in sufficient copies for
distribution by the Agent to each Lender, in such detail as the Agent or the
Lenders shall request, the following:
As soon as available, but in any event not later than ninety (90) days after the
close of each Fiscal Year, consolidated audited, and consolidating unaudited,
balance sheets, and statements of income and expense, cash flow, and of
stockholders' equity for the Parent and its consolidated Subsidiaries for such
Fiscal Year, and, with respect to the audited financial statements, the
accompanying notes thereto and setting forth in each case in comparative form
figures for the previous Fiscal Year, all in reasonable detail, fairly
presenting the financial position and the results of operations of the Parent
and its consolidated Subsidiaries as at the date thereof and for the Fiscal Year
then ended, and prepared in accordance with GAAP. Such statements shall be
examined in accordance with generally accepted auditing standards by and, in the
case of such statements performed on a consolidated basis, accompanied by a
report thereon unqualified as to scope of independent certified public
accountants selected by the Parent and reasonably satisfactory to the Agent.
Each Loan Party hereby authorizes the Agent to communicate directly with its
certified public accountants and, by this provision, authorizes those
accountants to disclose to the Agent any and all financial statements and other
supporting financial documents and schedules relating to such Loan Party and to
discuss directly with the Agent its finances and affairs. Each Loan Party will
authorize such independent accountants in writing (with a copy to the Agent) to
comply with the terms of this SECTION 7.2(A).
As soon as available, but in any event not later than thirty (30) days after the
end of each month, consolidated and consolidating unaudited balance sheets of
the Parent and its consolidated
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Subsidiaries as at the end of such month, and consolidated and consolidating
unaudited statements of income and expense for the Parent and its consolidated
Subsidiaries for such month and for the period from the beginning of the Fiscal
Year to the end of such month, all in reasonable detail, fairly presenting the
financial position and results of operations of the Parent and its consolidated
Subsidiaries as at the date thereof and for such periods, and prepared in
accordance with GAAP (other than presentation of footnotes and subject to normal
year-end audit adjustments) applied consistently with the audited Financial
Statements required to be delivered pursuant to SECTION 7.2(A). The Parent shall
certify by a certificate signed by its chief financial officer that all such
statements have been prepared in accordance with GAAP and present fairly,
subject to normal year-end adjustments, the financial position of the Parent and
its Subsidiaries as at the dates thereof and its results of operations for the
periods then ended.
As soon as available, but in any event not later than forty-five (45) days after
the close of each fiscal quarter other than the fourth quarter of a Fiscal Year,
consolidated and consolidating unaudited balance sheets of the Parent and its
consolidated Subsidiaries as at the end of such quarter, and consolidated and
consolidating unaudited statements of income and expense and statement of cash
flows for the Parent and its consolidated Subsidiaries for such quarter and for
the period from the beginning of the Fiscal Year to the end of such quarter, all
in reasonable detail, fairly presenting the financial position and results of
operation of the Parent and its consolidated Subsidiaries as at the date thereof
and for such periods, prepared in accordance with GAAP (other than presentation
of footnotes and subject to normal year-end audit adjustments) consistent with
the audited Financial Statements required to be delivered pursuant to SECTION
7.2(A). The Parent shall certify by a certificate signed by its chief financial
officer that all such statements have been prepared in accordance with GAAP and
present fairly, subject to normal year-end adjustments, the financial position
of the Parent and its consolidated Subsidiaries as at the dates thereof and its
results of operations for the periods then ended.
With each of the audited Financial Statements delivered pursuant to SECTION
7.2(A), a certificate of the independent certified public accountants that
examined such statement to the effect that they have reviewed and are familiar
with this Agreement and that, in examining such Financial Statements, they did
not become aware of any fact or condition which then constituted a Default or
Event of Default, except for those, if any, described in reasonable detail in
such certificate.
With each of the annual audited Financial Statements delivered pursuant to
SECTION 7.2(A), and within forty-five (45) days after the end of each fiscal
quarter, a certificate of the chief financial officer of the Parent (i) setting
forth in reasonable detail the calculations required to establish compliance
with the covenants set forth in SECTION 9.22, SECTION 9.23, SECTION 9.24 (when
applicable), and SECTION 9.25 during the period covered in such Financial
Statements and as at the end thereof, and (ii) stating that, except as explained
in reasonable detail in such certificate, (A) all of the representations and
warranties of the Loan Parties contained in this Agreement and the other Loan
Documents are correct and complete in all material respects as at the date of
such certificate as if made at such time, except for those that speak as of a
particular day, (B) the Loan Parties are, at the date of such certificate, in
compliance in all material respects with all of their respective covenants and
agreements in this Agreement and the other Loan Documents, (C) no Default or
Event of Default then exists or existed during the period covered by such
Financial
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Statements, and (D) explaining the variances of the figures in the corresponding
budgets (beginning with periods corresponding to the budget for the Fiscal Year
ending December 31, 2000) and prior Fiscal Year financial statements. If such
certificate discloses that a representation or warranty is not correct or
complete, or that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set forth what action
the Loan Parties have taken or propose to take with respect thereto.
No sooner than thirty (30) days prior to the beginning of each Fiscal Year and
no later than the fifteenth day following the final day of each Fiscal Year,
annual forecasts prepared by the Parent during such time period (to include
forecasted consolidated and consolidating balance sheets, statements of income
and expenses) for the Parent and its consolidated Subsidiaries as at the end of
and for each month of such Fiscal Year and consolidating statements of cash flow
for the Parent and its consolidated Subsidiaries as at the end of and for each
fiscal quarter of such Fiscal Year.
Promptly after filing with the PBGC and the IRS, a copy of each annual report or
other filing filed with respect to each Plan of any Loan Party.
Promptly upon the filing thereof, copies of all reports, if any, to or other
documents filed by any Loan Party with the Securities and Exchange Commission
under the Exchange Act (other than reports filed pursuant to Section 16
thereof), and all reports, notices, or statements sent or received by any Loan
Party to or from the holders of any equity interests of any Loan Party (other
than routine non-material correspondence sent by shareholders of any Loan Party)
or of any Debt for Borrowed Money of any Loan Party registered under the
Securities Act of 1933 or to or from the trustee under any indenture under which
the same is issued.
As soon as available, but in any event not later than fifteen (15) days after
any Loan Party's receipt thereof, a copy of all management reports and
management letters prepared by any independent certified public accountants of
Parent or any other Loan Party.
Promptly after their preparation, copies of any and all proxy statements, and
financial statements which the Parent makes available to its shareholders or any
holder of any Debt for Borrowed Money.
Promptly after filing with the IRS, a copy of each tax return filed by any Loan
Party.
Such additional information as the Agent and/or any Lender may from time to time
reasonably request regarding the financial and business affairs of any Loan
Party.
Section 7.3 NOTICES TO THE LENDERS. The Loan Parties shall notify the Agent in
writing of the following matters at the following times:
Immediately after becoming aware of any Default or Event of Default;
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Immediately after becoming aware of the assertion by the holder of any Capital
Stock of any Loan Party or of any Debt in excess of $1,000,000 that a default
exists with respect thereto or that any Loan Party is not in compliance with the
terms thereof, or the written threat or commencement by such holder of any
enforcement action because of such asserted default or non-compliance;
Immediately after becoming aware of any material adverse change in any Loan
Party's property, business, operations, or condition (financial or otherwise);
Immediately after becoming aware of any pending or threatened (in writing)
action, suit, proceeding, or counterclaim by any Person, or any pending or
threatened investigation by a Governmental Authority, or which may materially
and adversely affect the Collateral, the repayment of the Obligations, the
Agent's or any Lender's rights under the Loan Documents, or could reasonably be
expected to have a Material Adverse Effect;
Immediately after becoming aware of any pending or threatened (in writing)
strike, work stoppage, unfair labor practice claim, or other labor dispute
affecting any Loan Party in a manner which could reasonably be expected to have
a Material Adverse Effect;
Immediately after becoming aware of any violation of any law, statute,
regulation, or ordinance of a Governmental Authority affecting any Loan Party
which could reasonably be expected to have a Material Adverse Effect;
Immediately after receipt of any written notice of any violation by any Loan
Party of any Environmental Law which could reasonably be expected to have a
Material Adverse Effect or that any Governmental Authority has asserted in
writing that any Loan Party is not in compliance with any Environmental Law or
is investigating any Loan Party's compliance therewith;
Immediately after receipt of any written notice that any Loan Party is or may be
liable to any Person as a result of the Release or threatened Release of any
Contaminant or that any Loan Party is subject to investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to the Release or threatened Release of any Contaminant which, in either
case, is reasonably likely to give rise to liability in excess of $1,000,000;
Immediately after receipt of any written notice of the imposition of any
Environmental Lien against any property of any Loan Party;
Any change in any Loan Party's name, state of organization, or form of
organization, trade names under which any Loan Party will sell Inventory or
create Accounts, or to which instruments in payment of Accounts may be made
payable, in each case at least thirty (30) days prior thereto;
Within ten (10) Business Days after any Loan Party or any ERISA Affiliate knows
or has reason to know, that an ERISA Event or a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) has occurred, and, when
known, any action taken or threatened by the IRS, the DOL, or the PBGC with
respect thereto;
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Upon request, or, in the event that such filing reflects a significant change
with respect to the matters covered thereby, within three (3) Business Days
after the filing thereof with the PBGC, the DOL, or the IRS, as applicable,
copies of the following: (i) each annual report (form 5500 series), including
Schedule B thereto, filed with the PBGC, the DOL, or the IRS with respect to
each Plan, (ii) a copy of each funding waiver request filed with the PBGC, the
DOL or the IRS with respect to any Plan and all communications received by any
Loan Party or any ERISA Affiliate from the PBGC, the DOL, or the IRS with
respect to such request, and (iii) a copy of each other filing or notice filed
with the PBGC, the DOL, or the IRS, with respect to each Plan of any Loan Party
or any ERISA Affiliate;
Upon request, copies of each actuarial report for any Plan or Multi-employer
Plan and annual report for any Multi-employer Plan, and within three (3)
Business Days after receipt thereof by any Loan Party or any ERISA Affiliate,
copies of the following: (i) any notices of the PBGC's intention to terminate a
Plan or to have a trustee appointed to administer such Plan; (ii) any favorable
or unfavorable determination letter from the IRS regarding the qualification of
a Plan under Section 401(a) of the Code; or (iii) any notice from a
Multi-employer Plan regarding the imposition of withdrawal liability;
Within three (3) Business Days after the occurrence thereof: (i) any changes in
the benefits of any existing Plan which increase any Loan Party's annual costs
with respect thereto by an amount in excess of $1,000,000, or the establishment
of any new Plan or the commencement of contributions in excess of $1,000,000 to
any Plan to which any Loan Party or any ERISA Affiliate was not previously
contributing or (ii) any failure by any Loan Party or any ERISA Affiliate to
make a required installment or any other required payment in excess of
$1,000,000 under Section 412 of the Code on or before the due date for such
installment or payment; and
Within three (3) Business Days after any Loan Party or any ERISA Affiliate knows
or has reason to know that any of the following events has or will occur: (i) a
Multi-employer Plan has been or will be terminated; (ii) the administrator or
plan sponsor of a Multi-employer Plan intends to terminate a Multi-employer
Plan; or (iii) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multi-employer Plan.
Each notice given under this Section shall describe the subject matter thereof
in reasonable detail, and shall set forth the action that any Loan Party or any
ERISA Affiliate, as applicable, has taken or proposes to take with respect
thereto.
Section 7.4 REVISIONS OR UPDATES TO SCHEDULES. Should any of the information or
disclosures provided on any of the schedules originally attached hereto become
outdated or incorrect in any material respect, the Loan Parties from time to
time shall deliver to the Agent and the Lenders, together with an officer's
certificate of the type required pursuant to SECTION 7.2(E), such revisions or
updates to such schedule(s) whereupon such schedules shall be deemed to be
amended by such revisions or updates, as may be necessary or appropriate to
update or correct such schedule(s), PROVIDED that, notwithstanding the
foregoing, no such revisions or updates to Schedules 1.1B, 8.15, 8.17, 8.18,
8.21 or 8.22 shall be deemed to have amended, modified or superseded any such
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schedules as originally attached hereto, or to have cured any breach of warranty
or representation resulting from the inaccuracy or incompleteness of any such
schedules, unless and until the Agent and the Majority Lenders shall have
accepted in writing such revisions or updates to any such schedules.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
Each Loan Party warrants and represents to the Agent and the Lenders that
except as set forth in the Schedules to this Agreement as they may be modified
from time to time pursuant to Section 7.4, and except as hereafter disclosed to
and accepted by the Agent and the Majority Lenders in writing:
Section 8.1 AUTHORIZATION, VALIDITY, AND ENFORCEABILITY OF THIS AGREEMENT AND
THE LOAN DOCUMENTS; NO CONFLICTS. Each Loan Party has the power and authority to
execute, deliver, and perform this Agreement and the other Loan Documents to
which it is a party, to incur the Obligations, and to grant to the Agent Liens
upon the Collateral. Each Loan Party has taken all necessary action (including
obtaining approval of its stockholders, partners, general partner(s), members,
or other applicable equity owners, if necessary) to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents to
which it is a party. This Agreement and the other Loan Documents have been duly
executed and delivered by each Loan Party, and constitute the legal, valid, and
binding obligations of each Loan Party, enforceable against it in accordance
with their respective terms without defense, set-off or counterclaim. Each Loan
Party's execution, delivery, and performance of this Agreement and the other
Loan Documents to which it is a party do not and will not conflict with, or
constitute a violation or breach of, or constitute a default under, or result in
the creation or imposition of any Lien upon the property of any Loan Party by
reason of the terms of (a) any contract, mortgage, Lien, lease, agreement,
indenture (including, without limitation, the Subordinated Notes and the
Indenture entered into in connection therewith), or instrument to which such
Loan Party is a party or which is binding upon it, (b) any Requirement of Law
applicable to such Loan Party, or (c) the certificate or articles of
incorporation, by-laws, or other organizational or constituent documents, as the
case may be, of such Loan Party. The Borrowers' entering into this Agreement and
incurrence of the Obligations resulting from each Borrowing is not prohibited
under the Subordinated Notes.
Section 8.2 VALIDITY AND PRIORITY OF SECURITY INTEREST. The provisions of this
Agreement, the Mortgage(s), and the other Loan Documents create legal and valid
Liens on all the Collateral in favor of the Agent, for the ratable benefit of
the Agent and the Lenders, and, to the extent any such Liens may be perfected
under the UCC, such Liens constitute perfected and continuing Liens on the
Collateral, having priority over all other Liens on the Collateral (except in
the case of Permitted Liens described in CLAUSES (B), (D), (E), (F) and (H) of
the definition of "Permitted Liens" to the extent any such Liens would have
priority over the Agent's Lien pursuant to any Requirement of Law), securing all
the Obligations, and enforceable against the Loan Parties and all third parties.
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Section 8.3 ORGANIZATION AND QUALIFICATION. Each Loan Party (a) is duly formed
and organized and validly existing in good standing under the laws of the
jurisdiction of its formation, (b) is qualified to do business as a foreign
business entity and is in good standing in the jurisdictions set forth on
SCHEDULE 8.3, which are the only jurisdictions in which qualification is
necessary in order for it to own or lease its property and conduct its business
and (c) has all requisite power and authority to conduct its business and to own
its property as presently conducted or owned.
Section 8.4 CORPORATE NAME; PRIOR TRANSACTIONS. Except as set forth on SCHEDULE
8.4, during the past five (5) years, no Loan Party has been known by or used any
other corporate or fictitious name, or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its property outside of the ordinary course of business.
Section 8.5 SUBSIDIARIES AND AFFILIATES. SCHEDULE 8.5 is a correct and complete
list of the name and relationship to the Parent of each and all of the Parent's
Subsidiaries and other Affiliates. Each Subsidiary that is not a Loan Party is
(a) duly formed and organized and validly existing in good standing under the
laws of its jurisdiction of its formation set forth on SCHEDULE 8.5, (b)
qualified to do business as a foreign business entity and in good standing in
each jurisdiction in which the failure to so qualify or be in good standing
could reasonably be expected to have a Material Adverse Effect, and (c) has all
requisite power and authority to conduct its business and own its property as
presently conducted or owned.
Section 8.6 FINANCIAL STATEMENTS AND PROJECTIONS.
The Parent has delivered to the Agent and the Lenders the audited balance sheet
and related statements of income, retained earnings, cash flows, and changes in
stockholders equity for the Parent and its consolidated Subsidiaries as of
September 30, 1998, and for the Fiscal Year then ended, accompanied by the
report thereon of the Parent's independent certified public accountants, Ernst &
Young LLP. The Parent has also delivered to the Agent and the Lenders the
unaudited balance sheet and related statements of income and cash flows for the
Parent and its consolidated Subsidiaries as of June 30, 1999. Such financial
statements are attached hereto as EXHIBIT C. All such financial statements have
been prepared in accordance with GAAP and present accurately and fairly the
financial position of the Parent and its consolidated Subsidiaries as at the
dates thereof and their results of operations for the periods then ended (except
with respect to the financial statements dated June 30, 1999, for the absence of
applicable footnotes and subject to normal year-end adjustments).
The Latest Projections when submitted to the Lenders as required herein
represent the Loan Parties' best estimate of the future financial performance of
the Loan Parties for the periods set forth therein. The Latest Projections have
been prepared on the basis of the assumptions set forth therein, which the Loan
Parties believe are fair and reasonable in light of current and reasonably
foreseeable business conditions at the time submitted to the Lender.
Section 8.7 CAPITALIZATION. As of the Closing Date, the Parent's authorized
Capital Stock consists of 16,668,129 shares of common stock, par value $0.01 per
share, of which all shares are
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validly issued and outstanding and are fully paid and non-assessable. Each Loan
Party other than Parent is a Wholly-Owned Subsidiary of Parent.
Section 8.8 SOLVENCY. Each Loan Party is Solvent prior to and after giving
effect to the making of the Loans to be made on the Closing Date and the
issuance of the Letters of Credit to be issued on the Closing Date (if any), and
shall remain Solvent during the term of this Agreement.
Section 8.9 DEBT. After giving effect to the making of the Loans to be made on
the Closing Date, the Loan Parties have no Debt, except (a) the Obligations, (b)
Debt described on SCHEDULE 8.9, (c) trade payables and other contractual
obligations arising in the ordinary course of business, and (d) other Debt
existing on the Closing Date and reflected in the Financial Statements attached
hereto as EXHIBIT C.
Section 8.10 DISTRIBUTIONS. Since June 30, 1999, no Distribution has been
declared, paid, or made upon or in respect of any Capital Stock or other
securities of the Parent.
Section 8.11 TITLE TO PROPERTY. Each Loan Party has good and indefeasible title
in fee simple to its real property (if any) listed as owned real property in
SCHEDULE 8.12, and has good, indefeasible, and merchantable title to all of its
other property (including the assets reflected on the June 30, 1999 financial
statements delivered to the Agent and the Lenders, except as sold, transferred,
or otherwise disposed of in the ordinary course of business since the date
thereof), free of all Liens except Permitted Liens.
Section 8.12 REAL ESTATE; LEASES. SCHEDULE 8.12 sets forth a correct and
complete list of all Real Estate owned by each Loan Party, all leases and
subleases of real or personal property by each Loan Party as lessee or sublessee
(other than leases of personal property as to which it is lessee or sublessee
for which the value of such personal property is less than $500,000), and all
leases and subleases of real or personal property by each Loan Party as lessor,
lessee, sublessor, or sublessee. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect, and no
default by any party to any such lease or sublease exists.
Section 8.13 PROPRIETARY RIGHTS. SCHEDULE 8.13 sets forth a correct and complete
list of all of each Loan Party's Proprietary Rights. None of the Proprietary
Rights is subject to any licensing agreement or similar arrangement except as
set forth on SCHEDULE 8.13. To the best of each Loan Party's knowledge, none of
the Proprietary Rights infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or conflicts with the
Proprietary Rights. The Proprietary Rights described on SCHEDULE 8.13 constitute
all of the property of such type necessary to the current and anticipated future
conduct of the Loan Parties' business.
Section 8.14 TRADE NAMES. All trade names or styles under which any Loan Party
will sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, are listed on SCHEDULE 8.14.
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Section 8.15 LITIGATION. Except as set forth on SCHEDULE 8.15, there is no
pending or (to the best of any Loan Party's knowledge) threatened, action, suit,
proceeding, or counterclaim by any Person, or investigation by any Governmental
Authority, or any basis for any of the foregoing, which could reasonably be
expected to cause a Material Adverse Effect.
Section 8.16 RESTRICTIVE AGREEMENTS. No Loan Party is a party to any contract or
agreement, or subject to any charter or other corporate restriction, which
affects its ability to execute, deliver, and perform the Loan Documents and
repay the Obligations or which materially and adversely affects or, insofar as
reasonably foreseen, could reasonably be expected to materially and adversely
affect, the property, business, operations, or condition (financial or
otherwise) of such Loan Party, or could reasonably be expected to cause a
Material Adverse Effect.
Section 8.17 LABOR DISPUTES. Except as set forth on SCHEDULE 8.17, on the
Closing Date (a) there is no collective bargaining agreement or other labor
contract covering employees of any Loan Party, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement, (c) to the best knowledge of each Loan Party, no union or other labor
organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of any Loan Party or for any similar purpose, and
(d) there is no pending or (to the best of any Loan Party's knowledge)
threatened, strike, work stoppage, material unfair labor practice claim, or
other material labor dispute against or affecting any Loan Party or its
employees.
Section 8.18 ENVIRONMENTAL LAWS. Except as otherwise disclosed on SCHEDULE 8.18:
Each Loan Party has complied in all material respects with all Environmental
Laws applicable to its Premises and business, and no Loan Party nor any of its
present Premises or operations, nor its past property or operations, is subject
to any current enforcement order from or agreed order or consent order with any
Governmental Authority or private Person respecting (i) compliance with any
Environmental Law or (ii) any potential liabilities and costs or remedial action
(involving a liability or potential liability in excess of $1,000,000) arising
from the Release or threatened Release of a Contaminant.
Each Loan Party has obtained all permits necessary for its current operations
under Environmental Laws, and all such permits are in good standing and each
Loan Party is in compliance with all terms and conditions of such permits.
No Loan Party, nor to the best of any Loan Party's knowledge any of its
predecessors in interest, has in violation of any Environmental Law stored,
treated, or disposed of any hazardous waste (as defined pursuant to 40 CFR Part
261 or any equivalent Environmental Law) on any Premises.
No Loan Party has received any summons, complaint, order, or similar written
notice of any Environmental Claim.
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None of the present or past operations of any Loan Party is the subject of any
investigation by any Governmental Authority evaluating whether any remedial
action is needed to respond to a Release or threatened Release of a Contaminant.
There is not now, nor to the best of any Loan Party's knowledge has there ever
been on or in the Premises in violation of Environmental Laws:
any underground storage tanks or surface impoundments,
any asbestos-containing material, or
any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical
transformers, or other equipment.
No Loan Party has filed any notice under any requirement of Environmental Law
reporting a spill or accidental and unpermitted Release or discharge of a
Contaminant into the environment.
No Loan Party has entered into any negotiations or settlement agreements with
any Person (including the prior owner of its property) imposing material
obligations or liabilities on any Loan Party or any of its Subsidiaries with
respect to any remedial action in response to the Release of a Contaminant or
environmentally related claim.
None of the products manufactured, distributed, or sold by any Loan Party
contains asbestos containing material.
No Environmental Lien has attached to any Premises of any Loan Party.
Section 8.19 NO VIOLATION OF LAW. No Loan Party is in violation of any law,
statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation could reasonably be expected to have a Material Adverse Effect.
Section 8.20 NO DEFAULT. No Loan Party is in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed, or other agreement to which
any such Loan Party is a party or by which it is bound, which default could
reasonably be expected to have a Material Adverse Effect.
Section 8.21 ERISA COMPLIANCE. Except as specifically disclosed in SCHEDULE
8.21:
Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code, and other federal or state law. Each Plan which
is intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of the Loan Parties,
nothing has occurred which would cause the loss of such qualification. Each Loan
Party and each ERISA Affiliate has made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.
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There are no pending or, to the best knowledge of the Loan Parties, threatened
claims, actions, or lawsuits, or action by any Governmental Authority, with
respect to any Plan which has resulted or could reasonably be expected to result
in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
Except for instances, if any, which together do not give rise to liability in
excess of $1,000,000 in the aggregate, (i) no ERISA Event has occurred or is
reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) no Loan Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) no Loan Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multi-employer
Plan; and (v) no Loan Party nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
Section 8.22 TAXES. Each Loan Party has filed all federal and other tax returns
and reports required to be filed (or appropriate extensions have been timely
filed), and has paid all federal and other taxes, assessments, fees, and other
governmental charges levied or imposed upon them or their properties, income, or
assets or which otherwise are due and payable (other than any such taxes,
assessments, fees, and other governmental charges set forth on SCHEDULE 8.22 or
which, to any Loan Party's knowledge are not delinquent and in the aggregate do
not exceed $100,000).
Section 8.23 REGULATED ENTITIES. No Loan Party is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940. No Loan Party is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, or is subject to regulation under the Federal Power Act,
the Interstate Commerce Act, any state public utilities code or law, or any
other federal or state statute or regulation limiting its ability to incur
indebtedness.
Section 8.24 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the Loans are
to be used solely for acquisitions, working capital, and general business
purposes. No Loan Party is engaged in the business of purchasing or selling
Margin Stock or extending credit for the purpose of purchasing or carrying
Margin Stock.
Section 8.25 COPYRIGHTS, PATENTS, TRADEMARKS, AND LICENSES, ETC. Each Loan Party
owns or is licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual franchises,
licenses, rights of way, authorizations, and other rights that are reasonably
necessary for the operation of its businesses, without conflict with the rights
of any other Person. To the best knowledge of each Loan Party, no slogan or
other advertising device, product, process, method, substance, part, or other
material now employed, or now contemplated to be employed, by any Loan Party
infringes upon any rights held by any other
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Person. No claim or litigation regarding any of the foregoing is pending or
threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard, or code is pending or, to the
knowledge of any Loan Party, proposed, which, in either case, could reasonably
be expected to have a Material Adverse Effect.
Section 8.26 NO MATERIAL ADVERSE CHANGE. No material adverse change has occurred
in the Property, business, operations, or conditions (financial or otherwise) of
any Loan Party since June 30, 1999. On the basis of a comprehensive review and
assessment undertaken by the Loan Parties of their respective computers and
computer applications and inquiry made of the Loan Parties' material suppliers,
vendors, and customers, each Loan Party reasonably believes that the "Year 2000
problem" (that is, the risk that computers and computer applications used by any
person may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999) will not
result in a Material Adverse Effect.
Section 8.27 FULL DISCLOSURE. None of the representations or warranties made by
any Loan Party in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement, or certificate furnished by or on behalf of any Loan
Party in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of any Loan Party to the Lenders
prior to the Closing Date), contain any untrue statement of a material fact or
omit any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
Section 8.28 MATERIAL AGREEMENTS. SCHEDULE 8.28 sets forth all material
agreements and contracts to which any Loan Party is a party or is bound as of
the date hereof.
Section 8.29 BANK ACCOUNTS. As of the Closing Date, SCHEDULE 8.29 contains a
complete and accurate list of all bank accounts maintained by each Loan Party
with any bank or other financial institution.
Section 8.30 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other Person is necessary or required in connection
with the execution, delivery, or performance by, or enforcement against, any
Loan Party of this Agreement or any other Loan Document except for those which
have been duly obtained by the Loan Parties copies of which have been provided
to the Agent and the Lenders.
Section 8.31 INVESTMENT PROPERTY.
(a) SCHEDULE 8.31 sets forth a correct and complete list of all
Investment Property owned by each Loan Party. Each Loan Party is the legal
and beneficial owner of such Investment Property, as so reflected, free
and clear of any Lien (other than Permitted Liens), and has not sold,
granted any option with respect to, assigned or transferred, or otherwise
disposed of any of its rights or interest therein.
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(b) To the extent any Loan Party is an Issuer (as defined in SECTION
6.2(D)): (i) the Issuer's shareholders that are Loan Parties and the
ownership interest of each such shareholder are as set forth on SCHEDULE
8.5, and each such shareholder is the registered owner thereof on the
books of the Issuer; (ii) the Issuer acknowledges the Agent's Lien; (iii)
such security interest, collateral assignment, lien, and pledge in favor
of the Agent has been registered on the books of the Issuer for such
purpose as of the date hereof; and (iv) the Issuer is not aware of any
liens, restrictions, or adverse claims which exist on any such Investment
Property other than the continuing security interest, collateral
assignment, lien, and pledge in favor of the Agent granted pursuant to the
terms of SECTION 6.1.
Section 8.32 COMMON ENTERPRISE. The successful operation and condition of each
of the Loan Parties is dependent on the continued successful performance of the
functions of the group of Loan Parties as a whole and the successful operation
of each Loan Party is dependent on the successful performance and operation of
each other Loan Party. Each of the Loan Parties expects to derive benefit (and
its board of directors or other governing body has determined that it may
reasonably be expected to derive benefit), directly and indirectly, from
successful operations of the Parent, each of the other Loan Parties and the
Parent's Subsidiaries. Each Loan Party expects to derive benefit (and the boards
of directors or other governing body of each such Loan Party have determined
that it may reasonably be expected to derive benefit), directly and indirectly,
from the credit extended by the Lenders to the Borrowers hereunder, both in
their separate capacities and as members of the group of companies. Each Loan
Party has determined that execution, delivery, and performance of this Agreement
and any other Loan Documents to be executed by such Loan Party is within its
corporate purpose, will be of direct and indirect benefit to such Loan Party,
and is in its best interest.
Section 8.33 LOAN PARTIES; CERTAIN UNRESTRICTED SUBSIDIARIES. All Loan Parties
(other than the Parent) are Wholly-Owned Subsidiaries of the Parent. As of the
Closing Date the Loan Parties (other than the Parent and the Persons listed in
CLAUSE (II) of the definition of "Unrestricted Subsidiaries" in SECTION 1.1)
constitute all of the domestic Subsidiaries of the Parent existing as of the
Closing Date. As of the Closing Date, each of the Persons listed in CLAUSE (II)
of the definition of "Unrestricted Subsidiaries" in SECTION 1.1 has no assets
and is not active.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Loan Party covenants to the Agent and each Lender that so long as any
of the Obligations remain outstanding or this Agreement is in effect:
Section 9.1 TAXES AND OTHER OBLIGATIONS. Except as otherwise permitted by the
terms of this Agreement, each Loan Party shall, and shall cause each of its
Subsidiaries to, (a) file when due all tax returns and other reports which it is
required to file, (b) pay, or provide for the payment, when due, of all taxes,
fees, assessments, and other governmental charges against it or upon its
property, income, and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
provide to the Agent and the
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Lenders, upon request, satisfactory evidence of its timely compliance with the
foregoing, and (c) pay when due all Debt owed by it and all claims of
materialmen, mechanics, carriers, warehousemen, landlords, processors, and other
like Persons, and all other indebtedness owed by it and perform and discharge in
a timely manner all other obligations undertaken by it; PROVIDED, HOWEVER, so
long as such Loan Party has notified the Agent in writing, neither such Loan
Party nor any of its Subsidiaries need pay any tax, fee, assessment, or
governmental charge, that (x) it is contesting in good faith by appropriate
proceedings diligently pursued, (y) such Loan Party or its Subsidiary, as the
case may be, has established proper reserves for as provided in GAAP, and (z) no
Lien (other than a Permitted Lien) results from such non-payment.
Section 9.2 EXISTENCE AND GOOD STANDING. Except with respect to any Loan Party
that merges into or consolidates with another Loan Party as allowed by SECTION
9.9, each Loan Party shall maintain its existence and its qualification and good
standing in all jurisdictions in which the failure to maintain such existence
and qualification or good standing could reasonably be expected to have a
Material Adverse Effect.
Section 9.3 COMPLIANCE WITH LAW AND AGREEMENTS; MAINTENANCE OF LICENSES. Each
Loan Party shall comply, and shall cause each of its Subsidiaries to comply, in
all material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act). Each Loan Party shall, and shall cause each of its Subsidiaries
to, obtain and maintain all licenses, permits, franchises, and governmental
authorizations necessary to own its property and to conduct its business as
conducted on the Closing Date. No Loan Party shall modify, amend, or alter its
certificate or articles of incorporation other than in a manner which does not
adversely affect the rights of the Lenders or the Agent.
Section 9.4 MAINTENANCE OF PROPERTY. Each Loan Party shall maintain all of its
property necessary and useful in the conduct of its business, in good operating
condition and repair, ordinary wear and tear excepted.
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Section 9.5 INSURANCE.
Each Loan Party shall maintain with financially sound and reputable insurers
having a rating of at least A-VII or better by Best Rating Guide, insurance
against (i) loss or damage by fire with extended coverage, (ii) theft, burglary,
pilferage, and loss in transit (iii) public liability and third party property
damage (iv) larceny, embezzlement, or other criminal liability (v) business
interruption (vi) public liability and third party property damage (vii) and
such other hazards or of such other types as is customary for Persons engaged in
the same or similar business, all as the Agent, in its discretion, or acting at
the direction of the Majority Lenders, shall specify, in amounts, and under
policies acceptable to the Agent and the Majority Lenders. Without limiting the
foregoing, each Loan Party shall also maintain flood insurance, in the event of
a designation of the area in which any Real Estate covered by the Mortgages and
any of the Equipment and Inventory located on such Real Estate is located as
"flood prone" or a "flood risk area," (hereinafter "SFHA") as defined by the
Flood Disaster Protection Act of 1973, in an amount to be reasonably determined
by the Agent, and shall comply with the additional requirements of the National
Flood Insurance Program as set forth in said Act. Each Loan Party shall also
maintain flood insurance for its Inventory and Equipment which is, at any time,
located in a SFHA.
Each Loan Party shall cause the Agent, for the ratable benefit of the Agent and
the Lenders, to be named as secured party or mortgagee and loss payee or
additional insured, in a manner acceptable to the Agent. Each policy of
insurance shall contain a clause or endorsement requiring the insurer to give
not less than fifteen (15) days prior written notice to the Agent in the event
of cancellation of the policy for any reason whatsoever and a clause or
endorsement stating that the interest of the Agent shall not be impaired or
invalidated by any act or neglect of any Loan Party or the owner of any premises
for purposes more hazardous than are permitted by such policy. All premiums for
such insurance shall be paid by the Loan Parties when due, and certificates of
insurance and, if requested by the Agent, photocopies of the policies shall be
delivered to the Agent in sufficient quantity for distribution by the Agent to
each of the Lenders. If any Loan Party fails to procure such insurance or to pay
the premiums therefor when due, the Agent may, and at the direction of the
Majority Lenders shall, do so from the proceeds of Revolving Loans.
Each Loan Party shall promptly notify the Agent of any loss, damage, or
destruction to the Collateral in excess of (i) $500,000 if covered by insurance
or (ii) $100,000 if not covered by insurance. The Agent is hereby authorized to
collect all insurance proceeds in respect of Collateral directly and to apply or
remit them as follows:
With respect to insurance proceeds relating to property other than Collateral,
after deducting from such proceeds the reasonable expenses, if any, incurred by
the Agent in the collection or handling thereof, the Agent shall promptly remit
to the Loan Parties such proceeds.
With respect to insurance proceeds relating to Collateral other than Fixed
Assets, after deducting from such proceeds the reasonable expenses, if any,
incurred by the Agent in the collection or handling thereof, the Agent shall
apply such proceeds, ratably, to the reduction of the Obligations in the order
provided for in SECTION 4.8.
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With respect to insurance proceeds relating to Collateral consisting of Fixed
Assets, after deducting from such proceeds the reasonable expenses, if any,
incurred by the Agent in the collection or handling thereof, the Agent shall
apply such proceeds, ratably, to the reduction of the Loans, or at the option of
the Majority Lenders, may permit or require such money, or any part thereof, to
be used to replace, repair, restore, or rebuild the relevant Fixed Assets in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage, or destruction; PROVIDED,
HOWEVER, that so long as there does not then exist any Default or Event of
Default, the Loan Parties shall be permitted to use insurance proceeds relating
to Collateral consisting of Fixed Assets in an aggregate amount not to exceed
$1,000,000 with respect to any occurrence, to replace, repair, restore, or
rebuild the relevant Fixed Assets, in the manner set forth in this sentence; and
PROVIDED, FURTHER, that the Loan Parties provide the Agent with notice of
receipt of any such insurance proceeds and a summary of any planned replacement,
repair, restoration, or rebuilding of the relevant Fixed Assets.
Section 9.6 CONDEMNATION.
Each Loan Party shall, immediately upon learning of the institution of any
proceeding for the condemnation or other taking of any of its property, notify
the Agent of the pendency of such proceeding, and agrees that the Agent may
participate in any such proceeding, and the Loan Parties from time to time will
deliver to the Agent all instruments reasonably requested by the Agent to permit
such participation.
The Agent is hereby authorized to collect the proceeds of any condemnation claim
or award directly, and to apply or remit them as follows:
With respect to condemnation proceeds relating to property other than
Collateral, after deducting from such proceeds the reasonable expenses, if any,
incurred by the Agent in the collection or handling thereof, the Agent shall
remit such proceeds to the Loan Parties.
With respect to condemnation proceeds relating to Collateral, after deducting
from such proceeds the reasonable expenses, if any, incurred by the Agent in the
collection or handling thereof, the Agent shall apply such proceeds, ratably, to
the reduction of the Obligations in the order provided for in SECTION 4.8.
Section 9.7 ENVIRONMENTAL LAWS.
Each Loan Party shall conduct its business in compliance with all Environmental
Laws applicable to it, including those relating to the generation, handling,
use, storage, and disposal of any Contaminant. Each Loan Party shall take prompt
and appropriate action to respond to any existing or alleged non-compliance with
Environmental Laws ("ENVIRONMENTAL COMPLIANCE ISSUES") and shall report to the
Agent from time to time on such response.
Without limiting the generality of the foregoing, the Loan Parties shall submit
to the Agent and the Lenders annually, commencing on the first Anniversary Date,
and on each Anniversary Date thereafter, an update of the status of each
Environmental Compliance Issue. The Agent or any
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Lender may request copies of non-privileged technical reports prepared by any
Loan Party and its communications with any Governmental Authority to determine
whether such Loan Party is proceeding reasonably to correct, cure or contest in
good faith any Environmental Compliance Issue. At any time any Environmental
Compliance Issue or an Event of Default exists, each Loan Party shall, at the
Agent's or the Majority Lenders' request and at such Loan Party's expense, (i)
retain an independent environmental engineer reasonably acceptable to the Agent
to evaluate the site, including tests if appropriate, to which the Environmental
Compliance Issue relates and prepare and deliver to the Agent (with a copy to
the Loan Party), in sufficient quantity for distribution by the Agent to the
Lenders, a report setting forth the results of such evaluation, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof, and (ii) provide to the Agent in sufficient quantity for
distribution by the Agent to the Lenders a supplemental report of such engineer
whenever the scope of the environmental problems (if any), or the response
thereto or the estimated costs thereof, shall change in any material respect.
Section 9.8 COMPLIANCE WITH ERISA. Each Loan Party shall, and shall cause each
of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code, and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) make all required contributions to any
Plan subject to Section 412 of the Code; (d) not engage in a prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan; and (e) not engage in a transaction that could be subject to Section
4069 or 4212(c) of ERISA.
Section 9.9 MERGERS, CONSOLIDATIONS, SALES, ACQUISITIONS. No Loan Party shall
enter into any transaction of merger, reorganization, or consolidation, or
transfer, sell, assign, lease, or otherwise dispose of all or any part of its
property, or wind up, liquidate or dissolve, or agree to do any of the
foregoing; PROVIDED that notwithstanding the foregoing or any other provision of
this Agreement, as long as no Default exists or would result therefrom and
provided the Parent gives the Agent and the Lenders prior written notice:
a Loan Party, other than the Parent, may wind-up, dissolve, or liquidate if (i)
its property is transferred to the Parent or another Loan Party and (ii) the
Person acquiring such property complies with its obligations under SECTION 6.2
and SECTION 9.27 simultaneously with such acquisition;
a Loan Party, other than the Parent, may merge or consolidate with the Parent or
another Loan Party (provided the Parent or such other Loan Party is the survivor
of any such merger or consolidation to which it is a party);
a Loan Party may make Permitted Acquisitions; and
the Loan Parties may enter into sales or other dispositions of property of the
Loan Parties consisting of (i) Inventory sold in the ordinary course of business
as permitted by SECTION 6.4, (ii) subject to SECTION 6.11(C) and SECTION 4.5,
sales of Equipment having an orderly liquidation value of no greater than
$2,500,000 in the aggregate (net of costs for replacement of Equipment
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permitted under SECTION 6.11(C) in any Fiscal Year), PROVIDED, that the Agent
shall have received written notice of any such sale or disposition involving
Equipment with an orderly liquidation value in excess of $500,000 and (iii)
subject to SECTION 6.11(C) and SECTION 4.5, sales allowed by SECTION 9.19.
Section 9.10 DISTRIBUTIONS; CAPITAL CHANGE; RESTRICTED INVESTMENTS. No Loan
Party shall (a) directly or indirectly declare or make, or incur any liability
to make, any Distribution, except Distributions by a Loan Party to another Loan
Party, (b) make any change in its capital structure which could reasonably be
expected to have a Material Adverse Effect, or (c) make any Restricted
Investment.
Section 9.11 TRANSACTIONS AFFECTING COLLATERAL OR OBLIGATIONS. No Loan Party,
nor any of its Subsidiaries, shall enter into any transaction which could
reasonably be expected to have a Material Adverse Effect.
Section 9.12 GUARANTIES. No Loan Party shall make, issue, or become liable on
any Guaranty, except Guaranties of the Obligations in favor of the Agent,
Guaranties of Debt allowed under SECTION 9.13 and any Guaranty by the Parent of
the obligations of a Subsidiary of the Parent under operating leases entered
into by such Subsidiary in the ordinary course of business.
Section 9.13 DEBT. No Loan Party shall incur or maintain any Debt, other than:
(a) the Obligations; (b) trade payables and contractual obligations to suppliers
and customers arising in the ordinary course of business; (c) other Debt
existing on the Closing Date and reflected in the Financial Statements attached
hereto as EXHIBIT C; (d) Debt constituting purchase money Debt (including,
without limitation, obligations under Capital Leases) incurred after the Closing
Date not to exceed $3,000,000 in the aggregate; (e) Permitted Subordinated Debt;
(f) Debt constituting purchase money Debt (including, without limitation,
obligations under Capital Leases; PROVIDED that such Debt shall exclude all
amounts for consulting, shipping, installation, and other "soft costs" as
determined by the Agent) incurred after the Closing Date and prior to the second
anniversary of the Closing Date, not to exceed $8,000,000 for the purchase of a
management information system for the Loan Parties, and (g) other Debt of a type
not specifically listed in this Section and described on SCHEDULE 8.9.
Section 9.14 PREPAYMENT. No Loan Party shall voluntarily prepay (i) any Debt,
except the Obligations in accordance with the terms of this Agreement, if any
Default or Event of Default is in existence at the time of any such payment or
would result therefrom or (ii) any Permitted Subordinated Debt, PROVIDED, that
for so long as no Default is in existence or would result therefrom, a Loan
Party may voluntarily prepay Debt owing by such Loan Party to another Loan
Party.
Section 9.15 TRANSACTIONS WITH AFFILIATES. Except as set forth below, no Loan
Party shall sell, transfer, distribute, or pay any money or property, including,
but not limited to, any fees or expenses of any nature (including, but not
limited to, any fees or expenses for management services), to any Affiliate that
is not a Borrower, or lend or advance money or property to any Affiliate that is
not a Borrower, or invest in (by capital contribution or otherwise) or purchase
or
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repurchase any stock or indebtedness, or any property, of any Affiliate that is
not a Borrower, or become liable on any Guaranty of the indebtedness, dividends,
or other obligations of any Affiliate that is not a Borrower. Notwithstanding
the foregoing, any Loan Party may engage in transactions with an Affiliate which
is not a Borrower in the ordinary course of such Loan Party's business whether
in a single transaction or a series of related transactions in an amount not to
exceed $1,000,000 and upon terms no less favorable to such Loan Party than would
be obtained in a comparable arm's-length transaction with a third party who is
not an Affiliate.
Section 9.16 INVESTMENT BANKING AND FINDER'S FEES. No Loan Party shall pay or
agree to pay, or reimburse any other party with respect to, any investment
banking or similar or related fee, underwriter's fee, finder's fee, or broker's
fee to any Person in connection with this Agreement. The Loan Parties shall
defend and indemnify the Agent and the Lenders against and hold them harmless
from all claims of any Person that any Loan Party is obligated to pay for any
such fees, and all costs and expenses (including attorneys' fees) incurred by
the Agent and/or any Lender in connection therewith.
Section 9.17 BUSINESS CONDUCTED. The Loan Parties shall not engage directly or
indirectly, in any line of business other than the businesses in which the Loan
Parties are engaged on the Closing Date.
Section 9.18 LIENS. No Loan Party shall create, incur, assume, or permit to
exist any Lien on any property now owned or hereafter acquired by any of them,
except Permitted Liens. Other than as set forth in this Agreement or in
connection with the creation or incurrence of any Debt under SECTION 9.13(D) no
Loan Party will enter into or become subject to any Negative Pledge; PROVIDED
that any Negative Pledge entered into in connection with the creation or
incurrence of Debt under SECTION 9.13(D) shall be limited to the property
subject to the purchase money Lien securing such Debt.
Section 9.19 SALE AND LEASEBACK TRANSACTIONS. No Loan Party shall, directly or
indirectly, enter into any arrangement with any Person providing for any Loan
Party to lease or rent property that such Loan Party has sold or will sell or
otherwise transfer to such Person; PROVIDED that, subject to SECTION 4.5, any
Loan Party may at any time enter into any such arrangement so long as the
aggregate net book value of all property sold by such Loan Party in connection
with all such arrangements and the aggregate amount of all obligations incurred
by the Loan Parties in connection with all such arrangements do not exceed
$3,000,000.
Section 9.20 NEW SUBSIDIARIES. No Loan Party shall directly or indirectly,
organize, create, acquire or permit to exist any Subsidiary other than: (a)
those listed on SCHEDULE 8.5; (b) those Wholly-Owned Subsidiaries of the Parent
created or acquired in connection with a Permitted Acquisition, PROVIDED that
any such Subsidiary shall become a Loan Party or a Borrower (in the Agent's
discretion) hereunder; (c) any Wholly-Owned Subsidiary of the Parent organized
after the Closing Date and, at the time of such organization, which is
designated as an Unrestricted Subsidiary by written notice to the Agent signed
by the Parent, PROVIDED that the aggregate investment in all such Unrestricted
Subsidiaries (whether by loans, advances, equity, or any other form of
contribution) shall be included in the calculation of "other investments" under
CLAUSE (J)
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of the definition of Restricted Investment; or (d) any Subsidiary that is a
joint venture or other business entity, PROVIDED that the aggregate investment
in all such Subsidiaries under this CLAUSE (D) (whether by loans, advances,
equity, or any other form of contribution) shall be included in the calculation
of "other investments" under CLAUSE (J) of the definition of Restricted
Investment.
Section 9.21 FISCAL YEAR. No Loan Party shall change the last day of its Fiscal
Year.
Section 9.22 CAPITAL EXPENDITURES. No Loan Party shall make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by the Loan Parties on a consolidated basis would exceed $8,000,000
during any Fiscal Year.
Section 9.23 OPERATING LEASE OBLIGATIONS. No Loan Party shall enter into, or
suffer to exist, any lease of real or personal property as lessee or sublessee
(other than a Capital Lease), if, after giving effect thereto, the aggregate
amount of Rentals (as hereinafter defined) payable by the Loan Parties on a
consolidated basis in any Fiscal Year in respect of such lease and all other
such leases would exceed $10,000,000 (such amount being referred to herein as
"PERMITTED RENTALS"). The term "RENTALS" means all payments due from the lessee
or sublessee under a lease, including, without limitation, basic rent,
percentage rent, property taxes, utility or maintenance costs, and insurance
premiums.
Section 9.24 FIXED CHARGE COVERAGE RATIO. As of the last day of any fiscal
quarter ending prior to any date on which Availability is less than $10,000,000,
the Loan Parties shall not permit the Fixed Charge Coverage Ratio, determined
for Parent and its consolidated Subsidiaries for the preceding four fiscal
quarters ending as of such day, to be less than 1.20 to 1.00.
Section 9.25 ADJUSTED TANGIBLE NET WORTH. The Loan Parties shall not permit the
Adjusted Tangible Net Worth, determined for Parent and its consolidated
Subsidiaries, as of the end of any fiscal quarter, to be less than the Adjusted
Tangible Net Worth Requirement.
Section 9.26 USE OF PROCEEDS. The Loan Parties shall use the Loan Proceeds to
(i) pay Debt under the Original Agreement owing to the "Lenders" thereunder
other than the Bank, (ii) refinance other Debt under the Original Agreement as
provided by SECTION 15.22 and (iii) general working capital purposes (not
otherwise prohibited by this Agreement) in the ordinary course of business, and
shall not use any portion of the Loan proceeds, directly or indirectly, (a) to
purchase or carry any Margin Stock, (b) to repay or otherwise refinance
indebtedness of the Loan Parties or others incurred to purchase or carry any
Margin Stock, (c) to extend credit for the purpose of purchasing or carrying any
Margin Stock, or (d) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Exchange Act.
Section 9.27 FURTHER ASSURANCES. The Loan Parties shall execute and deliver, or
cause to be executed and delivered, to the Agent and/or the Lenders such
documents and agreements, and shall take or cause to be taken such actions, as
the Agent or any Lender may, from time to time, request to carry out the terms
and conditions of this Agreement and the other Loan Documents.
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ARTICLE 10
CONDITIONS OF LENDING
Section 10.1 CONDITIONS PRECEDENT TO MAKING OF LOANS ON THE CLOSING DATE. The
obligation of the Lenders to make the initial Revolving Loans and the obligation
of the Agent to cause to be issued or provide any Letter of Credit or Credit
Support for any Letter of Credit are subject to the following conditions
precedent having been satisfied in a manner satisfactory to the Agent and each
Lender:
The Agent shall have received each of the following documents, all of which
shall be satisfactory in form and substance to the Agent and the Lenders:
certified copies of the certificate of incorporation, certificate of limited
partnership, or comparable organizational document of each of the Loan Parties,
with all amendments, if any, certified by the appropriate Governmental
Authority, and the bylaws, regulations, operating agreement, or similar
governing document of each Loan Party, in each case certified by the corporate
secretary, general partner, or comparable authorized representative of such Loan
Party, as being true and correct and in effect on the Agreement Date;
certificates of incumbency and specimen signatures with respect to each Person
authorized to execute and deliver this Agreement and the other Loan Documents on
behalf of each Loan Party and each other Person executing any document,
certificate, or instrument to be delivered in connection with this Agreement and
the other Loan Documents and, in the case of each Borrower, to request
Borrowings and Letters of Credit or Credit Support for any Letter of Credit;
a certificate evidencing the existence of each Loan Party, and certificates
evidencing the good standing of each Loan Party in the jurisdiction of its
organization and in each other jurisdiction in which it is required to be
qualified as a foreign business entity to transact its business as presently
conducted, PROVIDED, that upon request by any Loan Party and with the consent of
the Agent, certificates of good standing for such Loan Party in any state other
than the state(s) of its organization and chief executive office, to the extent
not provided on the Closing Date, may be provided after the Closing Date;
certified copies of all action taken by each Loan Party to authorize the
execution, delivery, and performance of this Agreement, the other Loan Documents
and the Borrowings and the Letters of Credit;
a certificate of each Loan Party signed by its Responsible Officer:
(A) stating that all of the representations and
warranties made or deemed to be made under this Agreement are
true and correct as of the Closing Date, after giving effect
to the Loans to be made at such time and the application of
the proceeds thereof and the issuance of any Letter(s) of
Credit at such time,
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(B) stating that no Default or Event of Default exists,
(C) specifying the account of the Borrowers to which the
Agent is authorized to transfer the proceeds of the Revolving
Loans, as required by SECTION 2.2(C), and
(D) certifying as to such other factual matters as may
be reasonably requested by the Agent;
with respect to any Letter of Credit to be issued, all documentation required by
SECTION 2.4, duly executed;
a Revolving Note payable to the order of each Lender, duly executed and
delivered by each Borrower, complying with the requirements of SECTION 2.2.
UCC financing statements and/or amendments to existing UCC financing statements
with respect to all Collateral as may be requested by the Agent, duly executed
by the respective Loan Parties, in all jurisdictions that the Agent may deem
necessary or desirable in order to perfect the Agent's Lien therein;
duly executed UCC-3 termination statements or assignments and such other
instruments, in form and substance satisfactory to the Agent, as shall be
necessary to terminate and satisfy all Liens on the Property of the Loan Parties
except Permitted Liens;
a Copyright, Patent, and Trademark Agreement with respect to all Proprietary
Rights, if any, owned by any Loan Party which must be registered to protect its
use by such Loan Party, duly executed by each Loan Party, as applicable;
each Guaranty Agreement (if any), duly executed and delivered by each Person
required pursuant to SECTION 6.18;
(A) stock certificates and stock powers (duly executed in blank) for all Capital
Stock (to the extent certificated) in each Loan Party other than Parent (to the
extent any such Capital Stock is certificated), together with acknowledgments
executed by the respective issuers thereof, in form and substance satisfactory
to the Agent and (B) "control" agreements (pursuant to the UCC), each duly
executed, as the Agent may request with respect to any Investment Property
listed in SCHEDULE 8.31;
a Mortgage and a title report (such title report to provide a complete listing
of all Liens and other encumbrances on each property covered thereby together
with copies of the documents on file with the relevant Governmental Authority
with respect thereto) for each parcel of real property which any Loan Party
holds fee title ownership of;
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a Borrowing Base Certificate effective as of the Business Day preceding the day
such Loan is to be funded or any such Letter of Credit is to be issued;
landlord's or mortgagee's waiver and consent agreements duly executed on behalf
of each landlord or mortgagee, as the case may be, of Real Estate and any other
real property on which any Inventory proposed as Eligible Inventory is located
(PROVIDED, that the Borrowers may defer delivery of any such agreements for a
period not to exceed ninety (90) days from the Closing Date; PROVIDED, FURTHER,
that thereafter the Agent may, in its discretion, reserve an amount equal to
three (3) months rent for any such location from the Borrowing Base with respect
to all Eligible Inventory located at any such location);
each Blocked Account Agreement duly executed as requested by the Agent;
signed opinions of counsel for the Borrowers, opining as to such matters in
connection with the transactions contemplated by this Agreement as the Agent may
reasonably request, each such opinion to be in a form, scope, and substance
satisfactory to the Agent, the Lenders, and their respective counsel;
The Agent shall have received evidence, in form, scope, and substance,
reasonably satisfactory to the Agent, of all insurance coverage as required by
this Agreement;
the Financial Statements;
a copy of the written authorization required by SECTION 7.2(A); and
such other documents and instruments as the Agent or any Lender may reasonably
request.
This Agreement and the other Loan Documents shall have been executed by each
party thereto and the Loan Parties shall have performed and complied with all
covenants, agreements, and conditions contained herein and the other Loan
Documents which are required to be performed or complied with by the Loan
Parties before or on the Closing Date.
Upon making the initial Revolving Loans (including such Revolving Loans made to
finance the fees, costs, and expenses then payable under this Agreement) and
issuing any Letters of Credit or Credit Support for any Letter of Credit on the
date of making the initial Revolving Loans, and with all its obligations
current, the Borrowers would have Availability in an amount no less than
$20,000,000.
All representations and warranties made hereunder and in the other Loan
Documents shall be true and correct as if made on such date.
No Default or Event of Default shall exist on the Closing Date, or would exist
after giving effect to the Loans to be made, the Letters of Credit to be issued,
and the Credit Support to be in place on such date.
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The Loan Parties shall have paid all fees and expenses of the Agent and the
Attorney Costs incurred in connection with any of the Loan Documents and the
transactions contemplated thereby to the extent invoiced.
The Agent and the Lenders shall have had an opportunity, if they so choose, to
examine the books of account and other records and files of the Loan Parties and
to make copies thereof, and to conduct a pre-closing audit which shall include,
without limitation, verification of Inventory, Accounts, and the Borrowing Base,
and the results of such examination and audit shall have been satisfactory to
the Agent and the Lenders in all respects.
All proceedings taken in connection with the execution of this Agreement, all
other Loan Documents and all documents and papers relating thereto shall be
satisfactory in form, scope, and substance to the Agent and the Lenders.
No action, proceeding, investigation, regulation, or legislation shall have been
instituted, threatened, or proposed by or before any Governmental Authority to
enjoin, restrain, or prohibit, or to obtain damages in respect of, or which is
related to or arises out of this Agreement or the consummation of the
transactions contemplated by this Agreement or which, in the Agent's or the
Lenders' reasonable discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement.
The acceptance by the Borrowers of any Loans made or Letters of Credit issued on
the Closing Date shall be deemed to be a representation and warranty made by the
Borrowers to the effect that all of the conditions precedent to the making of
such Loans or the issuance of such Letters of Credit have been satisfied, with
the same effect as delivery to the Agent and the Lenders of a certificate signed
by a Responsible Officer of the Loan Parties, dated the Closing Date, to such
effect. Execution and delivery to the Agent by a Lender of a counterpart of this
Agreement shall be deemed confirmation by such Lender that (i) all conditions
precedent in this SECTION 10.1 have been fulfilled to the satisfaction of such
Lender and (ii) the decision of such Lender to execute and deliver to the Agent
an executed counterpart of this Agreement was made by such Lender independently
and without reliance on the Agent or any other Lender as to the satisfaction of
any condition precedent set forth in this SECTION 10.1.
Section 10.2 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Lenders to
make each Loan, including the initial Revolving Loans on the Closing Date and
the obligation of the Agent to issue or cause to be issued or to provide Credit
Support for any Letter of Credit shall be subject to the further conditions
precedent that on and as of the date of any such extension of credit:
the following statements shall be true, and the acceptance by the Borrowers of
any extension of credit shall be deemed to be a statement to the effect set
forth in CLAUSE (I) and CLAUSE (II), with the same effect as the delivery to the
Agent and the Lenders of a certificate signed by a Responsible Officer of each
Loan Party, dated the date of such extension of credit, stating that:
The representations and warranties contained in this Agreement and the other
Loan Documents are correct in all material respects on and as of the date of
such extension of credit as though
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made on and as of such date, other than any such representation or warranty
which relates to a specified prior date and except to the extent the Agent and
the Lenders have been notified by the Loan Parties that any representation or
warranty is not correct and the Majority Lenders have explicitly waived in
writing compliance with such representation or warranty; and
No event has occurred and is continuing, or would result from such extension of
credit, which constitutes a Default or an Event of Default;
The amount of the Borrowing Base shall be sufficient to make such Revolving
Loans or issue such Letters of Credit without the Availability being or becoming
less than zero dollars ($0.00), PROVIDED, HOWEVER, that the foregoing conditions
precedent are not conditions to each Lender participating in or reimbursing the
Bank or the Agent for such Lenders' Pro Rata Share of any Non-Ratable Loan or
Agent Advance made in accordance with the provisions of in SECTION 2.2(H),
SECTION 2.2(I), and SECTION 2.2(J).
The Agent shall have received satisfactory evidence that the Agent has a valid,
exclusive (other than Permitted Liens), and perfected first priority security
interest, lien, collateral assignment, and pledge as of such date in all
Collateral and other property, if any, covered by the Agent Lien (to the extent
any such Liens may be perfected under the UCC; PROVIDED that upon the Agent's
request, the Loan Parties shall provide any additional agreement, document,
instrument, certificate, or other item relating to any other Collateral as may
be required for perfection under any Requirement of Law);
Except as disclosed in writing to the Agent and the Lenders on or before the
Closing Date, as of the Closing Date and as of the date of funding such Loan or
issuing such Letter of Credit, there shall not have occurred any change which is
materially adverse, in the Agent's or the Lenders' discretion, to the assets,
liabilities, businesses, operations, or condition (financial or otherwise) of
the Loan Parties in comparison to such conditions as presented by the Financial
Statements and no Material Adverse Effect shall have occurred.
ARTICLE 11
DEFAULT REMEDIES
Section 11.1 EVENTS OF DEFAULT. It shall constitute an event of default ("EVENT
OF DEFAULT") if any one or more of the following shall occur for any reason:
any failure of timely payment of any principal of or interest or premium on (i)
any Revolving Loan, or (ii) any of the other Obligations and any such failure of
payment of any such other Obligations shall continue for a period of five (5)
days;
any representation or warranty made or deemed made by the Loan Parties in this
Agreement or in any of the other Loan Documents, any Financial Statement, or any
certificate furnished by the Loan Parties or any of their Subsidiaries at any
time to the Agent or any Lender shall prove to be untrue in any material respect
as of the date on which made, deemed made, or furnished;
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any default shall occur in
the observance or performance of any of the covenants and agreements contained
in ARTICLE 6 or ARTICLE 7 or SECTION 9.2 (insofar as it requires the
preservation of the existence of the Loan Parties), SECTION 9.9 through SECTION
9.15, and SECTION 9.18 through SECTION 9.27, or
the observance or performance of any of the covenants and agreements contained
in this Agreement, other than as referenced in SECTION 11.1(A), and SECTION
11.1(C)(I), or any other Loan Documents, or any other agreement entered into at
any time to which the Loan Parties and the Agent or any Lender are party
(including in respect of any Bank Products) and such default shall continue for
a period of thirty (30) days after written notice thereof has been given to the
Parent by the Agent, or if any such agreement or document shall terminate (other
than in accordance with its terms or the terms hereof or with the written
consent of the Agent and the Majority Lenders) or become void or unenforceable,
without the written consent of the Agent and the Majority Lenders;
default shall occur with respect to any Debt For Borrowed Money (other than the
Obligations) in an outstanding principal amount which exceeds $1,000,000, or
under any agreement or instrument under or pursuant to which any such Debt For
Borrowed Money may have been issued, created, assumed, or guaranteed by any Loan
Party, and such default shall continue for more than the period of grace, if
any, therein specified, if the effect thereof (with or without the giving of
notice or further lapse of time or both) is to accelerate, or to permit the
holders of any such Debt For Borrowed Money to accelerate, the maturity of any
such Debt For Borrowed Money, or any such Debt For Borrowed Money shall be
declared due and payable or be required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof;
any Loan Party shall (i) file a voluntary petition in bankruptcy or file a
voluntary petition or an answer or otherwise commence any action or proceeding
seeking reorganization, arrangement, or readjustment of its debts or for any
other relief under the Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter
existing, or consent to, approve of, or acquiesce in, any such petition, action,
or proceeding; (ii) apply for or acquiesce in the appointment of a receiver,
assignee, liquidator, sequestrator, custodian, monitor, trustee, or similar
officer for it or for all or any part of its property; (iii) make an assignment
for the benefit of creditors; or (iv) be unable generally to pay its debts as
they become due;
an involuntary petition or proposal shall be filed or an action or proceeding
otherwise commenced (other than as referenced in SECTION 11.1(E)) seeking
reorganization, arrangement, consolidation, or readjustment of the debts of any
Loan Party or for any other relief under the Bankruptcy Code, as amended, or
under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing and either (i) such petition, proposal, action, or proceeding
shall not have been dismissed within a period of sixty (60) days after its
commencement or (ii) an order for relief against any Loan Party shall have been
entered in such proceeding;
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a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee, or
similar officer for any Loan Party or for all or any part of its property shall
be appointed or a warrant of attachment, execution, or similar process shall be
issued against any part of the property of any Loan Party;
any Loan Party shall file a certificate of dissolution under applicable state
law or shall be liquidated, dissolved, or wound-up (except in a transaction
allowed under SECTION 9.9) or shall commence or have commenced against it any
action or proceeding for dissolution, winding-up, or liquidation, or shall take
any corporate action in furtherance thereof;
all or any material part of the property of any Loan Party shall be
nationalized, expropriated, or condemned, seized, or otherwise appropriated, or
custody or control of such property or of any Loan Party shall be assumed by any
Governmental Authority or any court of competent jurisdiction at the instance of
any Governmental Authority, except where contested in good faith by proper
proceedings diligently pursued where a stay of enforcement is in effect;
any guaranty of the Obligations shall be terminated, revoked, or declared void
or invalid;
one or more judgments, orders, decrees, or arbitration awards is entered against
any Loan Party involving liability in the aggregate (to the extent not covered
by independent third-party insurance as to which the insurer does not dispute
coverage) as to any single or related or unrelated series of transactions,
incidents or conditions, of $1,000,000 or more, and the same shall remain
unsatisfied, unvacated, and unstayed pending appeal for a period of thirty (30)
days after the entry thereof;
any loss, theft, damage, or destruction of any item or items of Collateral or
other property of any Loan Party occurs which materially and adversely affects
the property, business, operation, prospects, or condition of any Loan Party and
is not adequately covered by insurance;
there occurs a Material Adverse Effect;
there is filed against any Loan Party any civil or criminal action, suit, or
proceeding under any federal or state racketeering statute (including the
Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit
or proceeding (i) is not dismissed within one hundred twenty (120) days, and
(ii) could reasonably be expected to result in the confiscation or forfeiture of
any material portion of the Collateral;
for any reason other than the failure of the Agent to take any action available
to it to maintain perfection of the Agent's Liens, pursuant to the Loan
Documents, any Loan Document ceases to be in full force and effect or any Lien
with respect to any material portion of the Collateral intended to be secured
thereby ceases to be, or is not, valid, perfected, and prior to all other Liens
(other than Permitted Liens which are expressly permitted to have priority over
the Agent's Liens) or is terminated, revoked, or declared void;
(i) an ERISA Event shall occur with respect to a Pension Plan or Multi-employer
Plan which has resulted or could reasonably be expected to result in liability
of any Loan Party under Title IV of
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ERISA to the Pension Plan, Multi-employer Plan or the PBGC in an aggregate
amount in excess of $1,000,000; (ii) the aggregate amount of Unfunded Pension
Liability among all Pension Plans at any time exceeds $1,000,000; or (iii) any
Loan Party or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multi-employer
Plan in an aggregate amount in excess of $1,000,000;
there occurs a Change of Control; or
any "Event of Default" (as defined in the Subordinated Notes) occurs under the
Subordinated Notes prior to the discharge thereof.
Section 11.2 REMEDIES.
If a Default or an Event of Default exists, the Agent may, in its discretion,
and shall, at the direction of the Majority Lenders, do one or more of the
following at any time or times and in any order, without notice to or demand on
any Loan Party: (i) reduce the Maximum Revolver Amount, or the advance rates
against Eligible Accounts and/or Eligible Inventory used in computing the
Borrowing Base, or reduce one or more of the other elements used in computing
the Borrowing Base; (ii) restrict the amount of or refuse to make Revolving
Loans; and (iii) restrict or refuse to provide Letters of Credit or Credit
Support. If an Event of Default exists, the Agent shall, at the direction of the
Majority Lenders, do one or more of the following, in addition to the actions
described in the preceding sentence, at any time or times and in any order,
without notice to or demand on any Loan Party: (A) terminate the Commitments and
this Agreement; (B) declare any or all Obligations to be immediately due and
payable; PROVIDED, HOWEVER, that upon the occurrence of any Event of Default
described in SECTIONS 11.1(E), 11.2(F), 11.1(G), or 11.1(H), the Commitments
shall automatically and immediately expire and all Obligations shall
automatically become immediately due and payable without notice or demand of any
kind; and (C) pursue its other rights and remedies under the Loan Documents and
applicable law.
If an Event of Default has occurred and is continuing: (i) the Agent shall have
for the benefit of the Lenders, in addition to all other rights of the Agent and
the Lenders, the rights and remedies of a secured party under the UCC; (ii) the
Agent may, at any time, take possession of the Collateral and keep it on any
Loan Party's premises, at no cost to the Agent or any Lender, or remove any part
of it to such other place or places as the Agent may desire, or any Loan Party
shall, upon the Agent's demand, at such Loan Party's cost, assemble the
Collateral and make it available to the Agent at a place reasonably convenient
to the Agent; and (iii) the Agent may sell and deliver any Collateral at public
or private sales, for cash, upon credit, or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion, and may, if the
Agent deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Without in any way requiring notice to
be given in the following manner, each Loan Party agrees that any notice by the
Agent of sale, disposition, or other intended action hereunder or in connection
herewith, whether required by the UCC or otherwise, shall constitute reasonable
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notice to the Loan Parties if such notice is mailed by registered or certified
mail, return receipt requested, postage prepaid, or is delivered personally
against receipt, at least ten (10) days prior to such action to the Loan
Parties' address specified in or pursuant to SECTION 15.8. If any Collateral is
sold on terms other than payment in full at the time of sale, no credit shall be
given against the Obligations until the Agent or the Lenders receive payment,
and if the buyer defaults in payment, the Agent may resell the Collateral
without further notice to any Loan Party. In the event the Agent seeks to take
possession of all or any portion of the Collateral by judicial process, each
Loan Party irrevocably waives: (A) the posting of any bond, surety, or security
with respect thereto which might otherwise be required; (B) any demand for
possession prior to the commencement of any suit or action to recover the
Collateral; and (C) any requirement that the Agent retain possession and not
dispose of any Collateral until after trial or final judgment. Each Loan Party
agrees that the Agent has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person. The Agent is hereby
granted a license or other right to use, without charge, each Loan Party's
labels, patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and each Loan Party's rights under all
licenses and all franchise agreements shall inure to the Agent's benefit for
such purpose. The proceeds of sale shall be applied first to all expenses of
sale, including attorneys' fees, and then to the Obligations. The Agent will
return any excess to the Loan Parties and the Loan Parties shall remain liable
for any deficiency.
If an Event of Default occurs and is continuing, each Loan Party hereby waives
all rights to notice and hearing prior to the exercise by the Agent of the
Agent's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing.
Each Loan Party recognizes that the Agent may be unable to effect a public sale
of any or all of the Collateral or other property to be sold by reason of
certain prohibitions contained in the laws of any jurisdiction outside the
United States or in applicable federal or state securities laws but may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers who will be obliged to agree, among other things, to acquire such
Collateral or other property to be sold for their own account for investment and
not with a view to the distribution or resale thereof. Each Loan Party
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale
and, notwithstanding such circumstances, agrees that any such private sale
shall, to the extent permitted by law, be deemed to have been made in a
commercially reasonable manner. Unless required by a Requirement of Law, the
Agent shall not be under any obligation to delay a sale of any of the Collateral
or other property to be sold for the period of time necessary to permit the
issuer of such securities to register such securities under the laws of any
jurisdiction outside the United States under any applicable federal or state
securities laws, even if such issuer would agree to do so. Each Loan Party
further agrees to do or cause to be done, to the extent that such Loan Party may
do so under Requirements of Law, all such other acts and things as may be
necessary to make such sales or resales of any portion or all of the Collateral
or other property to be sold valid and binding and in compliance with any and
all Requirements of Law at the Loan Parties' expense. Each Loan Party further
agrees that a breach of any of the covenants contained in this SECTION 11.2(D)
will cause irreparable injury to the Agent and the Lenders for which there is no
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adequate remedy at law and, as a consequence, agrees that each covenant
contained in this SECTION 11.2(D) shall be specifically enforceable against such
Loan Party and such Loan Party hereby waives and agrees, to the fullest extent
permitted by law, not to assert as a defense against an action for specific
performance of such covenants that (i) such Loan Party's failure to perform such
covenants will not cause irreparable injury to the Agent and the Lenders or (ii)
the Agent or the Lenders have an adequate remedy at law in respect of such
breach. Each Loan Party further acknowledges the impossibility of ascertaining
the amount of damages which would be suffered by the Agent and the Lenders by
reason of a breach of any of the covenants contained in this SECTION 11.2(D)
and, consequently, agrees that, if such Loan Party shall breach any of such
covenants and the Agent or the Lenders shall sue for damages for such breach,
such Loan Party shall pay to the Agent, for the benefit of the Agent and the
Lenders, as liquidated damages and not as a penalty, an aggregate amount equal
to the value of the Collateral or other property to be sold on the date the
Agent shall demand compliance with this SECTION 11.2(D).
ARTICLE 12
TERM AND TERMINATION
Section 12.1 TERM AND TERMINATION. The term of this Agreement shall end on the
Stated Termination Date. The Agent upon direction from the Majority Lenders may
terminate this Agreement without notice upon the occurrence and during the
continuation of an Event of Default. Upon the effective date of termination of
this Agreement for any reason whatsoever, all Obligations (including all unpaid
principal, accrued and unpaid interest, and any early termination or prepayment
fees or penalties) shall become immediately due and payable and the Loan Parties
shall immediately arrange for the cancellation and return of Letters of Credit
then outstanding. Notwithstanding the termination of this Agreement, until all
Obligations are indefeasibly paid and performed in full in cash, the Loan
Parties shall remain bound by the terms of this Agreement and shall not be
relieved of any of their Obligations hereunder, and the Agent and the Lenders
shall retain all their rights and remedies hereunder (including the Agent's
Liens in and all rights and remedies with respect to all then existing and
after-arising Collateral).
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
Section 13.1 NO WAIVERS; CUMULATIVE REMEDIES. No failure by the Agent or any
Lender to exercise any right, remedy, or option under this Agreement or any
present or future supplement thereto, or in any other agreement between or among
any Loan Party and the Agent and/or any Lender, or delay by the Agent or any
Lender in exercising the same, will operate as a waiver thereof. No waiver by
the Agent or any Lender will be effective unless it is in writing, and then only
to the extent specifically stated. No waiver by the Agent or the Lenders on any
occasion shall affect or diminish the Agent's and each Lender's rights
thereafter to require strict performance by the Loan Parties of any provision of
this Agreement. The Agent's and each
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Lender's rights under this Agreement will be cumulative and not exclusive of any
other right or remedy which the Agent or any Lender may have.
Section 13.2 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by any Loan Party therefrom, shall be effective unless the same shall
be in writing and signed by the Majority Lenders (or by the Agent at the written
request of the Majority Lenders) and the Loan Parties and then any such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; PROVIDED, HOWEVER, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Lenders and the Loan
Parties and acknowledged by the Agent, do any of the following:
increase or extend the Commitment of any Lender;
postpone or delay any date fixed by this Agreement or any other Loan Document
for any payment of principal, interest, fees, or other amounts due to the
Lenders (or any of them) hereunder or under any other Loan Document;
reduce the principal of, or the rate of interest specified herein on any Loan,
or any fees or other amounts payable hereunder or under any other Loan Document;
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Loans which is required for the Lenders or any of them to take any
action hereunder;
increase any of the percentages set forth in the definition of the Borrowing
Base;
amend this Section or any provision of the Agreement providing for consent or
other action by all Lenders;
release Collateral other than as permitted by SECTION 14.12;
change the definitions of "Majority Lenders" or "Required Lenders"; or
increase the Maximum Revolver Amount and the Unused Letter of Credit
Subfacility;
PROVIDED, HOWEVER, the Agent may, in its sole discretion and notwithstanding the
limitations contained in CLAUSE (E) and CLAUSE (I) above and any other terms of
this Agreement, make Revolving Loans (including Agent Advances) in an amount not
to exceed ten percent (10.0%) of the Borrowing Base and, PROVIDED FURTHER, that
no amendment, waiver, or consent shall, unless in writing and signed by the
Agent, affect the rights or duties of the Agent under this Agreement or any
other Loan Document.
Section 13.3 ASSIGNMENTS; PARTICIPATIONS.
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Any Lender may, with the written consent of the Agent (which consent shall not
be unreasonably withheld) and so long as no Default exists of the Parent (which
consent shall not be unreasonably withheld), assign and delegate to one or more
Eligible Assignees (PROVIDED that no consent of the Agent or the Parent shall be
required in connection with any assignment and delegation by a Lender to an
Affiliate of such Lender) (each an "ASSIGNEE") all, or any ratable part of all,
of the Loans, the Commitments, and the other rights and obligations of such
Lender hereunder, in a minimum amount of $5,000,000 (PROVIDED that, unless an
assignor Lender has assigned and delegated all of its Loans and Commitments, no
such assignment and/or delegation shall be permitted unless, after giving effect
thereto, such assignor Lender retains a Commitment in a minimum amount of
$5,000,000); PROVIDED, HOWEVER, that the Loan Parties and the Agent may continue
to deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses, and related information with respect to
the Assignee, shall have been given to the Loan Parties and the Agent by such
Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered
to the Loan Parties and the Agent an Assignment and Acceptance in the form of
EXHIBIT F ("ASSIGNMENT AND ACCEPTANCE") together with any Note or Notes subject
to such assignment, and (iii) the assignor Lender or Assignee has paid to the
Agent a processing fee in the amount of $5,000.
From and after the date that the Agent notifies the assignor Lender that it has
received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations, including, but not
limited to, the obligation to participate in Letters of Credit and Credit
Support have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of a Lender under the Loan Documents, and
(ii) the assignor Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
By executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other Loan Document furnished pursuant hereto or
the attachment, perfection, or priority of any Lien granted by the Loan Parties
to the Agent or any Lender in the Collateral; (ii) such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of the Loan Parties or the performance or observance by any
Loan Party of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (iii) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such Assignee will,
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independently and without reliance upon the Agent, such assigning Lender or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such Assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers, including the discretionary rights and
incidental power, as are reasonably incidental thereto; and (vi) such Assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
Immediately upon satisfaction of the requirements of SECTION 13.3(A), this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Lender PRO TANTO.
Any Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons not Affiliates of the Loan Parties (a
"Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "ORIGINATING LENDER")
hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that (i) the
originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Loan Parties and the Agent shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, and (v) all amounts payable by the Loan Parties hereunder shall be
determined as if such Lender had not sold such participation; except that, if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent and subject to the same limitation as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
Notwithstanding any other provision in this Agreement, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
ss.203.14, and such Federal Reserve Bank may enforce such pledge or securitY
interest in any manner permitted under applicable law.
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ARTICLE 14
THE AGENT
Section 14.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby designates and
appoints the Bank as its agent under this Agreement and the other Loan Documents
and each Lender hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and each other Loan Document
and to exercise such powers and perform such duties as are expressly delegated
to it by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto. The Agent agrees to act as
such on the express conditions contained in this ARTICLE 14. The provisions of
this ARTICLE 14 are solely for the benefit of the Agent and the Lenders and the
Loan Parties shall have no rights as a third party beneficiary of any of the
provisions contained herein other than as expressly provided in SECTION 14.10
and SECTION 14.12. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
nor shall the Agent have or be deemed to have any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations, or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties. Except as expressly otherwise provided in this Agreement,
the Agent shall have and may use its sole discretion with respect to exercising
or refraining from exercising any discretionary rights or taking or refraining
from taking any actions which the Agent is expressly entitled to take or assert
under this Agreement and the other Loan Documents, including (a) the
determination of the applicability of ineligibility criteria with respect to the
calculation of the Borrowing Base, (b) the making of Agent Advances pursuant to
SECTION 2.2(I), and (c) the exercise of remedies pursuant to SECTION 11.2, and
any action so taken or not taken shall be deemed consented to by the Lenders.
Section 14.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees, or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
Section 14.3 LIABILITY OF THE AGENT. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation, or warranty made by the Loan Parties or Affiliate of
the Loan Parties, or any officer thereof, contained in this Agreement or in any
other Loan Document, or in any certificate, report, statement, or other document
referred to or provided
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for in, or received by the Agent under or in connection with, this Agreement or
any other Loan Document, or the validity, effectiveness, genuineness,
enforceability, or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Loan Parties or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party or any Loan Party's Affiliates.
Section 14.4 RELIANCE BY THE AGENT.
The Agent shall be entitled to rely, and shall be fully protected in relying,
upon any writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex, or telephone message, statement, or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent, or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to any Loan Party), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Majority Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Majority
Lenders (or all Lenders if so required by SECTION 13.2) and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.
For purposes of determining compliance with the conditions specified in SECTION
10.1, each Lender that has executed this Agreement shall be deemed to have
consented to, approved, or accepted or to be satisfied with, each document or
other matter either sent by the Agent to such Lender for consent, approval,
acceptance, or satisfaction, or required thereunder to be consented to or
approved by or acceptable or satisfactory to the Lender.
Section 14.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, unless the Agent
shall have received written notice from a Lender or a Loan Party referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." The Agent will notify the Lenders of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Lenders in
accordance with SECTION 11; PROVIDED, HOWEVER, that unless and until the Agent
has received any such request, the 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.
Section 14.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Loan Parties and their Affiliates, shall be deemed
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<PAGE>
to constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition, and creditworthiness of the Loan Parties and their Affiliates,
and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to the Loan Parties. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals, and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition, and
creditworthiness of the Loan Parties. Except for notices, reports, and other
documents expressly herein required to be furnished to the Lenders by the Agent,
the Agent shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, prospects, operations,
property, financial and other condition, or creditworthiness of any Loan Party
which may come into the possession of any of the Agent-Related Persons.
Section 14.7 INDEMNIFICATION. WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED
HEREBY ARE CONSUMMATED, THE LENDERS SHALL INDEMNIFY UPON DEMAND THE
AGENT-RELATED PERSONS (TO THE EXTENT NOT REIMBURSED BY OR ON BEHALF OF THE LOAN
PARTIES AND WITHOUT LIMITING THE OBLIGATION OF THE LOAN PARTIES TO DO SO), PRO
RATA, FROM AND AGAINST ANY AND ALL INDEMNIFIED LIABILITIES AS SUCH TERM IS
DEFINED IN SECTION 15.11; PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR
THE PAYMENT TO THE AGENT-RELATED PERSONS OF ANY PORTION OF SUCH INDEMNIFIED
LIABILITIES RESULTING SOLELY FROM SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. Without limitation of the foregoing, each Lender shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings, or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Loan Parties. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of the Agent.
Section 14.8 THE AGENT IN INDIVIDUAL CAPACITY. The Bank and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with any Loan Party and
Affiliates as though the Bank were not the Agent hereunder and without notice to
or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, the Bank or its Affiliates may receive information regarding any
Loan Party (including information that may be subject to confidentiality
obligations in favor of any such Loan Party)
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and acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, the Bank shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent, and the terms "Lender" and "Lenders"
include the Bank in its individual capacity.
Section 14.9 SUCCESSOR AGENT. The Agent may resign as Agent upon thirty (30)
days notice to the Lenders and the Loan Parties, such resignation to be
effective upon the acceptance of a successor agent to its appointment as Agent.
In the event the Bank sells all of its Commitment and Revolving Loans as part of
a sale, transfer, or other disposition by the Bank of substantially all of its
loan portfolio, the Bank shall resign as Agent and such purchaser or transferee
shall become the successor Agent hereunder. If the Agent resigns under this
Agreement, subject to the proviso in the preceding sentence, the Majority
Lenders shall appoint from among the Lenders a successor agent for the Lenders.
If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the
Lenders and the Loan Parties, a successor agent from among the Lenders. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent, and the retiring Agent's
appointment, powers, and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this ARTICLE 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.
Section 14.10 WITHHOLDING TAX.
If any Lender is a "foreign corporation, partnership, or trust" within the
meaning of the Code and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender agrees
with and in favor of the Agent, to deliver to the Agent and the Parent:
if such Lender claims an exemption from, or a reduction of, withholding tax
under a United States tax treaty, properly completed IRS Forms 1001 and W8
before the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during which
interest may be paid under this Agreement;
if such Lender claims that interest paid under this Agreement is exempt from
United States withholding tax because it is effectively connected with a United
States trade or business of such Lender, two properly completed and executed
copies of IRS Form 4224 before the payment of any interest is due in the first
taxable year of such Lender and in each succeeding taxable year of such Lender
during which interest may be paid under this Agreement, and IRS Form W9; and
such other form or forms as may be required under the Code or other laws of the
United States as a condition to exemption from, or reduction of, United States
withholding tax.
Such Lender agrees to promptly notify the Agent and the Parent of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
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If any Lender claims exemption from, or reduction of, withholding tax under a
United States tax treaty by providing IRS Form 1001 and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations owing to such Lender, such Lender agrees to notify the Agent and the
Parent of the percentage amount in which it is no longer the beneficial owner of
Obligations owing to such Lender. To the extent of such percentage amount, the
Agent and the Parent will treat such Lender's IRS Form 1001 as no longer valid.
If any Lender claiming exemption from United States withholding tax by filing
IRS Form 4224 with the Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations owing to such Lender, such
Lender agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
If any Lender is entitled to a reduction in the applicable withholding tax, the
Agent or any Loan Party may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by CLAUSE (A) of
this Section are not delivered to the Agent and the Parent, then the Agent or
any Loan Party may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that the Agent or any Loan Party did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify the Agent or any Loan Party of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Agent and the Loan
Parties fully for all amounts paid, directly or indirectly, by the Agent or any
Loan Party as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to the Agent under
this SECTION 14.10, together with all costs and expenses (including Attorney
Costs). The obligation of the Lenders under this SECTION 14.10(E) shall survive
the payment of all Obligations and the resignation or replacement of the Agent.
Section 14.11 RESERVED.
Section 14.12 COLLATERAL MATTERS.
The Lenders hereby irrevocably authorize the Agent, at its option and in its
sole discretion, to release any Agent's Lien upon any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full of all Loans
and reimbursement obligations in respect of Letters of Credit and Credit
Support, and the termination of all outstanding Letters of Credit (whether or
not any of such obligations are due) and all other Obligations; (ii)
constituting property being sold or disposed of if the Loan Party disposing of
such property certifies to the Agent that the sale or disposition is made in
compliance with SECTION 9.9 (and the Agent may rely conclusively on any such
certificate, without further inquiry); (iii) constituting property in which no
Loan Party owned
SECOND AMENDED AND RESTATED
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<PAGE>
any interest at the time the Lien was granted or at any time thereafter; or (iv)
constituting property leased to a Loan Party under a lease which has expired or
been terminated in a transaction permitted under this Agreement. Except as
provided above, the Agent will not release any of the Agent's Liens without the
prior written authorization of the Lenders; PROVIDED that the Agent may, in its
discretion, release the Agent's Liens on Collateral valued in the aggregate not
in excess of $10,000,000 during any one (1) year period without the prior
written authorization of the Lenders. Upon request by the Agent or the Loan
Parties at any time, the Lenders will confirm in writing the Agent's authority
to release any Agent's Liens upon particular types or items of Collateral
pursuant to this SECTION 14.12.
Upon receipt by the Agent of any authorization required pursuant to SECTION
14.12(A) from the Lenders of the Agent's authority to release any Agent's Liens
upon particular types or items of Collateral, and upon at least five (5)
Business Days prior written request by the Loan Parties, the Agent shall (and is
hereby irrevocably authorized by the Lenders to) execute such documents as may
be necessary to evidence the release of the Agent's Liens upon such Collateral;
PROVIDED, HOWEVER, that (i) the Agent shall not be required to execute any such
document on terms which, in the Agent's opinion, would expose the Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such release shall
not in any manner discharge, affect, or impair the Obligations or any Liens
(other than those expressly being released) upon (or obligations of the Loan
Parties in respect of) all interests retained by the Loan Parties, including the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
The Agent shall have no obligation whatsoever to any of the Lenders to assure
that the Collateral exists or is owned by any Loan Party or is cared for,
protected, or insured or has been encumbered, or that the Agent's Liens have
been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure, or fidelity, or to
continue exercising, any of the rights, authorities, and powers granted or
available to the Agent pursuant to any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission,
or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion given the Agent's own interest in the
Collateral in its capacity as one of the Lenders and that the Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.
Section 14.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
Each of the Lenders agrees that it shall not, without the express consent of all
Lenders, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of all Lenders, set-off against the Obligations, any amounts owing
by such Lender to any Loan Party or any accounts of any Loan Party now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by the Agent, take or cause
to be taken any action to enforce its rights under this Agreement or against any
Loan Party, including the commencement of any legal or equitable proceedings, to
foreclose any Lien on, or otherwise enforce any security interest in, any of the
Collateral.
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If at any time or times any Lender shall receive (i) by payment, foreclosure,
set-off, or otherwise, any proceeds of Collateral or any payments with respect
to the Obligations owing to such Lender arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from the Agent pursuant to the terms of this Agreement,
or (ii) payments from the Agent in excess of such Lender's ratable portion of
all such distributions by the Agent, such Lender shall promptly (A) turn the
same over to the Agent, in kind, and with such endorsements as may be required
to negotiate the same to the Agent, or in same day funds, as applicable, for the
account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (B) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; PROVIDED, HOWEVER, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.
Section 14.14 AGENCY FOR PERFECTION. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender (other than the Agent) obtain possession of any
such Collateral, such Lender shall notify the Agent thereof, and, promptly upon
the Agent's request therefor shall deliver such Collateral to the Agent or in
accordance with the Agent's instructions.
Section 14.15 PAYMENTS BY THE AGENT TO THE LENDERS. All payments to be made by
the Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds to each Lender pursuant to wire transfer
instructions delivered in writing to the Agent on or prior to the Closing Date
(or if such Lender is an Assignee, on the applicable Assignment and Acceptance),
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to the Agent. Concurrently with each such payment,
the Agent shall identify whether such payment (or any portion thereof)
represents principal, premium, or interest on the Loans or otherwise.
Section 14.16 CONCERNING THE COLLATERAL AND THE RELATED LOAN DOCUMENTS. Each
Lender authorizes and directs the Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the ratable benefit of the
Agent and the Lenders. Each Lender agrees that any action taken by the Agent,
the Majority Lenders, or the Required Lenders, as applicable, in accordance with
the terms of this Agreement or the other Loan Documents relating to the
Collateral, and the exercise by the Agent, the Majority Lenders, or the Required
Lenders, as applicable, of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.
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Section 14.17 FIELD AUDIT AND EXAMINATION REPORTS; DISCLAIMER BY LENDERS. By
signing this Agreement, each Lender:
is deemed to have requested that the Agent furnish such Lender, promptly after
it becomes available, a copy of each field audit or examination report (each a
"REPORT" and collectively, "REPORTS") prepared by the Agent;
expressly agrees and acknowledges that neither the Bank nor the Agent (i) makes
any representation or warranty as to the accuracy of any Report, or (ii) shall
be liable for any information contained in any Report;
expressly agrees and acknowledges that the Reports are not comprehensive audits
or examinations, that the Agent or other party performing any audit or
examination will inspect only specific information regarding the Loan Parties
and will rely significantly upon the Loan Parties' books and records, as well as
on representations of the Loan Parties' personnel;
agrees to keep all Reports confidential and strictly for its internal use, and
not to distribute except to its participants, or use any Report in any other
manner; and
without limiting the generality of any other indemnification provision contained
in this Agreement, agrees: (i) to hold the Agent and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to the Borrowers, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or loans of
the Borrowers; and (ii) to pay and protect, and indemnify, defend, and hold the
Agent and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses, and other amounts
(including Attorney Costs) incurred by the Agent and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.
Section 14.18 RELATION AMONG LENDERS. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.
ARTICLE 15
MISCELLANEOUS
Section 15.1 CUMULATIVE REMEDIES; NO PRIOR RECOURSE TO COLLATERAL. The
enumeration herein of the Agent's and each Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of one
right or remedy shall not preclude the
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exercise of any others, all of which shall be cumulative. The Agent and the
Lenders may, without limitation, proceed directly against any Person liable
therefor to collect the Obligations without any prior recourse to the
Collateral. No failure to exercise and no delay in exercising, on the part of
the Agent or any Lender, any right, remedy, power, or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power, or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power, or
privilege.
Section 15.2 SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
Section 15.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS.
THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO
ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW
RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF TEXAS; PROVIDED THAT
THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED
STATES FOR THE NORTHERN DISTRICT OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE LOAN PARTIES, THE AGENT, AND THE LENDERS CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF THE LOAN PARTIES, THE AGENT, AND THE LENDERS IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING (i) THE
AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING
AGAINST ANY LOAN PARTY OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION
THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON
THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (ii) EACH OF THE
PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE
IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE
THOSE JURISDICTIONS.
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EACH LOAN PARTY 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 SUCH LOAN PARTY AT ITS ADDRESS SET FORTH
IN SECTION 15.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5)
DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS, POSTAGE
PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE
LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
Section 15.4 WAIVER OF JURY TRIAL. EACH OF THE LOAN PARTIES, THE LENDERS, AND
THE AGENT WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE
LOAN PARTIES, THE LENDERS, AND THE AGENT AGREES THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM, OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
Section 15.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of each Loan Party contained in this Agreement
shall survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Agent or the Lenders or their
respective agents.
Section 15.6 OTHER SECURITY AND GUARANTIES. The Agent, may, without notice or
demand and without affecting the Loan Parties' obligations hereunder, from time
to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce, or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
Section 15.7 FEES AND EXPENSES. Each Loan Party agrees to pay to the Agent, for
its benefit, on demand, all costs and expenses that the Agent pays or incurs in
connection with the negotiation, preparation, syndication, consummation,
administration, enforcement, and termination of this
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Agreement or any of the other Loan Documents, including: (a) Attorney Costs; (b)
costs and expenses (including attorneys' and paralegals' fees and disbursements)
for any amendment, supplement, waiver, consent, or subsequent closing in
connection with the Loan Documents and the transactions contemplated thereby;
(c) costs and expenses of lien and title searches and title insurance; (d)
taxes, fees, and other charges for recording the Mortgage, filing financing
statements and continuations, and other actions to perfect, protect, and
continue the Agent's Liens (including costs and expenses paid or incurred by the
Agent in connection with the consummation of this Agreement); (e) sums paid or
incurred to pay any amount or take any action required of any Loan Party under
the Loan Documents that such Loan Party fails to pay or take; (f) costs of
appraisals, inspections, and verifications of the Collateral, including travel,
lodging, and meals for inspections of the Collateral and the Loan Parties'
operations by the Agent; (g) costs and expenses of forwarding loan proceeds,
collecting checks, and other items of payment, and establishing and maintaining
Payment Accounts and lock boxes; (h) costs and expenses of preserving and
protecting the Collateral; and (i) costs and expenses (including attorneys' and
paralegals' fees and disbursements) paid or incurred to obtain payment of the
Obligations, enforce the Agent's Liens, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Agent or any Lender arising out
of the transactions contemplated hereby (including preparations for and
consultations concerning any such matters). The foregoing shall not be construed
to limit any other provisions of the Loan Documents regarding costs and expenses
to be paid by the Loan Parties. All of the foregoing costs and expenses shall be
charged to the Borrowers' Loan Account as Revolving Loans as described in
SECTION 4.7.
Section 15.8 NOTICES. Except as otherwise provided herein, all notices, demands,
and requests that any party is required or elects to give to any other shall be
in writing, or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service, (b) four (4) days after it shall have been mailed by United States
mail, first class, certified or registered, with postage prepaid, or (c) in the
case of notice by such a telecommunications device, when properly transmitted,
in each case addressed to the party to be notified as follows:
IF TO THE AGENT OR TO THE BANK:
Bank of America, N.A.
901 Main Street, 6th Floor
Dallas, Texas 75202
Attention: Business Credit/Regional Manager: URGENT
Telecopy No.: 214-209-3501
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<PAGE>
WITH A COPY TO:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attention: Daniel C. Garner, Esq.
Telecopy No.: 214-855-4300
IF TO THE LOAN PARTIES:
Pentacon, Inc.
10375 Richmond Avenue, Suite 700
Houston, Texas 77042
Attention: Chief Financial Officer
Telecopy No.: 713-860-1001
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration, or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration, or other communication.
Section 15.9 WAIVER OF NOTICES. Unless otherwise expressly provided herein, each
Loan Party waives presentment, protest, and notice of demand or dishonor and
protest as to any instrument, notice of intent to accelerate the Obligations,
and notice of acceleration of the Obligations, as well as any and all other
notices to which it might otherwise be entitled. No notice to or demand on any
Loan Party which the Agent or any Lender may elect to give shall entitle any
Loan Party to any or further notice or demand in the same, similar, or other
circumstances.
Section 15.10 BINDING EFFECT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; PROVIDED, HOWEVER, that no interest herein may be
assigned by any Loan Party without the prior written consent of the Agent and
each Lender. The rights and benefits of the Agent and the Lenders hereunder
shall, if such Persons so agree, inure to any party acquiring any interest in
the Obligations or any part thereof.
Section 15.11 INDEMNITY OF THE AGENT AND THE LENDERS BY THE LOAN PARTIES.
EACH LOAN PARTY AGREES TO DEFEND, INDEMNIFY AND HOLD THE AGENT-RELATED PERSONS,
AND EACH LENDER AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
COUNSEL, AGENTS, AND ATTORNEYS-IN-FACT (EACH, AN "INDEMNIFIED PERSON") HARMLESS
FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, CHARGES, EXPENSES, AND
DISBURSEMENTS (INCLUDING ATTORNEY COSTS) OF ANY KIND OR NATURE WHATSOEVER WHICH
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MAY AT ANY TIME (INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF THE LOANS AND THE
TERMINATION, RESIGNATION, OR REPLACEMENT OF THE AGENT OR REPLACEMENT OF ANY
LENDER) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON IN ANY
WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED BY
OR REFERRED TO HEREIN, OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY ACTION
TAKEN OR OMITTED BY ANY SUCH PERSON UNDER OR IN CONNECTION WITH ANY OF THE
FOREGOING, INCLUDING WITH RESPECT TO ANY INVESTIGATION, LITIGATION, OR
PROCEEDING (INCLUDING ANY INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED
TO OR ARISING OUT OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE LOANS, OR
THE USE OF THE PROCEEDS THEREOF, WHETHER OR NOT ANY INDEMNIFIED PERSON IS A
PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES");
PROVIDED, THAT THE LOAN PARTIES SHALL HAVE NO OBLIGATION HEREUNDER TO ANY
INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES RESULTING SOLELY FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON. THE
AGREEMENTS IN THIS SECTION SHALL SURVIVE PAYMENT OF ALL OTHER OBLIGATIONS.
EACH LOAN PARTY AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS THE AGENT AND THE
LENDERS FROM ANY LOSS OR LIABILITY DIRECTLY OR INDIRECTLY ARISING OUT OF THE
USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE,
DISCHARGE, DISPOSAL, OR PRESENCE OF A HAZARDOUS SUBSTANCE RELATING TO ANY LOAN
PARTY'S OPERATIONS, BUSINESS, OR PROPERTY. THIS INDEMNITY WILL APPLY WHETHER THE
HAZARDOUS SUBSTANCE IS ON, UNDER OR ABOUT ANY LOAN PARTY'S PROPERTY OR
OPERATIONS OR PROPERTY LEASED TO ANY LOAN PARTY. THE INDEMNITY INCLUDES BUT IS
NOT LIMITED TO ATTORNEY COSTS (INCLUDING THE REASONABLE ESTIMATE OF THE
ALLOCATED COST OF IN-HOUSE COUNSEL AND STAFF). THE INDEMNITY EXTENDS TO THE
AGENT AND THE LENDERS, THEIR PARENTS, AFFILIATES, SUBSIDIARIES, AND ALL OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS, ATTORNEYS, AND ASSIGNS.
"HAZARDOUS SUBSTANCES" MEANS ANY SUBSTANCE, MATERIAL, OR WASTE THAT IS OR
BECOMES DESIGNATED OR REGULATED AS "TOXIC," "HAZARDOUS," "POLLUTANT," OR
"CONTAMINANT" OR A SIMILAR DESIGNATION OR REGULATION UNDER ANY FEDERAL, STATE,
OR LOCAL LAW (WHETHER UNDER COMMON LAW, STATUTE, REGULATION, OR OTHERWISE) OR
JUDICIAL OR ADMINISTRATIVE INTERPRETATION OF SUCH, INCLUDING PETROLEUM OR
NATURAL GAS. THIS INDEMNITY WILL SURVIVE REPAYMENT OF ALL OTHER OBLIGATIONS.
Section 15.12 LIMITATION OF LIABILITY. No claim may be made by any Loan Party,
any Lender, or other Person against the Agent, any Lender, or the Affiliates,
directors, officers, officers, employees, or agents of any of them for any
special, indirect, consequential, or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
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related to the transactions contemplated by this Agreement or any other Loan
Document, or any act, omission, or event occurring in connection therewith, and
each Loan Party and each Lender hereby waives, releases, and agrees not to sue
upon any claim for such damages, whether or not accrued and whether or not known
or suspected to exist in its favor.
Section 15.13 FINAL AGREEMENT. This Agreement and the other Loan Documents are
intended by the Loan Parties, the Agent, and the Lenders to be the final,
complete, and exclusive expression of the agreement between them. This Agreement
and the other Loan Documents supersede any and all prior oral or written
agreements relating to the subject matter hereof and thereof. No modification,
rescission, waiver, release, or amendment of any provision of this Agreement or
any other Loan Document shall be made, except by a written agreement signed by
the Loan Parties and a duly authorized officer of each of the Agent and the
requisite Lenders.
Section 15.14 COUNTERPARTS. This Agreement and the other Loan Documents may be
executed in any number of counterparts, and by the Agent, each Lender, and the
Loan Parties in separate counterparts, each of which shall be an original, but
all of which shall together constitute one and the same agreement; signature
pages may be detached from multiple separate counterparts and attached to a
single counterpart so that all signature pages are physically attached to the
same document.
Section 15.15 CAPTIONS. The captions contained in this Agreement and the other
Loan Documents are for convenience of reference only, are without substantive
meaning and should not be construed to modify, enlarge, or restrict any
provision.
Section 15.16 RIGHT OF SET-OFF. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Loan Parties, any such notice being waived by the
Loan Parties to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special (in the case of any special account, except
to the extent prohibited by any Requirement of Law), time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing by, such
Lender to or for the credit or the account of any Loan Party against any and all
Obligations owing to such Lender by such Loan Party, now or hereafter existing,
irrespective of whether or not the Agent or such Lender shall have made demand
under this Agreement or any Loan Document and although such Obligations may be
contingent or unmatured. Each Lender agrees promptly to notify the Loan Parties
and the Agent after any such set-off and application made by such Lender;
PROVIDED, HOWEVER, that the failure to give such notice shall not affect the
validity of such set-off and application. NOTWITHSTANDING THE FOREGOING, NO
LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST
ANY DEPOSIT ACCOUNT OR PROPERTY OF ANY LOAN PARTY HELD OR MAINTAINED BY SUCH
LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.
Section 15.17 JOINT AND SEVERAL LIABILITY. All Loans, upon funding, shall be
deemed to be jointly funded to and received by the Borrowers. Each Loan Party
jointly and severally agrees to pay, and shall be jointly and severally liable
under this Agreement for, all Obligations (excluding
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<PAGE>
Existing Obligations in the case of a Newly Obligated Party), regardless of the
manner or amount in which proceeds of Loans are used, allocated, shared or
disbursed by or among the Loan Parties themselves, or the manner in which the
Agent and/or any Lender accounts for such Loans or other extensions of credit on
its books and records. The Borrowers acknowledge and expressly agree with the
Agent and each Lender that the joint and several liability of each Borrower is
required solely as a condition to, and is given solely as inducement for and in
consideration of, credit or accommodations extended or to be extended under the
Loan Documents to any or all of the other Loan Parties and is not required or
given as a condition of extensions of credit to such Borrower. Each Loan Party's
obligations under this Agreement and as an obligor under a Guaranty Agreement
shall be separate and distinct obligations. Each Loan Party's obligations under
this Agreement shall, to the fullest extent permitted by law, be unconditional
irrespective of (i) the validity or enforceability, avoidance, or subordination
of the Obligations of any other Loan Party or of any promissory note or other
document evidencing all or any part of the Obligations of any other Loan Party,
(ii) the absence of any attempt to collect the Obligations from any other Loan
Party, any other guarantor, or any other security therefor, or the absence of
any other action to enforce the same, (iii) the waiver, consent, extension,
forbearance, or granting of any indulgence by the Agent and/or any Lender with
respect to any provision of any instrument evidencing the Obligations of any
other Loan Party, or any part thereof, or any other agreement now or hereafter
executed by any other Loan Party and delivered to the Agent and/or any Lender,
(iv) the failure by the Agent and/or any Lender to take any steps to perfect and
maintain its security interest in, or to preserve its rights to, any security or
collateral for the Obligations of any other Loan Party, (v) the Agent's and/or
any Lender's election, in any proceeding instituted under the Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any
borrowing or grant of a security interest by any other Loan Party, as
debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the
disallowance of all or any portion of the Agent's and/or any Lender's claim(s)
for the repayment of the Obligations of any other Loan Party under Section 502
of the Bankruptcy Code, or (viii) any other circumstances which might constitute
a legal or equitable discharge or defense of a guarantor or of any other Loan
Party. With respect to any Loan Party's Obligations arising as a result of the
joint and several liability of the Loan Parties hereunder with respect to Loans
or other extensions of credit made to any of the other Loan Parties hereunder,
such Loan Party waives, until the Obligations shall have been paid in full and
the Loan Agreement shall have been terminated, any right to enforce any right of
subrogation or any remedy which the Agent and/or any Lender now has or may
hereafter have against any other Loan Party, any endorser or any guarantor of
all or any part of the Obligations, and any benefit of, and any right to
participate in, any security or collateral given to the Agent and/or any Lender
to secure payment of the Obligations or any other liability of any Loan Party to
the Agent and/or any Lender. Upon any Event of Default, the Agent may proceed
directly and at once, without notice, against any Loan Party to collect and
recover the full amount, or any portion of the Obligations, without first
proceeding against any other Loan Party or any other Person, or against any
security or collateral for the Obligations. Each Loan Party consents and agrees
that the Agent shall be under no obligation to marshal any assets in favor of
any Loan Party or against or in payment of any or all of the Obligations.
Section 15.18 CONTRIBUTION AND INDEMNIFICATION AMONG THE LOAN PARTIES. To the
extent that any Loan Party shall repay any of the Obligations, then the Loan
Party making such Accommodation
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Payment shall be entitled to contribution and indemnification from, and be
reimbursed by, each of the other Loan Parties in an amount, for each of such
other Loan Parties, equal to a fraction of such Accommodation Payment, the
numerator of which fraction is such other Loan Party's Allocable Amount (as
defined below) and the denominator of which is the sum of the Allocable Amounts
of all of the Loan Parties. As of any date of determination, the "ALLOCABLE
AMOUNT" of each Loan Party shall be equal to the maximum amount of liability for
Accommodation Payments which could be asserted against such Loan Party hereunder
without (a) rendering such Loan Party "insolvent" within the meaning of Section
101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer
Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (b)
leaving such Loan Party with unreasonably small capital or assets, within the
meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section
5 of the UFCA, or (c) leaving such Loan Party unable to pay its debts as they
become due within the meaning of Section 548 of the Bankruptcy Code or Section 4
of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution,
indemnification, and reimbursement under this section shall be subordinate in
right of payment to the prior payment in full of the Obligations. The provisions
of this section shall, to the extent expressly inconsistent with any provision
in any Loan Document, supersede such inconsistent provision.
Section 15.19 AGENCY OF THE PARENT FOR EACH OTHER LOAN PARTY. Each of the other
Loan Parties irrevocably appoints the Parent as its agent for all purposes
relevant to this Agreement, including the giving and receipt of notices and
execution and delivery of all documents, instruments, and certificates
contemplated herein (including, without limitation, execution and delivery to
the Agent of Borrowing Base Certificates, Notices of Borrowing, and Notices of
Conversion/ Continuation) and all modifications hereto. Any acknowledgment,
consent, direction, certification, or other action which might otherwise be
valid or effective only if given or taken by all or any of the Loan Parties or
acting singly, shall be valid and effective if given or taken only by the
Parent, whether or not any of the other Loan Parties joins therein, and the
Agent and the Lenders shall have no duty or obligation to make further inquiry
with respect to the authority of the Parent under this SECTION 15.19, PROVIDED,
that nothing in this SECTION 15.19 shall limit the effectiveness of, or the
right of the Agent and the Lenders to rely upon, any notice (including without
limitation a Notice of Borrowing), document, instrument, certificate,
acknowledgment, consent, direction, certification or other action delivered by
any Borrower pursuant to this Agreement.
Section 15.20 ADDITIONAL LOAN PARTIES. The Loan Parties contemplate that, from
time to time, they may propose one or more Subsidiaries of the Parent to become
party to this Agreement as a Borrower and/or a Loan Party. Addition of any such
Person as a party to this Agreement is subject to approval of the Agent and the
Majority Lenders, and may be conditioned upon such requirements as they may
determine in their discretion, including, without limitation, (a) the furnishing
of such financial and other information as the Agent or any such Lender may
request; (b) approval by all appropriate approval authorities of the Agent and
each such Lender; (c) execution and delivery by the Loan Parties, such Person,
the Agent, and the Majority Lenders of such agreements and other documentation
(including, without limitation, an amendment to this Agreement or any other Loan
Document), and the furnishing by such Person or any of the Loan Parties of such
certificates, opinions, and other documentation, as the Agent and any such
Lender
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<PAGE>
may request. Notwithstanding the foregoing, neither the Agent nor any Lender
shall have any obligation to approve any such Person for addition as a party to
this Agreement.
Section 15.21 EXPRESS WAIVERS BY LOAN PARTIES IN RESPECT OF CROSS GUARANTIES AND
CROSS COLLATERALIZATION. Each Loan Party agrees as follows:
Each Loan Party hereby waives: (i) notice of acceptance of this Agreement; (ii)
notice of the making of any Loans, the issuance of any Letter of Credit or any
other financial accommodations made or extended under the Loan Documents or the
creation or existence of any Obligations; (iii) notice of the amount of the
Obligations, subject, however, to such Loan Party's right to make inquiry of the
Agent to ascertain the amount of the Obligations at any reasonable time; (iv)
notice of any adverse change in the financial condition of any other Loan Party
or of any other fact that might increase such Loan Party's risk with respect to
such other Loan Party under the Loan Documents; (v) notice of presentment for
payment, demand, protest, and notice thereof as to any promissory notes or other
instruments among the Loan Documents; and (vii) all other notices (except if
such notice is specifically required to be given to such Loan Party hereunder or
under any of the other Loan Documents to which such Loan Party is a party) and
demands to which such Loan Party might otherwise be entitled;
Each Loan Party hereby waives the right by statute or otherwise to require the
Agent or any Lender to institute suit against any other Loan Party or to exhaust
any rights and remedies which the Agent or any Lender has or may have against
any other Loan Party. Each Loan Party further waives any defense arising by
reason of any disability or other defense of any other Loan Party (other than
the defense that the Obligations shall have been fully and finally performed and
indefeasibly paid) or by reason of the cessation from any cause whatsoever of
the liability of any such Loan Party in respect thereof.
Each Loan Party hereby waives and agrees not to assert against the Agent, any
Lender, or the Letter of Credit Issuer: (i) any defense (legal or equitable),
set-off, counterclaim, or claim which such Loan Party may now or at any time
hereafter have against any other Loan Party or any other party liable under the
Loan Documents; (ii) any defense, set-off, counterclaim, or claim of any kind or
nature available to any other Loan Party against the Agent, any Lender, or the
Letter of Credit Issuer, arising directly or indirectly from the present or
future lack of perfection, sufficiency, validity, or enforceability of the
Obligations or any security therefor; (iii) any right or defense arising by
reason of any claim or defense based upon an election of remedies by the Agent,
any Lender, or the Letter of Credit Issuer under any applicable law; (iv) the
benefit of any statute of limitations affecting any other Loan Party's liability
hereunder;
Each Loan Party consents and agrees that, without notice to or by such Loan
Party and without affecting or impairing the obligations of such Loan Party
hereunder, the Agent may (subject to any requirement for consent of any of the
Lenders to the extent required by this Agreement), by action or inaction: (i)
compromise, settle, extend the duration or the time for the payment of, or
discharge the performance of, or may refuse to or otherwise not enforce the Loan
Documents; (ii) release all or any one or more parties to any one or more of the
Loan Documents or grant other indulgences to any other Loan Party in respect
thereof; (iii) amend or modify in any manner
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<PAGE>
and at any time (or from time to time) any of the Loan Documents; or (iv)
release or substitute any Person liable for payment of the Obligations, or
enforce, exchange, release, or waive any security for the Obligations or any
Guaranty of the Obligations;
Each Loan Party represents and warrants to the Agent and the Lenders that such
Loan Party is currently informed of the financial condition of all other Loan
Parties and all other circumstances which a diligent inquiry would reveal and
which bear upon the risk of nonpayment of the Obligations. Each Loan Party
further represents and warrants that such Loan Party has read and understands
the terms and conditions of the Loan Documents. Each Loan Party agrees that
neither the Agent, any Lender, nor the Letter of Credit Issuer has any
responsibility to inform any Loan Party of the financial condition of any other
Loan Party or of any other circumstances which bear upon the risk of nonpayment
or nonperformance of the Obligations.
Section 15.22 AMENDMENT AND RESTATEMENT; NON-ASSUMPTION BY NEW BORROWERS; DEEMED
ALLOCATION OF PAYMENTS AND PROCEEDS.
This Agreement and the other Loan Documents amends and restates in its entirety
the Original Agreement. All rights, benefits, indebtedness, interest,
liabilities, and obligations of the Agent, the Bank and any of the Loan Parties
under the Original Loan Documents are hereby renewed, amended, restated, and
superseded in their entirety according to the terms and provisions set forth
herein and in the other Loan Documents. All Original Obligations owing to the
Bank are renewed and continued and hereafter shall be payable in accordance with
this Agreement.
All obligations of any Loan Party under any guaranty agreement executed pursuant
to the Original Loan Documents are renewed and continued and hereafter shall be
payable in accordance with the Guaranty Agreements executed by such Loan
Parties, and each such Loan Party other than a Newly Obligated Party
acknowledges and agrees that the "Guaranteed Obligations" as defined by the
Guaranty Agreements include, without limitation, the Original Obligations owing
to the Bank existing on the Closing Date as renewed by this Agreement.
All security interests, liens, and assignments previously granted by any Loan
Party pursuant to the Original Loan Documents are hereby renewed and continued,
and all such security interests, liens, and assignments shall remain in full
force and effect as security for all Obligations as provided by the Loan
Documents.
This Agreement shall not result in or constitute a waiver of or a release,
discharge, or forgiveness of any amount payable pursuant to the Original Loan
Documents, which such amounts are payable pursuant to the terms of this
Agreement. Each Loan Party represents and warrants that as of the date hereof
there are no claims or offsets against, or defenses or counterclaims to, its
obligations under this Agreement or any of the Original Loan Documents hereto or
thereto. To induce the Agent, the Bank, and the Lenders to enter into this
Agreement, each Loan Party waives any and all such claims, offsets, defenses, or
counterclaims, whether known or unknown, arising prior to the date hereof and
relating to the Original Loan Documents or this Agreement.
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THIS WRITTEN LOAN AND SECURITY AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
THE BORROWERS:
PENTACON, INC.
By:_________________________________
Brian Fontana
Senior Vice President
and Chief Financial Officer
PENTACON AEROSPACE GROUP, INC.
By:_________________________________
Brian Fontana
Senior Vice President
and Treasurer
ALATEC PRODUCTS, INC.
By:_________________________________
Brian Fontana
Senior Vice President
and Treasurer
ALATEC CABLE HARNESS & ASSEMBLY
DIVISION, INC.
By:_________________________________
Brian Fontana
Senior Vice President
and Treasurer
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<PAGE>
ALATEC FASTENER AND COMPONENT GROUP,
INC.
By:_________________________________
Brian Fontana
Senior Vice President
ALATEC RACE, INC.
By:_________________________________
Brian Fontana
Senior Vice President
TRACE ALATEC SUPPLY COMPANY, INC.
By:_________________________________
Brian Fontana
Senior Vice President
TEXAS INTERNATIONAL AVIATION,
INC.
By:_________________________________
Brian Fontana
Senior Vice President
and Treasurer
WEST COAST AERO PRODUCTS
HOLDING CORP.
By:_________________________________
Brian Fontana
Senior Vice President
ASI AEROSPACE GROUP, INC.
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<PAGE>
By:_________________________________
Brian Fontana
Senior Vice President
and Treasurer
POLLARD ACQUISITION CORP.
By:_________________________________
Brian Fontana
Senior Vice President
and Treasurer
PENTACON INDUSTRIAL GROUP, INC.
By:_________________________________
Brian Fontana
Vice President
MAUMEE INDUSTRIES, INC.
By:_________________________________
Brian Fontana
Vice President
and Treasurer
AXS SOLUTIONS, INC.
By:_________________________________
Brian Fontana
Vice President
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<PAGE>
CAPITOL BOLT & SUPPLY, INC.
By:_________________________________
Brian Fontana
Vice President
PACE PRODUCTS, INC.
By:_________________________________
Brian Fontana
Vice President
SALES SYSTEMS, LIMITED
By:_________________________________
Brian Fontana
Vice President
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<PAGE>
THE AGENT:
BANK OF AMERICA, NATIONAL ASSOCIATION
By:_________________________________
Dan Lane
Vice President
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<PAGE>
THE LENDERS:
Commitment: $100,000,000 BANK OF AMERICA, NATIONAL
Pro Rata Share:100% ASSOCIATION
By:_________________________________
Dan Lane
Vice President
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM PENTACON, INC. CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 314
<SECURITIES> 0
<RECEIVABLES> 43,762
<ALLOWANCES> 0
<INVENTORY> 123,764
<CURRENT-ASSETS> 175,496
<PP&E> 14,598
<DEPRECIATION> (4,322)
<TOTAL-ASSETS> 326,298
<CURRENT-LIABILITIES> 45,886
<BONDS> 0
0
0
<COMMON> 167
<OTHER-SE> 118,220
<TOTAL-LIABILITY-AND-EQUITY> 326,298
<SALES> 68,406
<TOTAL-REVENUES> 68,406
<CGS> 46,834
<TOTAL-COSTS> 62,859
<OTHER-EXPENSES> (10)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,534
<INCOME-PRETAX> 1,023
<INCOME-TAX> 595
<INCOME-CONTINUING> 428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
