<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For Quarter Ended March 31, 1997 Number 0-9209
-------------------- -------
RIVERSIDE GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1144172
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
7800 Belfort Parkway, Jacksonville, Florida 32256
- ------------------------------------------- -----
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code number
904-281-2200
------------
Indicate by a 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
On May 5, 1997, there were 5,287,123 shares of the Registrant's common stock
outstanding.
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RIVERSIDE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1997 (Unaudited)
And December 31, 1996 3
Condensed Consolidated Statements
of Operations
Three months ended
March 31, 1997 and 1996 (Unaudited) 4
Condensed Consolidated Statement
of Common Stockholders' Equity
Three months ended
March 31, 1997 (Unaudited) 5
Condensed Consolidated Statements of
Cash Flows
Three months ended
March 31, 1997 and 1996 (Unaudited) 6
Notes to Condensed Consolidated
Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis 12
of Financial Condition and Results of
Operations
PART II.
Item 2. Changes in Securities 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
</TABLE>
2
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 575 $ 3,100
Accounts receivable, less allowance for doubtful
accounts of $4,637 in 1997 and $4,318 in 1996 68,003 71,743
Inventory 109,506 100,672
Construction and permanent loans 6,691 4,169
Deferred tax asset 13,431 10,331
Prepaid expenses 1,597 1,023
----------- -----------
Total current assets 199,803 191,038
Investment in real estate 16,635 16,854
Investment in Circle Investors, Inc. 5,345 5,345
Property, plant and equipment, net 49,564 50,245
Trademark (net of accumulated amortization of $10,107 in 1997 6,893 6,948
and $10,052 in 1996)
Deferred tax asset 18,831 18,831
Excess of cost over fair value of assets acquired 16,364 16,463
Other assets (net of accumulated amortization of
$7,508 in 1997 and $6,983 in 1996) 6,848 8,106
----------- -----------
Total assets $ 320,283 $ 313,830
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,611 $ 4,861
Accounts payable 42,568 41,318
Income tax payable 25 25
Accrued liabilities 27,110 28,000
----------- -----------
Total current liabilities 77,314 74,204
Long-term debt, less current maturities 196,067 186,142
Mortgage debt, related party 17,415 17,416
Other long-term liabilities 3,044 2,985
----------- -----------
Total liabilities 293,840 280,747
Minority interest 9,825 12,308
Commitments and contigencies (Note 3 )
COMMON STOCKHOLDERS' EQUITY :
Common stock, $.10 par value; 20,000,000 shares authorized; 529 530
issued and oustanding, 5,287,123 in 1997 and 5,296,123 in 1996
Additional paid in capital 16,711 16,728
Retained Earnings (Deficit) (622) 3,517
----------- -----------
Total common stockholders' equity 16,618 20,775
----------- -----------
Total liabilities and common stockholders' equity $ 320,283 $ 313,830
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1997 1996
---------- ----------
<S> <C> <C>
REVENUES:
Sales and service revenues $ 153,319 $ -
Insurance premiums and annuity considerations - 1,966
Net investment income (7) 3,157
Net realized investment gains 39 474
Other operating income 1,133 280
---------- ----------
$ 160,484 $ 5,877
---------- ----------
COSTS AND EXPENSES:
Cost of sales 122,372 -
Provision for doubtful accounts 1,046 -
Depreciation, goodwill and trademark amortization 1,307 -
Selling, general and administrative expenses 38,577 952
Interest expense 6,017 789
Policyholder benefits - 3,578
Policy acquisition expenses - 1,057
---------- ----------
169,319 6,376
---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES, EQUITY IN RELATED PARTIES,
AND MINORITY INTEREST (8,835) (499)
Current income tax (benefit) 2,740 -
Equity in losses of Wickes Lumber Company - (2,295)
Equity in losses of related parties (553) -
Minority interest 2,509 -
---------- ----------
NET LOSS $ (4,139) $ (2,794)
========== ==========
EARNINGS (LOSS) PER SHARE:
Loss per common share $ (0.78) $ (0.53)
========== ==========
Weighted average number of common stock
used in computing earnings per share 5,308,389 5,311,123
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL COMMON
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $ 530 $ 16,728 $ 3,517 $ 20,775
Net loss, three months ended March 31, 1997 (4,139) (4,139)
Purchase and retirement of 9,000 shares of (1) (17) (18)
common stock, at cost
------ ---------- -------- -------------
Balance, March 31, 1997 $ 529 $ 16,711 $ (622) $ 16,618
====== ========== ======== =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES: $ (4,139) $ (2,794)
Net loss
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Depreciation expense 1,082 103
Amortization expense 730 951
Net change in deferred acquisition costs -- 7
Provision for doubtful accounts 1,046 --
Gain on sale of fixed assets (25) --
Net realized investment gains (39) (474)
Provision for deferred income taxes (3,100) --
Equity in losses of unconsolidated subsidiaries 553 2,295
Minority interest (2,059) --
Interest on policyholder's funds -- 2,106
Change in other assets and liabilities:
Decrease in accounts receivable 2,734 --
Increase in inventory (8,834) --
Increase in other assets (442) (378)
Accrued investment income -- (417)
Increase in accounts payable and accrued liabilities 443 --
Reserve for unpaid claims, policy benefits and
recoverable on paid losses from reinsurers and others -- (415)
Net liabilities of discontinued operations, other liabilities
and current income taxes -- (558)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (12,500) 426
INVESTING ACTIVITIES
Purchase of investments:
Property, plant and equipment (515) --
Fixed maturities available for sale -- (30,383)
Equity securities -- (233)
Investment real estate (240) --
Mortgage, construction and policy loans (9,709) 3,587
Short-term investments -- (75,783)
Sale, maturity, and principal reductions of investments:
Property, plant and equipment 143 --
Fixed maturities available for sale -- 25,707
Equity securities -- --
Investment real estate 569 --
Mortgage, construction and policy loans 7,110 3,239
Short-term investments -- 87,981
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES (2,642) 6,941
FINANCING ACTIVITIES
Net borrowings under revolving line of credit 10,063 --
Repayment of debt (4,053) (2,401)
Increase in borrowings 6,625 --
Purchase and retirement of treasury shares (18) --
Deposits of policyholders' funds -- --
Withdrawal of policyholders' funds -- (4,867)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 12,617 (7,186)
INCREASE (DECREASE) IN CASH (2,525) 181
Cash at beginning of year 3,100 258
------------ ------------
CASH AT END OF PERIOD $ 575 $ 439
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
6
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RIVERSIDE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The condensed consolidated financial statements present the financial
position, results of operations, and cash flows of Riverside Group, Inc. and its
wholly-owned and majority-owned subsidiaries (the "Company").
The condensed consolidated balance sheets as of March 31, 1997, the
condensed consolidated statements of operations for the three months ended March
31, 1997 and 1996, the condensed consolidated statement of common stockholders'
equity for the three months ended March 31, 1997 and the condensed consolidated
statements of cash flows for the three months ended March 31, 1997 and 1996,
have been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
March 31, 1997, and for all periods presented have been made. The results for
the three month period ended March 31, 1997 is not necessarily indicative of the
results to be expected for the full year or for any interim period.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission.
Earnings Per Share
Earnings per share are based on the weighted average number of shares
of common stock outstanding during each period (5,308,389 shares in 1997 and
5,311,123 shares in 1996). During the first quarter of 1997, the Company
purchased and retired 9,000 shares of its common stock.
2. COMMITMENTS AND CONTINGENCIES
At March 31, 1997 Wickes had accrued approximately $1.1 million for
remediation of certain environmental and product liability matters, principally
underground storage tank removal.
7
<PAGE> 8
Many of the building center facilities presently and formerly operated
by Wickes contained underground petroleum storage tanks. Other than tanks at one
acquired facility recently installed in compliance with modern standards, all
such tanks known to Wickes located on facilities owned or operated by Wickes
have been filled, removed, or are scheduled to be removed in accordance with
applicable environmental laws in effect at the time. As a result of reviews made
in connection with the sale or possible sale of certain facilities, Wickes has
found petroleum contamination of soil and ground water on several of these sites
and has taken, and expects to take, remedial actions with respect thereto. In
addition, it is possible that similar contamination may exist on properties no
longer owned or operated by Wickes the remediation of which Wickes could under
certain circumstances be held responsible. Since 1988, Wickes has incurred
approximately $ 2.1 million of net costs with respect to the filling or removing
of underground storage tanks and related investigatory and remedial actions.
Wickes is one of many defendants in approximately 120 actions, each of
which seeks unspecified damages, brought in 1993, 1994 and 1995 in various
Michigan state courts against manufacturers and building material retailers by
individuals who claim to have suffered injuries from products containing
asbestos. Each of the plaintiffs in these actions is represented by one of two
law firms. Wickes is aggressively defending these actions and does not believe
that these actions will have a material adverse effect on the Company.
On November 3, 1995, a complaint was filed against Wickes', its directors
and the Company seeking to enjoin or to obtain damages with respect to Wickes,
agreement to issue 2,000,000 newly-issued shares of common stock to the Parent
Company for $10 million.
The Company and Wickes are involved in various other legal proceedings
which are incidental to the conduct of their businesses. The Company does not
believe that any of these proceedings will have a material adverse effect on the
Company.
The Company's assessment of the matters described in this note and other
forward-looking statements ("Forward-Looking Statements") in these notes are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are inherently subject to uncertainty. The outcome of the
matters in this note may differ from the Company's assessment of these matters
as a result of a number of factors including but not limited to: matters unknown
to the Company at the present time, development of losses materially different
from the Company's experience, Wickes' ability to prevail against its insurers
with respect to coverage issues to date, the financial ability of those insurers
and other persons from whom Wickes may be entitled to indemnity, and the
unpredictability of matters in litigation.
3. LONG TERM AND MORTGAGE DEBT
Consolidated long-term and mortgage debt is comprised of the following at
March 31, 1997 (in thousands):
THE PARENT GROUP
8
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<TABLE>
<S> <C>
LONG-TERM DEBT
Subordinated Notes $ 9,492
Warehouse line of credit for construction
and permanent loans 6,707
Other 858
Less: current maturities (7,414)
---------
Total Company long-term debt less current maturities $ 9,643
---------
MORTGAGE DEBT
Mortgage debt, non-recourse, related party $ 17,505
Less: current maturities (90)
---------
The Company long term mortgage debt, less current maturities $ 17,415
---------
WICKES
Revolving line of credit $ 86,376
Senior subordinated notes 100,000
Other 155
Less: current maturities (107)
---------
Total Wickes' long-term debt less current maturities $ 186,424
---------
Total long-term and mortgage debt
less current maturities $ 213,482
=========
</TABLE>
WICKES
A second amendment and restatement of Wickes' revolving credit agreement
was completed on April 11, 1997. Among other things, this amendment and
restatement (i) extended the life of the facility to March 2001, (ii) reduced
the interest rate premiums over the London InterBank Offered Rate ("LIBOR") and
over prime by 75 basis points, (iii) included provisions for further interest
rate premium reductions if certain performance levels are achieved, (iv)
modified certain covenants, and (v) provided for increases in the amount of
capital expenditures allowed by the agreement equal to the proceeds received
from the sale of certain excess real estate.
Under the revolving line of credit, Wickes may borrow against certain
levels of accounts receivable and inventory. The unused amount available for
borrowing, at March 29, 1997, was $28.9 million.
4. INCOME TAXES
The percentage ownership of Wickes by the Company does not allow
consolidation for federal income tax filing purposes. Thus, each company will
continue to separately determine its income tax liabilities. The Company's
effective tax rate, excluding Wickes', was 0% for the three months ended March
31, 1997 and 1996.
9
<PAGE> 10
Wickes' provision for income taxes for the first quarter of 1997 was a
benefit of $2.7 million, compared to a benefit of $3.3 million for the first
quarter of 1996. An effective tax rate of 39.1% was used to calculate federal
income taxes for the first quarter of 1997, compared with an effective rate of
38.5% for the first quarter of 1996. In addition to the effective rate used,
state franchise taxes were calculated separately and are included in the
provision reported.
5. SUBSEQUENT EVENT
On May 1, 1997, the Company obtained a $1.5 million demand bank line of
credit secured by 800,000 shares of Wickes common stock and 2,330 shares
of Circle preferred stock. Borrowings under this line of credit bear interest
payable monthly at two percent above the lender's standard rate, and principal
is payable upon demand and is designed to be paid with the cash proceeds of the
pledged Circle shares in a pending merger transaction with an unrelated third
party. Monthly principal payments of $125,000 per month are required beginning
November 1, 1997 if the principal has not otherwise been demanded or paid. The
demand bank line of credit contains certain affirmative and negative covenants,
including among others, prohibitions on mergers and the like, on the incurrence
of indebtedness to parties other than the lender, on loans to related parties,
on the payment of dividends, on the issuance of stock, on the disposition of
assets (other than real estate assets, the Circle shares and the shares of
pledged Wickes common stock), on the acquisition of assets or the making of
capital expenditures, and on the increase in compensation of the Company's chief
executive officer above the 1996 level. The demand bank line of credit also
requires the Company to pledge additional shares of Wickes common stock if the
value of the shares of Wickes common stock held as collateral falls below $4
million.
6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
revises the disclosure requirements and increases the comparability of EPS data
on an international basis by simplifying the existing computational guidelines
in APB Opinion No. 15. The pronouncement will require the Company to present
both basic and diluted EPS for net income on the face of the income statement
and is effective for the Company's fiscal year ending December 31, 1997. The
Company has determined that the impact of adopting the pronouncement will not
have a material impact on its financial statements.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere herein
and in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and analysis of Financial Condition and Results of
Operations contained in the Company's Annual report on Form 10-K for the year
ended December 31, 1996.
RESULTS OF OPERATIONS
GENERAL
The Company reported results of operations for the three months ended March
31, 1997 and 1996, as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(unaudited) (unaudited)
1997 1996
---- ----
<S> <C> <C>
Equity in earnings(losses) of Wickes (1) $ - $(2,295)
Earnings(loss) before income taxes, equity
in related parties, and
minority interest (2)(3) (8,835) (499)
Net earnings(loss) $ (4,139) $(2,794)
</TABLE>
(1) The Company accounted for its investment in Wickes on the equity method
through June 30, 1996.
(2) Includes $571,000 of additional deferred acquisition cost amortization for
the first quarter of 1996, resulting from the reorganization of the
Company's former life insurance subsidiaries.
(3) Includes realized investment gains of $39,000 and $474,000 for the first
quarters of 1997 and 1996, respectively.
WICKES LUMBER COMPANY
The Company estimates that, the Company's results of operations for
the first quarter of 1997 include losses of $2,681,000 attributable to Wickes.
In comparison, the Company recorded equity in Wickes' losses of $2,295,000 for
the first quarter of 1996.
The following discussion was obtained from the Wickes' first quarter 1997
10-Q.
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain expense and income items. This information
includes the results from all
11
<PAGE> 12
building centers and component manufacturing facilities operated by Wickes,
including those subsequently closed or sold.
<TABLE>
<CAPTION>
Three Months Ended
------------------
(unaudited)
March 29, 1997 March 30, 1996
-------------- --------------
<S> <C> <C>
Net sales 100.0 % 100.0 %
Gross profit 23.2 % 22.9 %
Selling, general an
administrative expense 23.7 % 23.4 %
Depreciation, goodwill and
trademark amortization 0.7 % 0.9 %
Provision for doubtful accounts 0.7 % 0.9 %
Other operating income (0.5)% (0.6)%
Income from operations (1.4)% (1.7)%
</TABLE>
Net Earnings
Wickes' first quarter has historically been adversely affected by seasonal
decreases in building construction activity in the Northeast and Midwest
resulting from winter weather conditions. In the first quarter of 1996, the
Northeast experienced record snowfalls which slowed construction in this area of
the country. Weather conditions during the first quarter of 1997 were closer to
historical seasonal averages.
Net loss for the three months ended March 29, 1997 was $5,190,000 compared
with $6,174,000 for the three months ended March 30, 1996. The decrease in loss
for the three month period primarily results from increased sales and gross
profit margins, decreased depreciation expense, provision for doubtful accounts,
interest expense, equity in loss of affiliated company, partially offset by an
increase in selling, general and administrative expenses ("SG&A") and a reduced
income tax benefit.
Net Sales
Net sales for the first quarter of 1997 increased 4.5% to $159.3 million
from $152.5 million for the first quarter of 1996. Same store sales increased
3.5% compared with the same period last year. Same store sales to Wickes'
primary customers, residential and commercial builders, increased 5.5% when
compared with the first quarter of 1996. As of May 1, 1997, Wickes operated 112
building centers, two more than it operated during the first quarter of 1996.
Wickes estimates that inflation in lumber prices accounted for approximately
$5.3 million of the sales increase for the quarter, compared with the 1996
comparable period. Also, weather conditions in the Northeast during the first
quarter of 1997 were more favorable compared with the record snowfalls recorded
in the first quarter of 1996.
12
<PAGE> 13
Gross Profit
1997 first quarter gross profit increased to $36.9 million from $34.9
million for the first quarter of 1996, a 5.8% increase. Gross profit as a
percent of sales increased to 23.2% for the first quarter of 1997 from 22.9% in
1996. The increase in gross profit as a percent of sales is primarily
attributable to improved product costs and increased lumber prices. Sales to the
professional builder, as a percent of total sales, decreased to 87.9% for the
first quarter of 1997 from 89.2% for the same period in 1996. Lumber and
building materials accounted for 87.3% of the materials sold in the first
quarter of 1997, compared with 85.3% of the materials sold in the first quarter
of 1996.
Selling, General and Administrative Expense
SG&A expense increased to 23.7% of net sales in the first quarter of 1997
compared with 23.7% of net sales in the first quarter of 1996. Much of the
increase is attributable to increased training, market expansion programs, and
Wickes' decision to invest in facilities and programs to support sales
improvement. Wickes expects to continue investing in these sales growth
initiatives through the second quarter.
Increases, as a percent of sales, in travel, professional fees, training
costs, and marketing were partially offset by reductions in utilities, phone and
salaries, wages, and employee benefits. Total salaries, wages and employee
benefits decreased, as a percent of sales, by 0.1%. As of March 29, 1997, Wickes
had 3,546 full time and part time employees, up 1.0% from March 30, 1996.
Depreciation, Goodwill and Trademark Amortization
Depreciation, goodwill and trademark amortization decreased to $1.2
million for the first quarter of 1997 compared with $1.4 million for the same
period in 1996. This decrease is primarily due to the sale or disposal of excess
facilities and equipment since June of 1995.
Provision for Doubtful Accounts
Provision for doubtful accounts decreased to $1.0 million or 0.7% of sales
for the first quarter of 1997 compared with $1.4 million or 0.9% of sales for
the same period in 1996. This decrease is the result of a more selective
customer base and improved credit policies at centers acquired since 1994, and
increased efforts in collecting previously reserved accounts receivable.
Other Operating Income
Other operating income for the first quarter 1997, was $.8 million, or
0.5% of sales compared with $.9 million, or 0.6% of sales for the same period
last year.
Interest Expense
13
<PAGE> 14
In the first quarter of 1997, interest expense decreased 9.7% to $5.2
million from $5.7 million in the first quarter of 1996. This reduction reflects
a $20.9 million decrease in average borrowings on Wickes' revolving credit
facility resulting primarily from the closing of building centers since December
1995 and $9.8 million in net proceeds from Wickes' issuance of two million
shares of its common stock in June 1996. The effective borrowing rate on total
long term debt for the first quarter increased 15 basis points from the first
quarter of 1996. Approximately 89% of Wickes' first quarter average borrowings
on its revolving credit facility were LIBOR-based.
Equity in Loss of Affiliated Company
In the first quarter of 1997, Wickes recorded a loss of $0.6 million,
under the equity method, with respect to its investment in its affiliate engaged
in operations in Russia. In the first quarter of 1996, Wickes recorded a loss of
$1.1 million.
PARENT COMPANY AND OTHER SUBSIDIARIES
The following discussion relates to the operations of the Parent Company
and its subsidiaries, other than Wickes and former life insurance subsidiaries
(the "Parent Group").
The Parent Group's non-interest operating expenses for the first three
months of 1997 and 1996 were $805,000 and $657,000, respectively. Increased
expenses were primarily due to expenses no longer allocable to the Life
Insurance Group, partially offset by savings of approximately $160,000 from the
restructuring of the Wickes Financial Services Center, Inc. program. Although
Wickes Mortgage Lending, Inc.'s ("WML") operating expenses increased for the
first quarter of 1997 by approximately $312,000, reimbursements received from
Wickes of approximately $300,000, offset the increase.
Revenues of the Parent Group (excluding investment income) for the first
quarter of 1997 and 1996 were $289,000 and $354,000, respectively. Included are
WML's revenues of $289,000 and $161,000 for 1997 and 1996, respectively. The net
decrease was a result of non-recurring transactions in the amount of $193,000 in
1996 at the Parent Company. Gains of sales of investment real estate were
$54,000 and $0 in the first quarter of 1997 and 1996, respectively.
In the first quarter of 1997, interest expense increased 10.6% to $865,000
from $782,000 in the first quarter of 1996. This change is primarily due to the
borrowings on WML's warehouse line of credit. Interest expense consisted in 1997
of: $384,000 on the Parent Company's subordinated notes and other debt; $370,000
on the Parent Company's real estate mortgage debt; and $111,000 on WML's
warehouse line of credit. In 1996, interest expense consisted of $396,000 on the
Parent Company's subordinated notes and other debt; and $389,000 on a note to a
bank repaid in June 1996 connection with the reorganization of the Company's
former life insurance subsidiaries.
14
<PAGE> 15
LIFE INSURANCE OPERATIONS
The Company's Condensed Consolidated Statements of Operations include the
operations of its former life insurance subsidiaries for the first three months
of 1996.
During the first three months of 1996, the operations (other than WML) of
the Company's life insurance subsidiaries generated income after taxes of
$1,143,000. However, based on an evaluation of the life operations profits and
the benefits to the Company of these operations, additional deferred acquisition
cost amortization of $571,000 was recorded reducing life insurance income to a
net of $572,000.
INCOME TAXES
The Company does not consolidate with Wickes for income tax filing
purposes. Thus, each company will continue to separately determine its income
tax liability. The Company's effective tax rate, excluding Wickes', was 0% for
the three months ended March 31, 1997 and 1996. The Company's equity in losses
of Wickes has reduced the Company's GAAP basis in its investment in Wickes
creating deferred tax benefits which will be realized upon sale or subsequent
increase in GAAP basis of this investment.
Wickes' provision for income taxes for the first quarter of 1997 was a
benefit of $2.7 million, compared to a benefit of $3.3 million for the first
quarter of 1996. An effective tax rate of 39.1% was used to calculate federal
income taxes for the first quarter of 1997, compared with an effective rate of
38.5% for the first quarter of 1996. In addition to the effective rate used,
state franchise taxes were calculated separately and are included in the
provision reported.
LIQUIDITY AND CAPITAL RESOURCES
THE PARENT GROUP
The Parent Company's general liquidity requirements consist primarily of
funds for payment of debt and related interest, and for operating expenses and
overhead. Operations, exclusive of Wickes (which is currently prohibited from
paying dividends by reason of restrictions in debt instruments), consist
primarily of real estate sales and the operations of WML.
As discussed below, the Company has significantly curtailed WML's
operations and does not anticipate that WML will be a significant contributor to
liquidity in the future. Also, real estate sales proceeds are required to be
applied to real estate debt reduction and are not available to the Parent
Company for other purposes. As a consequence, the Parent Company will need to
obtain significant additional funds through other asset sales or additional
financing to support its operations and overhead and to service its
indebtedness. The principal assets that could be sold by the Parent Company are
its shares of Circle common and preferred stock (the "Circle Shares") and Wickes
common stock.
15
<PAGE> 16
Circle has entered into a definitive merger agreement providing for a
merger of Circle with an unrelated third party (the "Circle Merger") pursuant to
which the Circle Shares are to be converted into an aggregate of approximately
$5.3 million in cash. Circle has informed the Company that it hopes to complete
the Circle Merger before September 30, 1997, but there can be no assurance when
or that the Circle Merger will be completed.
All of the Circle Shares are currently pledged to secure indebtedness of
the Company. Circle shares to be converted into $3.2 million, together with real
estate and one million shares of Wickes common stock in the Circle Merger, are
pledged to secure the Company's $17.5 million of real estate indebtedness.
Circle Shares to be converted into $2.1 million in the Circle Merger, together
with 800,000 shares of Wickes common stock, are pledged to secure the Company's
$1.5 million demand bank line of credit described below. The merger proceeds of
Circle Shares that are at the time of the Circle Merger pledged to secure the
Company's real estate indebtedness would remain pledged and would not be
available to the Parent Company until released. The amount of required
collateral for this indebtedness is adjusted quarterly and Circle Shares or
merger proceeds thereof would be released in the event there is any excess
collateral at any quarterly valuation date, which would depend upon factors
including the market value of Wickes common stock and the timing and amount of
real estate sales. Assuming no change in the current market price for Wickes
common stock, the amount of real estate sales completed since March 31, 1997 and
the amount of real estate sales provided for by existing contracts (some of
which are subject to the buyers' satisfaction with their due diligence
investigations) would be sufficient to obtain the release of all of the Circle
merger proceeds at the September 30, 1997 valuation date.
On May 1, 1997, the Company obtained a $1.5 million demand bank line of
credit. Borrowings under the demand bank line of credit are limited to $850,000
prior to September 30, 1997, unless the lender is satisfied that an acceptable
final closing date has been scheduled for the Circle Merger. See Note 5 of Notes
to Condensed Consolidated Financial Statements included elsewhere herein for a
description of the terms of, and restrictions placed upon the Company under, the
demand bank line of credit. On May 9, 1997, the Company had borrowed $390,000
under the demand bank line of credit. The Company anticipates that the demand
line of credit would be cancelled upon completion of the Circle Merger, and all
amounts owed thereunder would become due, and the balance of the proceeds of
the Circle Shares pledged under the line of credit would be required to be paid
to another lender. Pursuant to the terms of the loan agreement, there can be
no assurance that the lender will not exercise its right to terminate the
demand line of credit at any time and to demand repayment of the outstanding
borrowings.
Additional borrowings under the demand line of credit may not be
sufficient to fund the Company's liquidity requirements until completion of the
Circle Merger. In the event the Circle Merger does not take place or the
Company requires additional liquidity before the Circle Merger or to make its
September 30, 1997 interest payment, it will need to obtain additional funds
through sales of Wickes common stock or additional financing, which may not be
available. The Company does not believe that the cash proceeds of the merger
will be sufficient for general liquidity purposes and debt requirements
through the remainder of 1997 unless sufficient additional merger proceeds are
released from pledge under the Company's real estate indebtedness, but the
Company believes that the real estate sales provided for by existing contracts
would provide the release of sufficient cash merger proceeds for this purpose.
16
<PAGE> 17
The $10,000,000 principal of the Company's 13% Subordinated Notes is due
in September 1999. The Company anticipates that to repay this indebtedness it
will need to obtain additional funds through borrowings, issuance of debt or
equity securities, asset sales, or funds provided by operations in which the
Company may become engaged in the future.
In April 1997, the Company determined that WML would not be able to
attain sufficient profitability in the near term if it continued to emphasize
origination of permanent loans through loan representatives, located in branch
offices. Accordingly, WML has terminated the employment of all of its
permanent loan representatives in the field and for the present, is focusing
primarily on construction and construction/permanent loans under its marketing
arrangement with Wickes, together with permanent loans originated in the home
office.
During the first quarter of 1997, stockholders' equity decreased by a net
of $4.2 million primarily as a result of Wickes' operating losses. Wickes'
results of operations have historically been adversely affected by seasonal
weather factors during the first quarter of the year.
FORWARD-LOOKING INFORMATION CAUTIONARY STATEMENT. The discussion above of
the Company's future liquidity needs and sufficiency constitutes Forward-Looking
Information within the meaning of the Private Securities Litigation Reform Act
of 1995 and is inherently subject to uncertainty as a result of a number of risk
factors including, among other things: (i) the continued ability of the Company
to borrow, and the absence of a repayment demand, under its demand bank line of
credit, (ii) the Company's ability to achieve the level of real estate sales
required to meet scheduled real estate debt payments, and (iii) the ability of
the Company to raise funds through sales of Circle Shares or Wickes common
stock. Future real estate sales depend upon a number of factors, including
interest rates, general economic conditions, and conditions in the commercial
real estate markets in Atlanta, Georgia, and Jacksonville, Florida. As discussed
above, although the Circle merger would convert the Circle Shares into
approximately $5.3 million in cash, there is no assurance that this transaction
will be completed or how much of the merger proceeds will be available to the
Company over what time period. The Company's ability to sell Wickes common stock
will depend upon, among other things, the public trading price of Wickes common
stock and, in light of the relatively low public trading volume for Wickes
common stock, possibly the Company's ability to find a buyer or buyers for
Wickes Common Stock in a private transaction or otherwise.
WICKES
Wickes' principal sources of working capital and liquidity are earnings
and borrowings under its revolving credit facility. Wickes' primary need for
capital resources is to finance inventory and accounts receivable.
17
<PAGE> 18
The first three months of the year historically have generated negative
cash flows from operating activities, with first quarter 1996 being an
exception. With the peak building season historically occurring in the second
and third quarters, Wickes normally experiences increases in its accounts
receivable and inventory levels during the first quarter to meet the anticipated
increase in sales. In the first three months of 1997 net cash used in operating
activities amounted to $11.5 million.
Wickes' accounts receivable balance at the end of the first quarter of
1997 increased $6.6 million when compared to the first quarter of 1996, an
increase of 10.8%. Approximately $5.2 million of this increase is attributable
to increased credit sales during March.
Inventory at the end of the first quarter of 1997 was $6.5 million, or
6.3% higher than at the end of the first quarter of 1996. This increase is
largely attributable to inflation in lumber prices, special buys on commodity
building materials in preparation for the spring selling season, and the
start-up of four new building centers. Most of the special buys on commodity
building materials included extended accounts payable terms resulting in the
8.6% increase in accounts payable.
Wickes' capital expenditures consist primarily of the construction of
storage facilities, the remodeling of building centers and component
manufacturing facilities, and the purchase of vehicles, equipment and management
information systems. In the first three months of 1997, Wickes' spent $.5
million on capital expenditures. Wickes expects to spend approximately $6.0
million for all of 1997. Under Wickes' bank revolving credit agreement, as
amended, capital expenditures during 1997 are limited to $6 million plus the
proceeds from the sale of certain excess real estate plus the portion of 1996's
capital expenditures that were not spent. Wickes expects to fund capital
expenditures through borrowings and its internally generated cash flow.
In January, Wickes began distribution operations in start-up building
center facilities in Aurora, Illinois and Colorado Springs, Colorado. In April,
Wickes also began building centers operations in Denton, North Carolina and a
second facility in Pensacola, Florida. The Pensacola facility is located in a
previously closed facility which is owned by Wickes. The remaining three
facilities are leased. The following table reconciles the number of building
centers and component manufacturing facilities operated by Wickes:
<TABLE>
<CAPTION>
Component
Building Manufacturing
Centers Facilities
<S> <C> <C>
As of December 28, 1996 108 12
Expansion 2 -
---- -----
As of March 29, 1997 110 12
Expansion 2 -
Consolidation - (1)
---- ------
As of May 1, 1997 112 11
</TABLE>
18
<PAGE> 19
For a description of the April 11, 1997 amendment to Wickes' revolving
line of credit agreement, that, among other things, reduces Wickes' effective
interest rate, provides for additional reductions should certain goals be
achieved, extends the length of the agreement, and modifies or eliminates
certain covenants, see "Note 3. Long-Term Debt" of Notes to Condensed
Consolidated Financial Statements included elsewhere herein.
Wickes maintained excess availability under its revolving line of credit,
throughout the first three months of 1997. At the end of the first quarter of
1997, total borrowings under the revolving line of credit were $6.8 million
lower than at the end of the first quarter of 1996. Under the current terms of
Wickes' bank revolving credit agreement, Wickes believes that it will continue
to have sufficient funds available for its anticipated operations and capital
expenditures. On March 29, 1997, $86.4 million was outstanding under Wickes'
revolving line of credit, and the unused availability was approximately $28.9
million.
19
<PAGE> 20
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
For a description of the Company's $1.5 million demand bank line
of credit obtained on May 1, 1997, see "Note 5. Subsequent Event"
of Notes to Condensed Consolidated Financial Statements included
elsewhere herein.
For a description of the amendment to Wickes' revolving line of
credit agreement that, among other things, reduces the Company's
effective interest rate, provides for additional reductions should
certain goals be achieved, extends the length of the agreement,
and modifies or eliminates certain covenants, see "Note 3.
Long-Term Debt" of Notes to Condensed Consolidated Financial
Statements included elsewhere herein.
ITEM 5. OTHER INFORMATION
On April 9, 1997, the Board of Directors of Wickes approved a
proposal to amend the Wicke's Second Amended and Restated
Certificate of Incorporation to change Wickes' name to "Wickes,
Inc." This proposal will be submitted for approval of Wickes'
shareholders at the Annual Meeting scheduled for May 20, 1997. If
the proposal is approved by the shareholders, the name change will
be effective upon filing of a certificate of amendment with the
Secretary of State of the State of Delaware. Until such
certificate of amendment is filed, the name change may be
abandoned by the Board of Directors in its sole discretion.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Second Amended and Restated Credit Agreement dated April
11, 1997, among Wickes Lumber Company, as borrower each of
the financial institutions signatory thereto, BT Commercial
Corporation, as Agent, Nations Bank of Georgia N.A. as
Syndication Agent, and Bankers Trust Company, as Issuing
Bank.
20
<PAGE> 21
27.1 Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K
None
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
RIVERSIDE GROUP, INC.
By /s/ J. Steven Wilson
------------------------------
J. Steven Wilson
Chairman of the Board,
President and
Chief Executive Officer
By /s/ Catherine J. Gray
------------------------------
Catherine J. Gray
Vice President and Chief Financial Officer
Date: May 14, 1997
22
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
$130,000,000
among
WICKES LUMBER COMPANY (THE "BORROWER")
--------------------------------------
as Borrower,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 11.6 HEREOF, ("LENDERS"),
as Lenders,
BT COMMERCIAL CORPORATION, (THE "AGENT")
as Collateral and Administrative Agent,
NATIONSBANK OF GEORGIA, N.A. (THE "SYNDICATION AGENT"),
as Syndication Agent,
and
BANKERS TRUST COMPANY,
as Issuing Bank
DATED AS OF APRIL 11, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1. Definitions ........................................................ 2
1.1 General Definitions ...................................... 2
1.2 Accounting Terms and Determinations ...................... 25
1.3 Other Defined Terms ...................................... 26
1.4 Interrelationship with 1996 Credit Agreement ............. 26
ARTICLE 2. Revolving Loans .................................................... 27
2.1 Commitments .............................................. 27
2.2 Borrowing of Revolving Loans ............................. 27
2.3 Settlement of Lender Advances and Repayments ............. 30
2.4 Periodic Settlement of Agent Advances and Repayments ..... 30
2.5 Defaulting Lenders ....................................... 31
2.6 Mandatory Payment; Mandatory Reduction of Commitments .... 32
2.7 Maintenance of Loan Account; Statements of Account ....... 32
2.8 Payment Procedures ....................................... 33
2.9 Collection of Accounts ................................... 33
2.10 Application of Payments .................................. 34
ARTICLE 3. Letters of Credit .................................................. 34
3.1 Issuance of Letters of Credit ............................ 34
3.2 Terms of Letters of Credit ............................... 35
3.3 Lenders' Participation ................................... 35
3.4 Notice of Issuance ....................................... 36
3.5 Payment of Amounts Drawn Under Letters of Credit ......... 36
3.6 Payment by Lenders ....................................... 37
3.7 Nature of Issuing Bank's Duties .......................... 37
3.8 Obligations Absolute ..................................... 38
ARTICLE 4. Interest, Fees and Expenses ........................................ 39
4.1 Interest on Prime Rate Loans ............................. 39
4.2 Interest on Eurodollar Rate Loans ........................ 40
4.3 Interest After Event of Default .......................... 41
4.4 Reimbursement of Expenses ................................ 41
4.5 Unused Line Fee .......................................... 41
4.6 Letter of Credit Fees .................................... 42
4.7 Early Termination Fee .................................... 43
4.8 Special Provisions Relating to Eurodollar Rate Loans ..... 43
4.9 Indemnification in Certain Events ........................ 46
4.10 Net Payments ............................................. 47
4.11 Affected Lenders ......................................... 48
4.12 Sharing of Payments ...................................... 49
4.13 Calculations ............................................. 50
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 5. Conditions Precedent .............................................. 50
5.1 Conditions Precedent to Effectiveness .................... 50
5.2 Conditions Precedent to Effectiveness
and to Each Revolving Loan and Letter of Credit .......... 52
ARTICLE 6. Representations and Warranties .................................... 52
6.1 Organization and Qualification ........................... 52
6.2 Authority ................................................ 53
6.3 Enforceability ........................................... 53
6.4 No Conflict .............................................. 53
6.5 Consents and Filings ..................................... 53
6.6 Financial Data ........................................... 53
6.7 Subsidiaries ............................................. 53
6.8 No Judgments or Litigation ............................... 54
6.9 No Defaults .............................................. 54
6.10 Labor Matters ............................................ 54
6.11 Compliance with Law ...................................... 55
6.12 ERISA .................................................... 55
6.13 Compliance with Environmental Laws ....................... 56
6.14 Intellectual Property .................................... 56
6.15 Licenses and Permits ..................................... 56
6.16 Title to Property ........................................ 57
6.17 Investment Company ....................................... 57
6.18 Taxes and Tax Returns .................................... 57
6.19 Material Contracts ....................................... 58
6.20 Affiliate Transactions ................................... 58
6.21 Accuracy and Completeness of Information ................. 58
6.22 Recording Taxes .......................................... 59
6.23 Solvency ................................................. 59
6.24 No Change ................................................ 59
ARTICLE 7. Affirmative Covenants ............................................. 59
7.1 Financial Reporting ...................................... 59
7.2 Collateral Reporting ..................................... 61
7.3 Notification Requirements ................................ 62
7.4 Corporate Existence ...................................... 65
7.5 ERISA .................................................... 65
7.6 Environmental and Other Matters .......................... 65
7.7 Insurance; Casualty Loss ................................. 66
7.8 Taxes .................................................... 67
7.9 Compliance With Laws ..................................... 67
7.10 Use of Proceeds .......................................... 67
7.11 Fiscal Year .............................................. 68
7.12 Intellectual Property .................................... 68
7.13 Maintenance of Property .................................. 68
7.14 Books and Records; Inspections ........................... 68
7.15 Further Assurances ....................................... 68
ARTICLE 8. Negative Covenants ................................................ 69
8.1 Fixed Charge Coverage Ratio ............................. 69
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
8.2 Consolidated Net Worth .................................. 70
8.3 [Reserved] .............................................. 70
8.4 [Reserved] .............................................. 70
8.5 [Reserved] .............................................. 70
8.6 Capital Expenditures .................................... 70
8.7 Additional Indebtedness ................................. 71
8.8 Liens ................................................... 71
8.9 Sale of Assets .......................................... 73
8.10 Corporate Changes ....................................... 73
8.11 Guaranties .............................................. 74
8.12 Restricted Payments ..................................... 74
8.13 Investments ............................................. 74
8.14 Affiliate Transactions .................................. 75
8.15 Prohibited Transactions Under ERISA ..................... 76
8.16 Additional Bank Accounts ................................ 76
8.17 Excess Cash ............................................. 77
8.18 Material Amendments of Material Contracts ............... 77
8.19 Additional Negative Pledges ............................. 77
8.20 Additional Subsidiaries; Acquisitions ................... 77
8.21 Hedging Transactions .................................... 78
8.22 Activities of Subsidiaries .............................. 78
ARTICLE 9. Events of Default and Remedies .................................... 79
9.1 Events of Default ....................................... 79
9.2 Acceleration and Cash Collateralization ................. 80
9.3 Rescission of Acceleration .............................. 81
9.4 Remedies ................................................ 81
9.5 Right of Setoff ......................................... 81
9.6 License for Use of Software and Other Intellectual Property 82
9.7 Deficiencies; Remedies Cumulative ....................... 82
ARTICLE 10. The Agent ......................................................... 82
10.1 Appointment of Agent ................................... 82
10.2 Nature of Duties of Agent .............................. 83
10.3 Lack of Reliance on Agent .............................. 83
10.4 Certain Rights of the Agent ............................ 84
10.5 Reliance by Agent ...................................... 84
10.6 Indemnification of Agent ............................... 84
10.7 The Agent in its Individual Capacity ................... 84
10.8 Holders of Notes ....................................... 85
10.9 Successor Agent ........................................ 85
10.10 Collateral Matters ..................................... 86
10.11 Actions with Respect to Defaults ....................... 87
10.12 Delivery of Information ................................ 87
10.13 Syndication Agent ...................................... 88
ARTICLE 11. Miscellaneous ..................................................... 88
11.1 SUBMISSION TO JURISDICTION; WAIVERS .................... 88
11.2 JURY TRIAL ............................................. 89
11.3 GOVERNING LAW .......................................... 89
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
11.4 Delays; Partial Exercise of Remedies ................... 89
11.5 Notices ................................................ 89
11.6 Assignability .......................................... 89
11.7 Confidentiality ........................................ 92
11.8 Indemnification ........................................ 93
11.9 Entire Agreement; Successors and Assigns ............... 94
11.10 Amendments and Waivers ................................. 94
11.11 Nonliability of Agent and Lenders ...................... 95
11.12 Independent Nature of Lenders' Rights .................. 95
11.13 Counterparts ........................................... 95
11.14 Effectiveness .......................................... 95
11.15 Severability ........................................... 95
11.16 Headings Descriptive ................................... 96
11.17 Maximum Rate ........................................... 96
11.18 Release of Headquarters Lease Assignment ............... 96
11.19 Existing Agreements Superseded ......................... 97
</TABLE>
<TABLE>
<CAPTION>
ANNEXES
<S> <C> <C>
Annex I - List of Lenders and Commitment Amounts
EXHIBITS
Exhibit A - Form of Revolving Note
Exhibit B - Form of Compliance Certificate
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Collateral Access Agreement
Exhibit E - Form of Notice of Borrowing
Exhibit F - Form of Assignment and Assumption Agreement
Exhibit G - Form of Notice of Continuation
Exhibit H - Form of Notice of Conversion
Exhibit I - Form of Bailee Notice
SCHEDULES
Schedule A - Closing Documents List
Schedule B - Disclosure Schedule
Schedule C - Qualified Account Debtors
</TABLE>
iv
<PAGE> 6
SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered
into as of April 8, 1997 among WICKES LUMBER COMPANY, a Delaware corporation
(and any permitted successor or assign, the "Borrower"), and each of those
financial institutions identified as Lenders on Annex I hereto (together with
each of their successors and assigns, referred to individually as a "Lender" and
collectively as the "Lenders"), BT COMMERCIAL CORPORATION, acting in the manner
and to the extent described in Article 10 hereof (in such capacity, the
"Agent"), NATIONSBANK OF GEORGIA, N.A., as Syndication Agent (the "Syndication
Agent"), and Bankers Trust Company, as issuer of letters of credit (in such
capacity, the "Issuing Bank"), AMENDS AND RESTATES IN FULL the Amended and
Restated Credit Agreement, dated as of March 12, 1996 among the Borrower, the
lenders thereunder, the Agent and the Issuing Bank (the "1996 Credit Agreement")
(this amendment and restatement of the 1996 Credit Agreement, the "Credit
Agreement").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Agent and the Issuing Bank are
parties to the 1996 Credit Agreement pursuant to which the Borrower obtained
from the Lenders a credit facility for the purposes indicated therein;
WHEREAS, the Borrower, the Lenders, the Agent and the Issuing Bank
desire to amend and restate the 1996 Credit Agreement in full as set forth
herein;
WHEREAS, the Borrower has requested that the Lenders, the Agent, the
Syndication Agent and the Issuing Bank enter into this Credit Agreement in order
to continue to make Revolving Loans to the Borrower in an aggregate amount of up
to $130,000,000 and to provide Letters of Credit to the Borrower to provide for
the Borrower's ongoing working capital, general business and capital expenditure
requirements;
WHEREAS, it is the intent of the Borrower, the Lenders, the Agent, the
Syndication Agent and the Issuing Bank that this Credit Agreement amend and
restate in its entirety the 1996 Credit Agreement and that, from and after the
Effective Date, the 1996 Credit Agreement shall be of no force and effect except
to evidence the terms and conditions under which the Borrower heretofore has
incurred obligations and liabilities to the Agent and the Lenders as evidenced
by the 1996 Credit Agreement and the Agent's books and records; and
WHEREAS, this Credit Agreement is made in renewal, amendment,
restatement and modification of, but not in extinguishment of, the obligations
under the 1996 Credit Agreement.
NOW, THEREFORE, the Borrower, the Lenders, the Issuing Bank, the
Syndication Agent and the Agent hereby agree as follows:
<PAGE> 7
ARTICLE 1. Definitions.
1.1 General Definitions. As used herein, the following terms shall
have the meanings herein specified (to be equally applicable to both the
singular and plural forms of the terms defined):
Accounts shall mean "Accounts" as defined in the Security Agreement.
Acquisition Basket shall mean, as of any date, the lesser of (i) the sum of (a)
the cumulative EBITDA of the Consolidated Entity for the period from December
29, 1996 through the last day of the most recent fiscal month of the Borrower
ending prior to such date for which monthly financial statements have been
delivered to the Agent pursuant to Section 7.1(d) (less the cumulative Fixed
Charges of the Consolidated Entity for such period) and (b) all Transferred Sale
Proceeds and (ii) $10,000,000.
Adjusted EBITDA shall mean, for any fiscal period, the difference of (i) EBITDA
for such period minus (ii) the difference of (a) the Restructuring Reserve as of
the start of such period minus (b) the Restructuring Reserve as of the end of
such period; provided that, with respect to any fiscal period ending on or prior
to the last day of fiscal December 1997, the Restructuring Reserve as of the
start of such period shall be deemed to be the lesser of (1) the actual
Restructuring Reserve and (2) $6,000,000.
Adjusted Eurodollar Rate shall mean, with respect to each Interest Period for
any Eurodollar Rate Loan, the rate obtained by dividing (i) the Eurodollar Rate
for such Interest Period by (ii) a percentage equal to 1 minus the stated
maximum rate (stated as a decimal) of all reserves, if any, required to be
maintained against "Eurocurrency liabilities" as specified in Regulation D (or
against any other category of liabilities which includes deposits by reference
to which the interest rate on Eurodollar Rate Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Lender to United States residents).
Adjusted Interest Expense shall mean Interest Expense, excluding interest which
is paid in kind or is otherwise not paid or payable in cash.
Affiliate shall mean, with respect to any Person, any Person which directly or
indirectly controls, is controlled by, or is under common control with, such
Person or any Subsidiary of such Person or any Person who is a director or
officer of such Person or any Subsidiary of such Person. For purposes of this
definition, "control" shall mean the possession, directly or indirectly, of the
power to (i) vote ten percent (10%) or more of the securities having ordinary
voting power for the election of directors of such Person or (ii) direct or
cause the direction of
2
<PAGE> 8
management and policies of a business, whether through the ownership of voting
securities, by contract or otherwise and either alone or in conjunction with
others or any group.
Affiliate Transaction shall have the meaning given to such term in Section 8.14
hereof.
Agent shall mean BTCC as provided in the preamble to this Credit Agreement or
any successor to BTCC.
Agent Advance shall mean a Revolving Loan made by the Agent to the Borrower
pursuant to Section 2.2 hereof.
Agent's Fee Letter shall mean that certain letter dated the date hereof between
the Agent and the Borrower providing for the payment of certain fees in
connection with the Credit Agreement.
Amendment and Restatement Fee Letter shall mean that certain letter dated March
12, 1996 between the Agent and Wickes Lumber Company providing for the payment
of certain fees in connection with the 1996 Credit Agreement.
Applicable Lending Office shall mean, with respect to each Lender, such Lender's
Eurodollar Lending Office in the case of a Eurodollar Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.
Assignment and Assumption Agreement shall mean an assignment and assumption
agreement entered into by an assigning Lender and an assignee Lender, and
accepted by the Agent, in accordance with Section 11.6, substantially in the
form of Exhibit F.
Auditors shall mean a nationally-recognized firm of independent public
accountants selected by the Borrower and satisfactory to the Agent in its sole
discretion. For purposes of this Credit Agreement, the Borrower's current firm
of independent public accountants, Coopers & Lybrand, shall be deemed to be
satisfactory to the Agent.
Bailee Notice shall mean a notification to a bailee of the Borrower's Inventory
of the Agent's security interest in such Inventory, substantially in the form of
Exhibit I.
Benefit Plan shall mean a defined benefit plan as defined in Section 3(3) of
ERISA (other than a Multiemployer Plan) for which the Borrower, any Subsidiary
or any ERISA Affiliate is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA.
Blocked Account shall have the meaning given to such term in Section 2.9 hereof.
Blocked Account Agreement shall have the meaning given to such term in Section
2.9 hereof.
3
<PAGE> 9
Blocked Account Bank shall have the meaning given to such term in Section 2.9
hereof.
Borrower shall mean Wickes Lumber Company and any permitted successor or assign.
Borrowing shall mean a borrowing of Revolving Loans of the same Type on the same
day.
Borrowing Base shall have the meaning given to such term in Section 2.1 hereof.
Borrowing Base Certificate shall have the meaning given to such term in Section
7.2 hereof.
BT Account shall have the meaning given to such term in Section 2.9 hereof.
BTCC shall mean BT Commercial Corporation, in its individual capacity.
Building Materials shall mean that portion of Inventory comprising "Building
Materials," as listed on Schedule B, Part 1.1 hereto (as such list may be
supplemented or otherwise modified from time to time with the consent of the
Agent).
Business Day shall mean any day other than a Saturday, Sunday or legal holiday
on which commercial banks in New York, New York, are generally closed. When used
in connection with Eurodollar Rate Loans, this definition will also exclude any
day on which commercial banks are not open for dealing in U.S. dollar deposits
in the London (England, U.K.) interbank market.
Capital Asset Sale Proceeds shall mean the aggregate Net Cash Proceeds received
by the Borrower in connection with the sale or other disposition by the Borrower
of the Real Estate and related capital assets listed on Schedule 8.9 (as may be
amended with the consent of the Agent and the Syndication Agent).
Capital Expenditures shall mean, for any period, the sum of (a) all expenditures
capitalized for financial statement purposes plus, without duplication, (b) the
entire principal amount of any debt (including obligations under capitalized
leases) assumed or incurred in connection with any such expenditures; provided
that "Capital Expenditures" shall in any event include the purchase price paid
in connection with the acquisition of any Person (including through the purchase
of a majority of the capital stock or other ownership interests of such Person
or through merger or consolidation) to the extent allocable to property, plant
or equipment. Notwithstanding the foregoing, "Capital Expenditures" shall not
include (i) insurance proceeds from a Casualty Loss applied to the repair or
replacement of the property affected by such Casualty Loss and (ii) expenditures
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(other than Maintenance Capital Expenditures) of Capital Asset Sale Proceeds
otherwise permitted hereunder.
Cash Equivalents shall mean any of the following, so long as the Agent has a
perfected security interest therein: (i) securities issued, guarantied or
insured by the United States or any of its agencies with maturities of not more
than one year from the date acquired; (ii) certificates of deposit with
maturities of not more than one year from the date acquired issued by a U.S.
federal or state chartered commercial bank of recognized standing, which has
capital and unimpaired surplus in excess of $200,000,000 and which bank or its
holding company has a short-term commercial paper rating of at least A-1 or the
equivalent by Standard & Poor's Corporation and at least P-1 or the equivalent
by Moody's Investors Services, Inc.; (iii) reverse repurchase agreements with
terms of not more than seven days from the date acquired, for securities of the
type described in (i) above and entered into only with commercial banks having
the qualifications described in (ii) above; (iv) commercial paper, other than
commercial paper issued by the Borrower or any of its Affiliates, issued by any
Person incorporated under the laws of the United States or any state thereof and
rated at least A-1 or the equivalent thereof by Standard & Poor's Corporation or
at least P-1 or the equivalent thereof by Moody's Investors Service, Inc., in
each case with maturities of not more than one year from the date acquired; and
(v) investments in money market funds registered under the Investment Company
Act of 1940, as amended, which have net assets of at least $200,000,000 and at
least eighty-five percent (85%) of whose assets consist of securities and other
obligations of the type described in clauses (i) through (iv) above.
Casualty Loss shall have the meaning given to such term in Section 7.7 hereof.
Change of Control shall mean one or more of the following events:
(a) Within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934, as in effect on the Closing Date, J. Steven Wilson ceases to
beneficially own (other than through death or incapacity or by virtue of
transfers to trusts for the benefit of his minor children), directly or
indirectly, shares representing at least 50% of the issued and outstanding
capital stock of the Borrower beneficially owned by him at the close of business
on October 22, 1993; or
(b) J. Steven Wilson ceases to be the chief executive officer of the
Borrower or, in the event of his death or incapacity, he is not within 90 days
replaced with a chief executive officer satisfactory to the Majority Lenders in
their sole discretion; or
(c) less than a majority of the members of the Borrower's board of
directors then in office shall be persons who either
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(i) were serving as directors on the Closing Date or (ii) were nominated as
directors and approved by the vote of the majority of the directors who are
directors referred to in clause (i) above or this clause (ii); or
(d) the stockholders of the Borrower shall approve any plan or proposal
for the liquidation or dissolution of the Borrower; or
(e) a Person or group of Persons (within the meaning of Rule 13d-5
under the Securities Exchange Act of 1934, as amended from time to time) (other
than J. Steven Wilson and his Affiliates) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended from
time to time) of securities of the Borrower representing more than 25% of the
combined voting power of the outstanding voting securities for the election of
directors or shall have the right to elect a majority of the Board of directors
of the Borrower.
Closing Date shall mean October 22, 1993.
Closing Documents List shall mean the Closing Documents List attached hereto as
Schedule A.
Collateral shall mean any and all assets and rights and interests in or to
property of the Borrower pledged from time to time as security for the
Obligations whether now owned or hereafter acquired, including, without
limitation, all of the Accounts, Inventory, Equipment and Intangibles of the
Borrower.
Collateral Access Agreements shall mean any landlord waivers, mortgagee waivers,
bailee letters or any similar acknowledgment agreements of any warehouseman or
processor in possession of Inventory, in each case similar in substance to
Exhibit D or as otherwise required by the Agent.
Collateral Documents shall mean all contracts, instruments and other documents
now or hereafter executed and delivered in connection with the Original Credit
Agreement, the 1996 Credit Agreement and/or this Credit Agreement, pursuant to
which mortgages, liens and/or security interests are granted to the Agent in the
Collateral for the benefit of the Lenders and the Issuing Bank.
Collections shall mean all cash, funds, checks, notes, instruments and any other
form of remittance tendered by account debtors in payment of Accounts.
Commitment of any Lender shall mean the amount set forth opposite such Lender's
name on Annex I, as such annex may be amended from time to time, under the
heading "Commitment," as such amount may
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be reduced from time to time pursuant to the terms of this Credit Agreement.
Concentration Account Agreement shall have the meaning given to such term in
Section 2.9 hereof.
Consignment Agreement shall mean that certain Agreement, dated as of October 7,
1994, among the Borrower, GLC and the Agent, as such agreement may be amended or
replaced from time to time with the consent of the Agent.
Consolidated Entity shall mean the Borrower and each of its Subsidiaries which
would be consolidated with the Borrower for purposes of financial reporting.
Consolidated Net Income shall mean for any period the consolidated net income of
the Consolidated Entity for such period.
Consolidated Net Worth shall mean the excess of the consolidated assets of the
Consolidated Entity over the consolidated liabilities of the Consolidated
Entity.
Contingency Account shall have the meaning given to such term in Section 8.16
hereof.
Contingent Obligation of any Person shall mean any direct or indirect guaranty
or other contractual obligation, contingent or otherwise, of such Person with
respect to any Indebtedness or other obligation or liability of another,
including any such Indebtedness, obligation or liability directly or indirectly
guaranteed, endorsed (other than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by such Person,
or in respect of which such Person is otherwise directly or indirectly liable,
including any contractual obligations (contingent or otherwise) arising through
any agreement to purchase, repurchase, or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income, or other financial condition, or to make payment other than for
value received.
Covered Taxes shall have the meaning given to such term in Section 4.10 hereof.
Credit Agreement shall mean this second amended and restated credit agreement,
as the same may be modified, amended, extended, restated or supplemented from
time to time.
Credit Documents shall mean, collectively, this Credit Agreement, the Revolving
Notes, the Letters of Credit, each of the Collateral Documents and all other
documents, agreements,
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instruments, opinions and certificates now or hereafter executed and delivered
in connection herewith or therewith, as the same may be modified, amended,
extended, restated or supplemented from time to time.
Credit Parties shall mean, collectively, the Borrower and any other parties
(other than the Lenders, the Agent, the Syndication Agent, the Issuing Bank and
Bankers Trust Company) to the Credit Documents (other than the Collateral Access
Agreements, the Blocked Account Agreements and the opinions).
Current Assets shall mean all assets designated as "current" on a consolidated
balance sheet.
Current Liabilities shall mean all liabilities (other than the Restructuring
Reserve) designated as "current" on a consolidated balance sheet.
Default shall mean an event, condition or default which with the giving of
notice, the passage of time or both would be an Event of Default.
Defaulting Lender shall have the meaning given to such term in Section 2.5
hereof.
Disbursement Account shall have the meaning given to such term in Section 2.2(c)
hereof.
DOL shall mean the United States Department of Labor and any successor
department or agency.
Dollars and the sign $ shall each mean freely transferable lawful money of the
United States.
Domestic Lending Office shall mean, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" opposite its name on
Annex I hereto, as such annex may be amended from time to time.
Early Termination Fee shall have the meaning given to such term in Section 4.7
hereof.
EBITDA shall mean, in any fiscal period, the Consolidated Net Income (other than
extraordinary items of the Borrower for such period), (i) plus the amount of all
Interest Expense, income tax expense, depreciation and amortization, including
amortization of any goodwill or other intangibles for such period, (ii) plus
losses and minus gains (to the extent not duplicative) attributable to any fixed
asset sales and (iii) plus or minus (as the case may be) any other non-cash
charges which have been subtracted or added, as the case may be, in calculating
Consolidated Net Income for such period.
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Effective Date shall mean the first date on which all of the conditions
precedent set forth in Article 5 hereof have been satisfied.
Eligible Accounts Receivable shall mean Accounts of the Borrower payable in
Dollars and deemed by the Agent in its Permitted Discretion to be eligible for
inclusion in the calculation of the Borrowing Base. In determining the amount to
be so included, the face amount of such Accounts shall be reduced by the amount
of all returns, discounts, claims, credits, charges, or other allowances and by
the aggregate amount of all reserves, limits and deductions provided for in this
definition and elsewhere in this Credit Agreement. Unless otherwise approved in
writing by the Agent, no Account shall be deemed to be an Eligible Account
Receivable if:
(a) the Account arises out of a sale made by the Borrower to an
Affiliate; or
(b) the Account is unpaid more than 30 days after the original
payment due date, with respect to Accounts the invoice for which provides that
payment is due in the month following the month of purchases relating to such
invoice; or
(c) the Account is unpaid more than 30 days after the original
payment due date, with respect to Accounts the invoice for which provides that
payment is due in the second or third month following the month of purchases
relating to such invoice; provided, however, that the aggregate amount of all
such invoices providing for payment in the second or third month following the
month of purchases relating to such invoices (other than invoices also covered
by subsection (d) of this definition) that may constitute Eligible Accounts
Receivable shall not exceed 10% of total Eligible Accounts Receivable at any one
time; provided, further, that any Account the invoice for which provides that
payment is due after the third month following the month of purchases relating
to such invoice shall in no event be an Eligible Accounts Receivable; or
(d) the Account is unpaid more than 30 days after the original
payment due date, with respect to Accounts (i) the invoice for which provides
that payment is due in the second month following the date of purchases relating
to such invoice and (ii) the account debtors of which are Qualified Account
Debtors; provided, however, that the aggregate amount of all such invoices that
may constitute Eligible Accounts Receivable shall not exceed $5,000,000.
(e) the Account is from the same account debtor (or any Affiliate
thereof) and fifty percent (50%) or more, in face amount, of all Accounts
from such account debtor (or any Affiliate thereof) are ineligible pursuant
to (b), (c) and/or (d) above; or
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(f) the Account, when aggregated with all other Accounts of such
account debtor, exceeds two percent (2%) (or, with respect to any Qualified
Account Debtor, four percent (4%)) in face value of all Accounts of the Borrower
then outstanding, to the extent of such excess; provided, however, that Accounts
supported or secured by an irrevocable letter of credit in form and substance
satisfactory to the Agent, issued by a financial institution satisfactory to the
Agent, and, if requested by the Agent, duly transferred to the Agent (together
with sufficient documentation to permit direct draws by the Agent) shall be
excluded to the extent of the face amount of such letter of credit for the
purposes of such calculation; or
(g) the account debtor is also a creditor of the Borrower, (ii)
the account debtor has disputed its liability on, or the account debtor has made
any claim with respect to, such Account or any other Account due from such
account debtor to the Borrower, which has not been resolved or (iii) the Account
otherwise is or may become subject to any right of setoff by the account debtor;
provided, that any Account deemed ineligible pursuant to this clause (f) shall
only be ineligible to the extent of the amount owed by the Borrower to the
account debtor, the amount of such dispute or claim, or the amount of such
setoff, as applicable.
(h) the account debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or if a decree or order for relief has
been entered by a court having jurisdiction over the account debtor in an
involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or if any other petition or other application for relief
under the federal bankruptcy laws has been filed by or against the account
debtor, or if the account debtor has filed a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up, or shall
authorize or commence any action or proceeding for dissolution, winding-up or
liquidation, or if the account debtor has failed, suspended business, declared
itself to be insolvent, is generally not paying its debts as they become due or
has consented to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or affairs,
unless the payment of Accounts from such account debtor is secured in a manner
satisfactory to the Agent or, if the Account from such account debtor arises
subsequent to a decree or order for relief with respect to such account debtor
under the federal bankruptcy laws, as now or hereafter in effect, the Agent
shall have determined that the timely payment and collection of such Account
will not be impaired; or
(i) the sale is to an account debtor outside of the continental
United States, unless the account debtor thereon has supplied the Borrower with
an irrevocable letter of credit in
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form and substance satisfactory to the Agent, issued by a financial
institution satisfactory to the Agent and which has been duly transferred to
the Agent (together with sufficient documentation to permit direct draws by the
Agent); or
(j) the sale to the account debtor is on a bill-and-hold, guarantied
sale, sale-and-return, sale on approval or consignment basis or made pursuant
to any other written agreement providing for repurchase or return; or
(k) the Agent determines in its Permitted Discretion that collection
of such Account is uncertain or that such Account may not be paid by reason of
the account debtor's financial inability to pay; or
(l) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower duly assigns
its rights to payment of such Account to the Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. ss.3727 et seq.); or
(m) the goods giving rise to such Account have not been shipped and
delivered to and accepted by the account debtor or the services giving rise to
such Account have not been performed by the Borrower and accepted by the
account debtor or the Account otherwise does not represent a final sale; or
(n) the Account does not comply with all applicable legal
requirements, including, where applicable, the Federal Consumer Credit
Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board
of Governors of the Federal Reserve System, in each case as amended; or
(o) the Agent does not have a valid and perfected first priority
security interest in such Account or the Account does not otherwise conform to
the representations and warranties contained in the Credit Agreement or the
other Credit Documents; or
(p) the Account is subject to any adverse security deposit, progress
payment or other similar advance made by or for the benefit of the applicable
account debtor.
Eligible Inventory shall mean items of Inventory of the Borrower held for sale
in the ordinary course (but not packing or shipping materials or maintenance
supplies) deemed by the Agent in its Permitted Discretion to be eligible for
inclusion in the calculation of the Borrowing Base. In determining the amount to
be so included, the amount of such Inventory shall be valued at the lower of
cost or market on a basis consistent with the Borrower's current and historical
accounting practice or as otherwise acceptable to the Agent. Unless otherwise
approved in writing by the Agent, Inventory shall not be deemed Eligible
Inventory if:
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(a) it is not owned solely by the Borrower or the Borrower does
not have good, valid marketable title thereto; or
(b) it is not (i) subject to the Consignment Agreement or (ii)
located on (or in transit to) property owned or leased by the Borrower or in a
contract warehouse or other third party location, subject in each case to a
Collateral Access Agreement executed by the lessor, the contract warehouseman or
the other third party, as the case may be (and any related filings or notices
required by the Agent), and segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises; or
(c) it is not subject to a perfected first priority Lien in favor
of the Agent, except for Liens for unpaid rent or normal and customary
warehousing and common carrier charges; or
(d) it is not located in the United States; or
(e) it is goods returned or rejected by the Borrower's customers
or goods in transit to third parties (other than to warehouse sites covered by
Collateral Access Agreements); or
(f) with respect to Inventory in transit, (i) the carrier of such
Inventory has not been given notice of the Agent's interest therein pursuant
to a Bailee Notice (a copy of which shall be promptly delivered to the Agent)
or (ii) the aggregate amount of such Inventory in transit at any time exceeds
two and one-half percent (2.5%) of total Eligible Inventory at such time, to
the extent of such excess; or
(g) with respect to work in process, the aggregate amount of
such work in process at any time exceeds $2,000,000, to the extent of such
excess; or
(h) it is obsolete or slow moving, or does not otherwise conform
to the representations and warranties contained in the Credit Documents.
Equipment shall mean "Equipment" as defined in the Security Agreement.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute thereto and all final or temporary
regulations promulgated thereunder and published, generally applicable rulings
entitled to precedential effect.
ERISA Affiliate shall mean any entity required at any relevant time to be
aggregated with the Borrower or any Subsidiary under Sections 414(b), (c), (m)
or (o) of the Internal Revenue Code.
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Eurodollar Lending Office shall mean, with respect to any Lender, the office of
such Lender specified as its "Eurodollar Lending Office" opposite its name on
Annex I, as such annex may be amended from time to time (or, if no such office
is specified, its Domestic Lending Office), or such other office or Affiliate of
such Lender as such Lender may from time to time specify to the Borrower and the
Agent.
Eurodollar Rate shall mean, with respect to the Interest Period for each
Eurodollar Rate Loan comprising part of the same Borrowing, an interest rate per
annum equal to the rate (rounded upward to the nearest whole multiple of
one-sixteenth (1/16) of one percent (1.00%) per annum, if such rate is not such
a multiple) of the offered quotation, if any, to first class banks in the
Eurodollar market by Bankers Trust Company for U.S. dollar deposits of amounts
in immediately available funds comparable to the principal amount of the
Eurodollar Rate Loan for which the Eurodollar Rate is being determined with
maturities comparable to the Interest Period for which such Eurodollar Rate will
apply as of approximately 10:00 A.M. New York City time two (2) Business Days
prior to the commencement of such Interest Period.
Eurodollar Rate Calculation Date shall have the meaning given to such term in
Section 4.2 hereof.
Eurodollar Rate Loan shall mean a Revolving Loan that bears interest as provided
in Section 4.2 hereof.
Eurodollar Rate Spread shall have the meaning given to such term in Section 4.2
hereof.
Event(s) of Default shall have the meaning provided for in Article 9 of this
Credit Agreement.
Existing Advances shall mean the loans, investments and advances between the
Borrower and its Subsidiaries in existence as of the Effective Date and
described on Schedule B hereto.
Expenses shall mean all present and future expenses incurred by or on behalf of
the Agent in connection with the Credit Agreement, any other Credit Document or
otherwise related thereto, whether incurred heretofore or hereafter, which
expenses shall include, without being limited to, the cost of record searches,
the fees and expenses of attorneys (including the allocated cost of internal
counsel) and paralegals, all costs and expenses incurred by the Agent in opening
bank accounts and lockboxes, depositing checks, receiving and transferring
funds, and any charges imposed on the Agent due to insufficient funds of
deposited checks and the Agent's standard fee relating thereto, collateral
examination fees and expenses, fees and expenses of accountants, appraisers or
other consultants, experts or advisors employed or retained by the Agent, fees
and expenses incurred by the Agent in connection with the assignments of or
sales of participations in the Revolving Loans, fees and taxes relative to
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the filing of financing statements, costs of preparing and recording Collateral
Documents, all expenses, costs and fees set forth in Article 4 of this Credit
Agreement, all other fees and expenses required to be paid pursuant to the Fee
Letter and/or the Amendment and Restatement Fee Letter and all fees and expenses
incurred in connection with releasing Collateral and the amendment or
termination of any of the Credit Documents.
Expiration Date shall mean March 31, 2001.
Fairness Conditions shall have the meaning given to such term in Section 8.14
hereof.
Federal Funds Rate shall mean, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the
rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by it.
Fee Letter shall mean that certain letter dated July 16, 1993 between BT
Commercial Corporation and Wickes Lumber Company providing for the payment of
certain fees in connection with the Original Credit Agreement.
Fees shall mean, collectively, the Unused Line Fee, the Letter of Credit Fees,
the Issuing Bank Fees and the other fees provided for in the Fee Letter, the
Amendment and Restatement Fee Letter, the Second Amendment and Restatement Fee
Letter, the Syndication Agent's Fee Letter and/or the Agent's Fee Letter or
otherwise payable to the Agent, the Syndication Agent, the Issuing Bank or the
Lenders.
Financial Statements shall mean the consolidated (and, if requested,
consolidating) balance sheets, statements of operations, statements of cash
flows and statements of changes in stockholders' equity/deficit of the Borrower
for the period specified.
Fixed Charge Coverage Ratio shall have the meaning given to such term in Section
8.1 hereof.
Fixed Charges shall mean, with respect to any Person for any period, the sum of
(a) Adjusted Interest Expense of such Person for such period, (b) all income
taxes (and other taxes of a similar nature or imposed in lieu thereof) paid in
cash by such Person during such period and (c) all Capital Expenditures of such
Person during such period.
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Foreign Lender shall mean any Lender organized under the laws of a jurisdiction
outside of the United States.
Funding Bank shall have the meaning given to such term in Section 4.9 hereof.
GAAP shall mean generally accepted accounting principles in the United States as
in effect from time to time.
GLC shall mean GLC Division, Inc., a Delaware corporation and a wholly-owned
Subsidiary of the Borrower.
Governing Documents shall mean, as to any Person, the certificate or articles of
incorporation and by-laws or other organizational or governing documents of such
Person.
Governmental Authority shall mean any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
Hardlines shall mean that portion of Inventory comprising "Hardlines," as listed
on Schedule B, Part 1.1 hereto (as such list may be supplemented or otherwise
modified from time to time with the consent of the Agent).
Headquarters shall mean the Borrower's headquarters building located at 706
North Deerpark Drive, Vernon Hills, Illinois.
Headquarters Lease shall mean that lease, dated as of April 1997, between the
Borrower and ERM North Central, Inc., with respect to approximately 22,000
square feet of space in the Borrower's Headquarters.
Headquarters Lease Assignment shall have the meaning given to such term in
Section 8.1 hereof.
Headquarters Lease Build-Out Expenditure shall mean not more than $950,000 spent
by the Borrower to build-out a portion of the Headquarters pursuant to the terms
of the Headquarters Lease.
Highest Lawful Rate shall mean, at any given time during which any Obligations
shall be outstanding hereunder, the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Obligations owing under this Credit Agreement, under
the laws of the State of New York (or the law of any other jurisdiction whose
laws may be mandatorily applicable notwithstanding other provisions of this
Credit Agreement and the other Credit Documents), or under applicable federal
laws which may presently or hereafter be in effect and which allow a higher
maximum nonusurious interest rate than under New York (or such other
jurisdiction's) law, in any case after taking into account, to the extent
permitted by applicable law, any and all relevant
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payments or charges under this Credit Agreement and any other Credit Documents
executed in connection herewith, and any available exemptions, exceptions and
exclusions.
Incremental Borrowing Base Amount shall have the meaning given to such term in
Section 8.20(c) hereof.
Indebtedness shall mean, with respect to any Person, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under capital leases, (c) all obligations of such Person in
respect of letters of credit, banker's acceptances or similar obligations issued
or created for the account of such Person, (d) liabilities arising under
Interest Rate Agreements and Lumber Hedging Agreements of such Person, (e) all
Contingent Obligations of such person and (f) all liabilities secured by any
Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
Indenture shall mean the Indenture with respect to the Senior Subordinated
Notes, dated as of October 15, 1993, between the Borrower and Marine Midland
Bank, N.A., as trustee, as amended, supplemented or otherwise modified from time
to time with the prior written consent of the Majority Lenders.
Intangibles shall mean "Intangibles" as defined in the Security Agreement.
Interest Coverage Ratio shall mean, with respect to any period, the ratio of
EBITDA for such period to Adjusted Interest Expense for such period.
Interest Expense shall mean, with respect to any Person, the aggregate
consolidated interest expense of such Person in respect of Indebtedness
determined on a consolidated basis, including, without limitation, amortization
of original issue discount on any Indebtedness and of all fees payable in
connection with the incurrence of such Indebtedness (to the extent included in
interest expense), the interest portion of any deferred payment obligation and
the interest component of any capital lease obligations.
Interest Period shall mean for any Eurodollar Rate Loan the period commencing on
the date of such Borrowing and ending on the last day of the period selected by
the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three, four, five or six months, in each case
as the Borrower may, in an appropriate Notice of Borrowing, Notice of
Continuation or Notice of Conversion, select; provided, however, that the
Borrower may not select any Interest Period
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that ends after the Expiration Date. Whenever the last day of any Interest
Period would otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next succeeding
Business Day, provided that if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day.
Interest Rate Agreement shall mean any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement under which the Borrower or any
Subsidiary is a party or beneficiary.
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute thereto and all final or temporary
rules and regulations promulgated thereunder and published, generally applicable
rulings entitled to precedential effect to the extent such rules, regulations or
rulings are effective and applicable hereto.
Internal Revenue Service or IRS shall mean the United States Internal Revenue
Service and any successor agency.
Inventory shall mean "Inventory" as defined in the Security Agreement.
Investment shall mean all expenditures made and all liabilities incurred
(contingently or otherwise) for or in connection with the acquisition of stock
or Indebtedness of, or for loans, advances, capital contributions or transfers
of property to, or in respect of any guaranties (or other commitments as
described under Indebtedness) of obligations of, any Person. In determining the
aggregate amount of Investments outstanding at any particular time, (i) the
amount of any Investment represented by a guaranty shall be taken at not less
than the principal amount of the obligations guarantied and still outstanding;
(ii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (iii) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise; and (iv) there
shall not be deducted from the aggregate amount of Investments any decrease in
the market value thereof.
Issuing Bank shall mean Bankers Trust Company or any Lender that is acceptable
to the Agent which has agreed to issue a Letter of Credit for the account of the
Borrower under this Credit Agreement.
Issuing Bank Fees shall have the meaning given to such term in Section 4.6
hereof.
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Lender and Lenders shall have the respective meanings provided in the preamble
to this Credit Agreement.
Lender Advance shall mean a Revolving Loan made by the Lenders to the Borrower
pursuant to Section 2.2 hereof.
Letter of Credit Fee Percentage shall have the meaning given to such term in
Section 4.6 hereof.
Letter of Credit Fees shall mean the fees payable to the Agent for the benefit
of the Agent and the Lenders by the Borrower under and pursuant to Section 4.6
hereof.
Letter of Credit Obligations shall mean, at any time, the sum of (i) the
aggregate undrawn amount of all Letters of Credit outstanding at such time, plus
(ii) the aggregate amount of all drawings under Letters of Credit for which the
Issuing Bank has not at such time been reimbursed, plus (iii) the aggregate
amount of all payments made by each Lender to the Issuing Bank with respect to
such Lender's participation in Letters of Credit as provided in Section 3.3
hereof for which the Borrower has not at such time reimbursed the Lenders,
whether by way of a Revolving Loan or otherwise.
Letter of Credit Request shall have the meaning given to such term in Section
3.4 hereof.
Letters of Credit shall mean all letters of credit (whether documentary or
stand-by and whether for the purchase of inventory, equipment or otherwise)
issued for the account of the Borrower pursuant to Article 3 hereof and all
amendments, renewals, extensions or replacements thereof.
Lien(s) shall mean any lien, claim, charge, pledge, security interest, deed of
trust, mortgage, other encumbrance or other arrangement having the practical
effect of the foregoing or other preferential arrangement of any other kind and
shall include the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
Loan Account shall have the meaning given to such term in Section 2.7 hereof.
LTC shall mean Lumber Trademark Company, an Illinois corporation and a
wholly-owned Subsidiary of the Borrower.
LTC Documents shall mean the LTC Sublicense Agreement and the LTC Subordination
Agreement.
LTC Sublicense Agreement shall mean that certain Amended and Restated Trademark
Sublicense Agreement, dated as of March 18, 1994, between the Borrower and LTC,
as such agreement may be amended from time to time with the consent of the
Agent.
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LTC Subordination Agreement shall mean that certain Subordination Agreement,
dated as of March 18, 1994, among the Borrower, LTC and the Agent, as such
agreement may be amended from time to time with the consent of the Agent.
Lumber Hedging Account shall mean an account maintained by the Borrower and
approved by the Agent at an appropriate financial institution in connection with
the purchase by the Borrower of Lumber Hedging Agreements.
Lumber Hedging Agreement shall mean any lumber futures contract or similar
agreement or arrangement entered into by the Borrower designed to protect the
Borrower against fluctuations in the price of lumber actually used in the
ordinary course of the Borrower's business.
Maintenance Capital Expenditures shall mean, for any period, the sum of all
Capital Expenditures made by the Borrower for (i) the maintenance and repair of
any property, facilities or equipment and (ii) the replacement of any obsolete
property, facilities or equipment.
Majority Lenders shall mean, at any time, those Lenders (i) then owed or holding
in the aggregate more than fifty percent (50%) of the Total Commitments or (ii)
if the Commitments are terminated, those Lenders then owed or holding in the
aggregate more than fifty percent (50%) of the outstanding principal amount of
Revolving Loans (or if the Commitments are terminated and no Revolving Loans are
outstanding, those Lenders then holding more than fifty percent (50%) of the
aggregate participation interests in Letters of Credit then outstanding).
Material Adverse Effect shall mean a material adverse effect on (i) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of any Credit Party, (ii) any Credit Party's
ability to perform its obligations under the Credit Documents to which it is a
party, or (iii) the rights and remedies of the Agent, the Issuing Bank or the
Lenders under any Credit Document.
Material Contract shall mean any contract (including, without limitation, the
Indenture, each of the LTC Documents and the Consignment Agreement) or other
arrangement (other than the Credit Documents), whether written or oral, to which
the Borrower or any of the Subsidiaries is a party as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto could have
a Material Adverse Effect.
Mortgage shall mean each mortgage, deed of trust or similar document executed by
the Borrower for the benefit of the Agent and/or the Lenders, each as amended,
restated, supplemented, or otherwise modified from time to time.
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Multiemployer Plan shall mean a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA and (i) which is, or within the immediately preceding six
(6) years was, contributed to by the Borrower, any Subsidiary or any ERISA
Affiliate or (ii) with respect to which the Borrower or any Subsidiary may incur
any liability.
Net Cash Proceeds shall mean, with respect to any sale or other disposition of
assets, the total cash proceeds received in connection therewith less all
advisory fees, legal costs, closing costs, commissions and other out-of-pocket
expenses reasonably incurred in connection therewith.
Net Income shall mean, with respect to any Person during any period, the net
income (loss) of such Person during such period determined in accordance with
GAAP, less any reduction in respect of dividends or other distributions (made by
such Person) on any equity interests of such Person during such period.
1996 Credit Agreement shall have the meaning set forth in the preamble to this
Credit Agreement.
Notice of Borrowing shall have the meaning given to such term in Section 2.2
hereof.
Notice of Continuation shall have the meaning given to such term in Section
4.8(a) hereof.
Notice of Conversion shall have the meaning given to such term in Section 4.8(b)
hereof.
Obligations shall mean the unpaid principal of and interest on (including
interest accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Revolving Notes, any reimbursement obligation
or indemnity of the Borrower on account of Letters of Credit (including
obligations to Lenders as participants in the letter of credit exposure of the
Issuing Bank under Section 3.3 hereof) or any accommodation extended with
respect to applications for Letters of Credit, the Fees, the Expenses and all
other obligations and liabilities of the Borrower to the Agent, the Syndication
Agent, the Issuing Bank or to the Lenders, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement, the
Notes, any other Credit Document and any other document made, delivered or given
in connection herewith or therewith, and each other obligation and liability,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, whether on account of principal, interest, fees,
indemnities, costs or expenses (including, without limitation, all fees and
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disbursements of counsel to the Agent, the Syndication Agent, the Issuing Bank
or to the Lenders) that are required to be paid by the Borrower to the Lenders,
the Agent, the Syndication Agent or the Issuing Bank pursuant to the terms of
the Credit Agreement or any of the other Credit Documents.
Original Credit Agreement shall mean the Credit Agreement dated as of October
22, 1993, among the Borrower, the lenders thereunder, the Agent and the Issuing
Bank, as previously amended by that certain Second Amendment, dated as of August
1, 1994, that certain Third Amendment, Waiver and Consent, dated as of October
7, 1994, that certain Fourth Amendment, dated as of January 1, 1995, that
certain Fifth Amendment, dated as of June 16, 1995, that certain Sixth
Amendment, Waiver and Consent, dated as of June 13, 1995, that certain Seventh
Amendment, dated as of June 30, 1995, that certain Eighth Amendment, dated as of
June 30, 1995, that certain Ninth Amendment and Waiver, dated as of November 10,
1995, and that certain Tenth Amendment, dated as of November 10, 1995, and as
amended and restated in full by the 1996 Credit Agreement.
PBGC shall mean the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
Permitted Acquisition shall mean the acquisition by the Borrower from any Person
of any assets (including, without limitation, stock or other ownership
interests) that constitute a stand-alone business entity engaged in the same
general lines of business as presently conducted by the Borrower.
Permitted Discretion shall mean the Agent's judgment exercised in good faith
based upon its consideration of any factor which the Agent believes in good
faith: (i) will or could adversely affect the value of any Collateral, the
enforceability or priority of the Agent's Liens thereon or the amount which the
Agent and the Lenders would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of such
Collateral; (ii) suggests that any collateral report or financial information
delivered to the Agent by any Person on behalf of the Borrower is incomplete,
inaccurate or misleading in any material respect; (iii) materially increases the
likelihood of a bankruptcy, reorganization or other insolvency proceeding
involving the Borrower or any of its Subsidiaries or any of the Collateral, or
(iv) creates or reasonably could be expected to create a Default or Event of
Default. In exercising such judgment, the Agent may consider such factors
already included in or tested by the definition of Eligible Accounts Receivable
or Eligible Inventory, as well as any of the following: (i) the financial and
business climate of the Borrower's industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Accounts, (iii) changes in demand for, and pricing of, Inventory, (iv) changes
in any concentration of risk with respect to Accounts and Inventory, (v) changes
in turnover statistics with respect to Inventory
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and/or Accounts, including actual versus historical and projected, and (vi) any
other factors that change the credit risk of lending to the Borrower on the
security of the Accounts and Inventory. The burden of establishing lack of good
faith hereunder shall be on the Borrower.
Person shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and, as applicable, the successors, heirs and assigns of
each.
Plan shall mean any employee benefit plan, program or arrangement, whether oral
or written, maintained or contributed to by the Borrower or any Subsidiary, or
with respect to which the Borrower or any Subsidiary may incur liability.
Pledge Agreements shall mean that certain Borrower Pledge Agreement, dated as of
October 7, 1994, pursuant to which the Borrower pledged to the Agent all of the
issued and outstanding shares of capital stock of GLC and (b) that certain
Borrower Pledge Agreement, dated as of February 20, 1996, pursuant to which the
Borrower pledged to the Agent all of the shares of capital stock owned by it of
Riverside International Holding Corporation, in each case as security for the
Obligations, as the same has been and may be amended, restated, supplemented or
otherwise modified from time to time.
Prime Lending Rate shall mean the rate which Bankers Trust Company announces
from time to time as its prime lending rate, as in effect from time to time. The
Prime Lending Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. Bankers Trust Company and
each of the Lenders may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
Prime Rate Loan shall mean a Revolving Loan that bears interest as provided in
Section 4.1 hereof.
Prime Rate Spread shall have the meaning given to such term in Section 4.1
hereof.
Proportionate Share shall mean, with respect to any Lender, (i) a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the Total Commitments
or, (ii) if the Commitments are terminated, a fraction the numerator of which
shall be the principal amount of such Lender's Revolving Loans and the
denominator of which shall be the aggregate principal amount of all Revolving
Loans of all Lenders then outstanding, or (iii) if the Commitments are
terminated and no Revolving Loans are outstanding, a fraction the numerator of
which shall be such
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Lender's aggregate participation interests, pursuant to Section 3.3, in the
Letters of Credit then outstanding and the denominator of which shall be the
Letter of Credit Obligations.
Purchase Money Liens shall mean liens on any item of Equipment acquired after
the date of this Credit Agreement, provided that: (i) each such lien shall
attach only to the property to be acquired; (ii) a description is furnished to
the Agent for any property so acquired, the purchase price of which is greater
than $250,000; and (iii) the debt incurred in connection with such acquisitions
shall not exceed the amount of the purchase price of such items of Equipment
then being financed.
Qualified Account Debtors shall mean those account debtors of the Borrower
listed on Schedule C hereto (as amended from time to time by the Agent in the
exercise of its Permitted Discretion).
Real Estate shall mean all real property owned or leased by the Borrower,
together with all fixtures, improvements and other structures thereon.
Reduced Rate shall have the meaning given to such term in Section 4.10(b)
hereof, relating to backup withholding tax.
Regulation D shall mean Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto.
Reportable Event shall mean any of the events described in Section 4043 of ERISA
and the regulations thereunder.
Required Lenders shall mean, at any time, those Lenders (i) then owed or holding
in the aggregate more than seventy-five percent (75%) of the Total Commitments
or (ii) if the Commitments are terminated, those Lenders then owed or holding in
the aggregate more than seventy-five percent (75%) of the outstanding principal
amount of Revolving Loans (or if the Commitments are terminated and no Revolving
Loans are outstanding, those Lenders then holding more than seventy-five percent
(75%) of the aggregate participation interests in Letters of Credit then
outstanding).
Requirement of Law shall mean, as to any Person, the Governing Documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
Restructuring Reserve shall mean the reserve established with respect to the
December 30, 1995, Financial Statements to cover costs associated with the
closing of certain of the Borrower's building centers and the related reduction
of administrative staff at the Borrower's corporate headquarters.
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Retiree Health Plan shall mean an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA.
Revolving Loans shall have the meaning given to such term in Section 2.1 hereof,
any of which Revolving Loans may be a Eurodollar Rate Loan or a Prime Rate Loan.
Revolving Note shall mean a promissory note of the Borrower payable to the order
of any Lender, in the form of Exhibit A, evidencing the aggregate Indebtedness
of the Borrower to such Lender resulting from the Revolving Loans made by such
Lender or acquired by such Lender pursuant to Section 11.6 hereof, as the same
may from time to time be amended, restated, supplemented or otherwise modified.
Second Amendment and Restatement Fee Letter shall mean that certain letter dated
the date hereof between the Agent and the Borrower providing for the payment of
certain fees in connection with the Credit Agreement.
Security Agreement shall mean the Security Agreement, dated the Closing Date,
between the Agent and the Borrower, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time.
Senior Subordinated Notes shall mean the Borrower's 11-5/8% Senior Subordinated
Notes due 2003, issued pursuant to the Indenture, as amended, supplemented or
otherwise modified from time to time with the prior written consent of the
Majority Lenders.
Settlement Date shall have the meaning given to such term in Section 2.4 hereof.
Subsidiary shall mean as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Borrower.
Syndication Agent shall mean Nationsbank of Georgia, N.A., as provided in the
preamble to this Credit Agreement.
Syndication Agent's Fee Letter shall mean that certain letter agreement dated as
of even date herewith between the Borrower and
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the Syndication Agent providing for the payment of certain fees to the
Syndication Agent in connection with this Credit Agreement.
Termination Event shall mean (i) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan; (ii) the withdrawal of the Borrower, any Subsidiary
or any ERISA Affiliate from a Benefit Plan during a plan year in which such
entity was a "substantial employer" as defined in Section 4001(a)(2) of ERISA;
(iii) the providing of notice of intent to terminate a Benefit Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan;
(v) any event or condition (a) which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Benefit Plan or Multiemployer Plan, or (b) that may result in termination of
a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
the Borrower, any Subsidiary or any ERISA Affiliate from a Multiemployer Plan.
Transferred Sale Proceeds shall mean, on any date, the portion of Capital Asset
Sale Proceeds designated (without duplication) as "Transferred Sale Proceeds" by
the Borrower in a written notice delivered to the Agent.
Total Commitments shall mean the sum of the Commitments of all the Lenders,
which shall not exceed $130,000,000.
Type shall mean, in reference to a Revolving Loan, that it is a Eurodollar Rate
Loan or a Prime Rate Loan.
Unused Availability shall mean, on any date, the Revolving Credit Commitment
less the sum of (i) the aggregate face amount of outstanding Letters of Credit
on such date and (ii) the aggregate outstanding principal balance of the
Revolving Loans on such date.
Unused Line Fee shall have the meaning given to such term in Section 4.5 hereof.
Unused Line Fee Percentage shall have the meaning given to such term in Section
4.5 hereof.
Woodproducts shall mean that portion of Inventory comprising "Woodproducts," as
listed on Schedule B, Part 1.1 hereto (as such list may be supplemented or
otherwise modified from time to time with the consent of the Agent).
1.2 Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Credit Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all
material respects with the
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Financial Statements delivered to the Agent on or before the Closing Date. All
accounting determinations for purposes of determining compliance with Sections
8.1, 8.2 and 8.6 hereof shall be made in accordance with GAAP as in effect on
the Closing Date and applied on a basis consistent in all material respects
with the audited Financial Statements delivered to the Agent on or before the
Closing Date. The Financial Statements required to be delivered hereunder from
and after the Closing Date, and all financial records, shall be maintained in
accordance with GAAP. If GAAP shall change from the basis used in preparing
the audited Financial Statements delivered to the Agent on or before the
Closing Date, the certificates required to be delivered pursuant to Section 7.1
demonstrating compliance with the covenants contained herein shall, at the
election of the Borrower or upon the request of the Majority Lenders, include
calculations setting forth the adjustments necessary to demonstrate how the
Borrower is in compliance with the financial covenants based upon GAAP as in
effect on the Closing Date.
1.3 Other Defined Terms. Terms not otherwise defined herein which are
defined in the Uniform Commercial Code as in effect in the State of New York
(the "Code") shall have the meanings given them in the Code. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Credit
Agreement shall refer to this Credit Agreement as a whole and not to any
particular provision of this Credit Agreement, and references to Article,
Section, Annex, Schedule, Exhibit and like references are references to this
Credit Agreement unless otherwise specified.
1.4 Interrelationshop with 1996 Credit Agreement. As stated in the
preamble hereof, this Credit Agreement is intended to amend and restate the
provisions of the 1996 Credit Agreement and, notwithstanding any substitution
of Revolving Notes as of the Effective Date, except as expressly modified
herein, (a) all of the terms and provisions of the 1996 Credit Agreement shall
continue to apply for the period prior to the Effective Date, including any
determinations of payment dates, interest rates, Events of Default or any
amount that may be payable to the Agent, and (b) the Obligations (as defined
in the 1996 Credit Agreement) under the 1996 Credit Agreement shall continue to
be paid or prepaid on or prior to the Effective Date, and be secured by the
Collateral, and shall from and after the Effective Date continue to be owing
and be subject to the terms of this Credit Agreement. All references in the
Revolving Notes and the other Credit Documents to the Original Credit
Agreement, the 1996 Credit Agreement or the "Credit Agreement" shall be deemed
to include references to this Credit Agreement. As of the Effective Date all of
the covenants set forth in the 1996 Credit Agreement are of no further force and
effect, it being understood that all obligations of the Borrower with respect to
the Obligations (as defined in the 1996 Credit Agreement) shall be governed by
this Credit Agreement from and after the Effective Date.
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ARTICLE 2. Revolving Loans
2.1 Commitments. Subject to the terms and conditions set forth in this
Credit Agreement, on and after the Effective Date and to and excluding the
Expiration Date, each Lender severally agrees to make loans and advances to
the Borrower ("Revolving Loans") in an amount not to exceed at any time its
Proportionate Share of the lesser of the Total Commitments and the Borrowing
Base minus, in each case, the then outstanding Letter of Credit Obligations.
"Borrowing Base" shall mean the sum of:
A) eighty percent (80%) of Eligible Accounts Receivable (increasing
to eighty-five percent (85%) during the fiscal months of January through
May of each year), plus
(B) the sum of fifty-five percent (55%) of Eligible Inventory that
is Woodproducts (increasing to sixty percent (60%) during the fiscal
months of January through May of each year), fifty-two and one-half
percent (52 1/2%) of Eligible Inventory that is Hardlines and fifty
percent (50%) of Eligible Inventory that is Building Materials
(increasing to fifty-five percent (55%) during the fiscal months of
January through May of each year), minus
(C) the aggregate amount of reserves, if any, established by the
Agent;
provided that at no time may the sum of the aggregate outstanding principal
amount of Revolving Loans plus the face amount of the then outstanding Letters
of Credit drawn against Eligible Inventory exceed the product of (x) .65
multiplied by (y) the sum of the then outstanding amount of Revolving Loans plus
the face amount of the then outstanding Letters of Credit.
The Agent, in the exercise of its Permitted Discretion, may (i) establish and
increase or decrease reserves against Eligible Accounts Receivable and Eligible
Inventory, (ii) reduce the advance rates provided for in this definition, or
restore such advance rates to any level equal to or below the advance rates in
effect as of the date of this Credit Agreement, and (iii) impose additional
restrictions (or eliminate the same) to the standards of eligibility set forth
in the definitions of "Eligible Accounts Receivable" and "Eligible Inventory."
2.2. Borrowing of Revolving Loans. It is contemplated that Revolving
Loans will be made available to the Borrower directly by the Lenders ("Lender
Advances") and, in the circumstances described in Section 2.2(b), from the Agent
acting on behalf of the Lenders ("Agent Advances"). The Borrower hereby agrees
to execute and deliver to each Lender a Revolving Note in the form of Exhibit A
to evidence the Revolving Loans made to the Borrower by such Lender.
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(a) Lender Advances of Revolving Loans. Subject to the determination
by the Agent and the Lenders that the conditions for Borrowing contained in
Section 5.2 are satisfied, upon notice from the Borrower to the Agent ("Notice
of Borrowing"), Lender Advances of Revolving Loans shall be made to the extent
of each Lender's Proportionate Share of the requested Borrowing. The Notice of
Borrowing shall specify whether the requested Borrowing is of Prime Rate Loans
or Eurodollar Rate Loans.
(b) Agent Advances of Revolving Loans. The Agent is authorized by the
Lenders, but is not obligated, to make Agent Advances consisting only of Prime
Rate Loans (i) upon a Notice of Borrowing received by the Agent, or (ii) upon
advice received by the Agent on a Business Day from the Disbursement Account
Bank of the face amount of checks drawn on the Disbursement Account, which have
been or will be presented for payment on that day minus the amount of funds then
available in the Disbursement Account, pursuant to Section 2.2(c). Agent
Advances (together with all other Revolving Loans and all Letter of Credit
Obligations outstanding) may not at any time exceed the amount available for
borrowing under Section 2.1. Agent Advances shall be subject to periodic
settlement with the Lenders under Section 2.4. Agent Advances of Prime Rate
Loans may be made only in the following circumstances:
(i) For administrative convenience, the Agent may, but is not
obligated to, make Agent Advances in reliance upon the Borrower's actual
or deemed representations under Section 5.2 that the conditions for
borrowing are satisfied.
(ii) If the conditions for borrowing under Section 5.2 cannot be
fulfilled, the Borrower shall in its Notice of Borrowing or otherwise
give immediate notice thereof to the Agent, with a copy to each of the
Lenders, and the Agent may, but is not obligated to, continue to make Agent
Advances for fifteen (15) Business Days from the date the Agent first
receives such notice, or until sooner instructed by the Majority Lenders to
cease; provided that the Agent provides the Lenders promptly with a copy of
such Notice of Borrowing or other notice delivered by the Borrower to the
Agent of the Borrower's failure to satisfy the conditions for borrowing
under Section 5.2.
(c) Disbursement of Revolving Loans. Revolving Loans, whether made as
Lender Advances or Agent Advances, subject to the terms and conditions of
this Credit Agreement, will be made as follows:
(i) The Borrower has informed the Agent that it has decided to open an
account (the "Disbursement Account") with Bankers Trust (Delaware) (the
"Disbursement Account Bank") for the purpose of paying trade payables and
other operating expenses. The Agent is authorized to transmit proceeds of
Revolving Loans upon advice received by the Agent from the
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Disbursement Account Bank, as described in Section 2.2(b), directly to the
Disbursement Account. In the absence of contrary instructions from the
Borrower, such advice from the Disbursement Account Bank will be deemed a
sufficient Notice of Borrowing for an Agent Advance of Prime Rate Loans.
(ii) It is contemplated that Revolving Loans be made available to fund
the Borrower's Letter of Credit Obligations, as described in Section 3.5,
and such Revolving Loans may be made available by the Agent directly to the
Issuing Bank upon notice from the Issuing Bank of unfunded Letter of Credit
Obligations.
(iii) The Agent will make requested Revolving Loans available as
instructed in a Notice of Borrowing, and in the absence of such
instructions, shall transmit the proceeds of such requested Revolving Loans
directly to the Disbursement Account.
(d) Notices of Borrowing; Minimum Amounts. Notice of Borrowing for
(i) Lender Advances of Prime Rate Loans shall be given not later than
1:00 P.M. New York City time on the same Business Day of the proposed
Borrowing and (ii) Agent Advances of Prime Rate Loans shall be given not later
than 3:00 P.M. New York City time on the same Business Day of the proposed
Borrowing. Notice of Borrowing for Eurodollar Rate Loans shall be given
not later than 5:00 P.M. on the third Business Day prior to the proposed
Borrowing.
(i) Notices of Borrowing may be given under this Section by telephone
or facsimile transmission, and, if by telephone, promptly confirmed in
writing substantially in the form of Exhibit E. Once given, a Notice of
Borrowing is irrevocable by and binding on the Borrower.
(ii) The Borrower shall specify in each Notice of Borrowing whether the
conditions for the requested Borrowing are satisfied and whether the
requested Borrowing is of Prime Rate Loans or Eurodollar Rate Loans. The
Borrower may request one or more Borrowings on the same Business Day. Each
such Borrowing shall, unless otherwise specifically provided herein, consist
entirely of Revolving Loans of the same Type and, if such Borrowing is to
consist of Eurodollar Rate Loans, shall be in an aggregate amount for all
Lenders of not less than $1,000,000 or an integral multiple of $100,000 in
excess thereof. The right of the Borrower to choose Eurodollar Rate Loans is
subject to the provisions of Section 4.8.
(iii) On or prior to the Closing Date, the Borrower provided to the
Agent a list, with specimen signatures, of officers authorized to request
Revolving Loans, substantially in the form attached as Exhibit O to the
Original Credit Agreement. The Agent is entitled to rely upon such list
until it is replaced by the Borrower. The Agent shall have no duty
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<PAGE> 35
to verify the authenticity of the signature appearing on any Notice of
Borrowing or other writing delivered hereunder and, with respect to an oral
request for Revolving Loans, the Agent shall have no duty to verify the
identity of any individual representing himself as one of the officers
authorized to make such request on behalf of the Borrower. Neither the Agent
nor any of the Lenders shall incur any liability to the Borrower as a result
of acting upon any telephonic notice the Agent believes in good faith to
have been given by a duly authorized officer or other individual authorized
to request Revolving Loans on behalf of the Borrower or for otherwise acting
in good faith.
2.3 Settlement of Lender Advances and Repayments. The Agent shall give
each Lender prompt notice by telephone or facsimile transmission of a Notice of
Borrowing that requests Lender Advances of Revolving Loans. No later than 3:00
P.M. New York City time on the date designated for the Borrowing, each Lender,
for the account of its Applicable Lending Office, shall make available to the
Agent at the Agent's address its Proportionate Share of such Borrowing in
immediately available funds. Unless the Agent receives contrary written notice
prior to the date of any such orrowing of Revolving Loans, it is entitled to
assume that each Lender will make available its Proportionate Share of the
Borrowing and in reliance upon that assumption, but without any obligation to do
so, may advance such Proportionate Share on behalf of the Lender.
2.4 Periodic Settlement of Agent Advances and Repayments.
(a) The Settlement Date. The amount of Revolving Loans and the amount
of each Lender's Proportionate Share of Revolving Loans shall be computed weekly
(or more frequently in the Agent's discretion) and shall be adjusted upward or
downward based on all Revolving Loans (including Agent Advances) and repayments
of Revolving Loans received by the Agent as of 5:00 P.M. New York City time on
the last Business Day of the period specified by the Agent (such date, the
"Settlement Date").
(b) Summary Statements; Settlements. The Agent shall deliver to each of
the Lenders promptly after the Settlement Date a summary statement of the amount
of outstanding Revolving Loans (including Agent Advances) for the period and the
amount of repayments received for the period. As reflected on the summary
statement: (i) the Agent shall transfer to each Lender its allocated share of
interest and Unused Line Fee and its Proportionate Share of repayments; and (ii)
each Lender shall transfer to the Agent (as provided below), or the Agent shall
promptly transfer to each Lender, such amounts as are necessary to insure that,
after giving effect to all such transfers, the amount of Revolving Loans made by
each Lender shall be equal to such Lender's Proportionate Share of the aggregate
amount of Revolving Loans outstanding as of such Settlement Date. If the summary
statement requires transfers to be made to the Agent by
30
<PAGE> 36
the Lenders and is received prior to 12:00 Noon New York City time on a Business
Day, such transfers shall be made in immediately available funds no later than
3:00 P.M. New York City time that day; and, if received after 12:00 Noon New
York City time, then no later than 3:00 P.M. New York City time on the next
Business Day. The obligation of each Lender to transfer such funds is
irrevocable, unconditional and without recourse to or warranty by the Agent.
(c) Distribution of Interest and Unused Line Fees. Interest on the
Revolving Loans (including Agent Advances) together with the amount of the
Unused Line Fee, shall be allocated by the Agent to each Lender in accordance
with the Proportionate Share of Revolving Loans actually funded by and repaid to
each Lender, and shall accrue from and including the date such Revolving Loans
are so advanced and to but excluding the date such Revolving Loans are either
repaid by the Borrower or actually settled under this Section. Promptly after
the end of each month (or, with respect to interest on Eurodollar Rate Loans,
promptly after such interest is received by the Agent), the Agent shall
distribute to each Lender its Proportionate Share of the interest and Unused
Line Fee accrued during that month.
2.5 Defaulting Lenders
(a) A Lender who fails to pay the Agent its Proportionate Share of any
Revolving Loans (including Agent Advances) made available by the Agent on such
Lender's behalf, or who fails to pay any other amount owing by it to the Agent,
is a "Defaulting Lender." The Agent may recover all such amounts owing by a
Defaulting Lender on demand. If the Defaulting Lender does not pay such amounts
on the Agent's demand, the Agent shall promptly notify the Borrower and the
Borrower shall pay such amounts within five Business Days. In addition, the
Defaulting Lender or the Borrower shall pay the Agent interest on such amount
for each day from the date it was made available by the Agent to the Borrower to
the date it is recovered by the Agent at a rate per annum equal to (x) the
overnight Federal Funds Rate, if paid by the Defaulting Lender, or (y) the then
applicable rate of interest calculated under Section 4.1, if paid by the
Borrower; plus, in each case, the Expenses and losses, if any, incurred as a
result of the Defaulting Lender's failure to perform its obligations.
(b) The failure of any Lender to fund its Proportionate Share of any
Revolving Loan (including Agent Advances) shall not relieve any other Lender of
its obligation to fund its Proportionate Share of such Revolving Loan.
Conversely, no Lender shall be responsible for the failure of another Lender to
fund its Proportionate Share of a Revolving Loan.
(c) The Agent shall not be obligated to transfer to a Defaulting Lender
any payments made by the Borrower to the Agent for the Defaulting Lender's
benefit; nor shall a Defaulting
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<PAGE> 37
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 the Borrower the amount of all such
payments received or retained by it for the account of such Defaulting Lender.
For purposes of voting or consenting to matters with respect to the Credit
Documents and determining Proportionate Shares, such Defaulting Lender shall be
deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be
zero (-0-). This section shall remain effective with respect to such Lender
until (x) the Obligations under this Credit Agreement shall have been declared
or shall have become immediately due and payable or (y) the Majority Lenders,
the Agent and the Borrower shall have waived such Lender's default in writing.
The operation of this Section shall not be construed to increase or otherwise
affect the Commitment of any Lender, or relieve or excuse the performance by the
Borrower of its duties and obligations hereunder.
2.6 Mandatory Payment; Mandatory Reduction of Commitments
(a) The aggregate balance of Revolving Loans and all Letter of Credit
Obligations outstanding at any time in excess of the lesser of the Total
Commitments and the Borrowing Base shall be immediately due and payable without
the necessity of any demand.
(b) On the Expiration Date, the Commitment of each Lender shall
automatically reduce to zero and may not be reinstated. The Borrower may reduce
or terminate the Total Commitments at any time and from time to time in whole or
in part. Each such reduction of the Total Commitments must be in an amount not
less than $1,000,000 (and in increments of $1,000,000 thereafter). If the
Borrower seeks to reduce the Total Commitments to an amount less than
$50,000,000, then the Total Commitments shall be reduced to zero and this Credit
Agreement shall be terminated. Once reduced, no portion of the Total Commitments
may be reinstated.
2.7 Maintenance of Loan Account; Statements of Account. The Agent shall
maintain an account on its books in the name of the Borrower (the "Loan
Account") in which the Borrower will be charged with all loans and advances made
by the Lenders to the Borrower or for the Borrower's account, including the
Revolving Loans and all Letter of Credit Obligations, the Fees, the Expenses and
any other Obligations. The Loan Account will be credited with all amounts
received by the Agent from the Borrower or from others for the Borrower's
account, including all amounts received in the BT Account from the Blocked
Account Banks. In no event shall prior recourse to any Accounts or other
Collateral be a prerequisite to the Agent's right to demand payment of any
Obligation upon its maturity. Further, the Agent shall have no obligation
whatsoever to perform in any respect any of the Borrower's contracts or
obligations relating to the Accounts.
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<PAGE> 38
After the end of each month, the Agent shall send the Borrower a statement
accounting for the charges, loans, advances and other transactions occurring
among and between the Agent, the Lenders and the Borrower during that month. The
monthly statements shall, absent manifest error, be an account stated, which is
final, conclusive and binding on the Borrower.
2.8 Payment Procedures. Payments of interest, Fees and Expenses shall be
made not later than 2:00 P.M. New York City time on the day when due, in
immediately available Dollars, to the Agent at its address set forth in Section
11.5 hereof. The Borrower hereby authorizes the Agent to charge the Loan Account
with the amount of all payments to be made hereunder and under the other Credit
Documents, including all Fees and Expenses, as and when such payments become
due. The Borrower's obligations to the Lenders with respect to such payments
shall be discharged by making such payments to the Agent pursuant to this
Section or by charging the Loan Account.
2.9 Collection of Accounts
(a) All Collections and other amounts received by the Borrower from any
account debtor, in addition to all other cash received from any other source
(including, without limitation, upon sales of Collateral or other property
permitted hereunder (unless remitted directly to the Agent)), shall upon receipt
be deposited into an account (each, a "Blocked Account") opened by the Borrower
at a financial institution selected by the Borrower and acceptable to the Agent
(each, a "Blocked Account Bank"). The Borrower shall use its best efforts to
cause each Blocked Account Bank to enter into an agreement with the Borrower and
the Agent substantially in the form of Exhibit B to the Original Credit
Agreement (each, a "Blocked Account Agreement"), provided that, with respect to
any Blocked Account not subject to a Blocked Account Agreement, the Agent may
require the Borrower to close such Blocked Account and have all funds therein
transferred to the BT Account and all future Collections which would otherwise
be deposited in such Blocked Account deposited in another Blocked Account which
is subject to a Blocked Account Agreement. Deposits in each Blocked Account
shall be transferred via the automatic clearing house system each Business Day
into an account (the "BT Account") maintained by the Agent at Bankers Trust
Company and established pursuant to a concentration account agreement entered
into among the Borrower, the Agent and Bankers Trust Company substantially in
the form of Exhibit C to the Original Credit Agreement (the "Concentration
Account Agreement"). Where applicable, such transfers shall be subject to the
terms and conditions of the relevant Blocked Account Agreement. The Borrower
shall accurately report all amounts deposited in the Blocked Accounts to ensure
the proper transfer of funds as set forth above.
(b) The Borrower may request that the Agent close Blocked Accounts
and/or open new Blocked Accounts (or, in either case,
33
<PAGE> 39
permit the Borrower to do so), subject to the execution anddelivery to the Agent
of appropriate Blocked Account Agreements (unless expressly waived by the Agent)
consistent with the provisions of this Section 2.9 and otherwise satisfactory to
the Agent.
2.10 Application of Payments. All amounts received in the BT Account
from the Blocked Account Banks shall be credited to the Loan Account. If an
Event of Default has occurred and is continuing, all amounts received by the
Agent in the BT Account or otherwise shall be applied in the following order:
first, to the payment of any Fees, Expenses or other Obligations due and payable
to the gent under any of the Credit Documents, including amounts advanced by the
Agent on behalf of the Lenders pursuant to Section 2.4(b); second, to the
payment of any Fees, expenses or other Obligations due and payable to the
Issuing Bank under any of the Credit Documents; third, to the ratable payment of
any Fees, expenses or other Obligations due and payable to the Syndication Agent
or the Lenders under any of the Credit Documents other than those obligations
specifically referred to in this Section 2.10; fourth, to the ratable payment of
interest due on the Revolving Loans; fifth, to the ratable payment of principal
due on the Revolving Loans. Any payment received hereunder as a distribution in
any proceeding referred to in Section 9.1(f) shall, unless paid with respect to
amounts specifically owing to the Agent, the Syndication Agent or the Issuing
Bank, be distributed and applied to the payment of the amounts due hereunder and
under the Revolving Notes ratably in accordance with such amounts (or, if a
court of competent jurisdiction shall otherwise specify, as specified by such
court).
ARTICLE 3. Letters of Credit
3.1 Issuance of Letters of Credit. Subject to the terms and conditions
of this Credit Agreement and in reliance upon the representations and warranties
of the Borrower set forth herein, the Issuing Bank shall issue Letters of Credit
hereunder at the request of the Borrower and for its account, as more
specifically described below. The Issuing Bank shall not issue any Letter of
Credit for the account of the Borrower if at the time of such requested
issuance:
(a) The face amount of such requested Letter of Credit, when added to
the Letter of Credit Obligations then outstanding, would cause the Letter of
Credit Obligations to exceed (i) $10,000,000 or, (ii) when added to the
aggregate amount of Revolving Loans and all Letter of Credit Obligations then
outstanding would cause the sum of the aggregate amount of Revolving Loans and
Letter of Credit Obligations then outstanding to exceed the lesser of (x) the
Total Commitments and (y) the Borrowing Base then in effect;
34
<PAGE> 40
(b) Any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain the Issuing Bank
from issuing such Letter of Credit or any Requirement of Law applicable to the
Agent or the Issuing Bank or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over the Agent
or the Issuing Bank shall prohibit, or request that the Agent or the Issuing
Bank refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the Agent or the Issuing Bank with
respect to such Letter of Credit any restriction or reserve or capital
requirement (for which the Agent or the Issuing Bank is not otherwise
compensated) not in effect as of the Closing Date, or any unreimbursed loss,
cost or expense which was not applicable, in effect or known to the Agent or the
Issuing Bank as of the Closing Date and which the Agent or the Issuing Bank
deems in good faith to be material to it; or
(c) A default of any Lender's obligations to fund under Section 3.5
exists, or such Lender is a Defaulting Lender under Section 2.5, unless the
Agent and the Issuing Bank have entered into satisfactory arrangements with the
Borrower to eliminate the Agent's and the Issuing Bank's risk with respect to
such Lender, including cash collateralization of such Lender's Proportionate
Share of the Letter of Credit Obligations.
3.2 Terms of Letters of Credit. The Letters of Credit shall be in a
form customarily issued by the Issuing Bank or in such other form as has been
approved by the Issuing Bank. At the time of issuance, the amount and the terms
and conditions of each Letter of Credit, and of any drafts or acceptances
thereunder, shall be subject to approval by the Agent and the Borrower. In no
event may the term of any standby Letter of Credit issued hereunder exceed 360
days (except that such Letters of Credit may provide for annual renewal) nor the
term of any documentary Letter of Credit exceed 120 days, and all Letters of
Credit issued hereunder shall expire no later than the date that is five (5)
Business Days prior to the Expiration Date. Any Letter of Credit containing an
automatic renewal provision shall also contain a provision pursuant to which,
notwithstanding any other provisions thereof, it shall expire no later than the
date that is five (5) days prior to the Expiration Date.
3.3 Lenders' Participation. Immediately upon issuance or amendment by
the Issuing Bank of any Letter of Credit in accordance with the procedures set
forth in Section 3.1, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without recourse
or warranty, an undivided interest and participation to the extent of such
Lender's Proportionate Share (based upon its Commitment) in the liability with
respect to such Letter of Credit (including, without limitation, all obligations
of the Borrower with respect thereto, other than amounts owing to the Issuing
35
<PAGE> 41
Bank consisting of Issuing Bank Fees) and any security therefor or guaranty
pertaining thereto.
3.4 Notice of Issuance. Whenever the Borrower desires the issuance of
a Letter of Credit, the Borrower shall deliver to the Agent a written notice no
later than 1:00 P.M. New York City time at least five (5) Business Days (or such
shorter period as may be agreed to by the Issuing Bank) in advance of the
proposed date of issuance, which written notice shall be in such form as may be
required from time to time by the Agent and the Issuing Bank (a "Letter of
Credit Request"). The transmittal by the Borrower of each Letter of Credit
Request shall be deemed to be a representation and warranty by the Borrower that
the Letter of Credit may be issued in accordance with and will not violate any
of the requirements of Section 3.1. Prior to the date of issuance of each Letter
of Credit, the Borrower shall provide to the Agent a precise description of the
documents and the text of any certificate to be presented by the beneficiary of
such Letter of Credit which if presented by such beneficiary on or prior to the
expiration date of the Letter of Credit would require the Issuing Bank to make
payment under the Letter of Credit. The Issuing Bank, in its reasonable
judgment, may require changes in any such documents and certificates. No Letter
of Credit shall require payment against a conforming draft to be made thereunder
prior to the second Business Day (under the laws of the jurisdiction of the
Issuing Bank) after the date on which such draft is presented, together with all
documents and/or certificates required to be presented in connection therewith
under the terms of the applicable Letter of Credit. A Letter of Credit Request
may be given in writing or electronically and, if requested by the Agent, with
prompt confirmation in writing. Any electronic Letter of Credit Request shall be
deemed to have been prepared by, or under the supervision of the chief financial
officer of the Borrower. The Agent shall promptly provide the aforementioned
Letter of Credit Request, document description and proposed text of
certification to the Issuing Bank.
3.5 Payment of Amounts Drawn Under Letters Letters of Credit. In the
event of any drawing under any Letter of Credit by the beneficiary thereof, the
Issuing Bank shall notify the Agent, which shall notify the Borrower of such
draw, not later than 11:00 A.M. New York City time on the Business Day
immediately prior to the date on which the Issuing Bank intends to honor such
drawing. The Borrower will be deemed to have concurrently given a Notice of
Borrowing to the Agent for Revolving Loans in the amount of and at the time of
such drawing. Subject to satisfaction or waiver of the conditions specified in
Article 5 hereof and the other terms and conditions of Borrowings contained
herein, the Lenders shall be obligated to, on the date of such drawing, make
Revolving Loans in the amount of such drawing, the proceeds of which shall be
applied directly by the Agent to reimburse the Issuing Bank for the amount of
such drawing or payment. If for any reason, proceeds of such Revolving Loans are
not received by the Issuing Bank on such date in an amount equal
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<PAGE> 42
to the amount of such drawing, the Borrower shall be obligated to and shall
reimburse the Issuing Bank, on the Business Day (under the laws of the
jurisdiction of the Issuing Bank) immediately following the date of such
drawing, in an amount in immediately available funds equal to the excess of the
amount of such drawing over the amount of such Revolving Loans, if any, which
are so received, plus accrued interest on such amount at the rate set forth in
Section 4.1 hereof.
3.6 Payment by Lenders. If Revolving Loans are not made in an amount
sufficient to reimburse the Issuing Bank in full for the amount of any draw, the
Agent shall promptly notify each Lender of the unreimbursed amount of such
drawing and of such Lender's respective participation therein. Each Lender shall
make available to the Agent for the benefit of the Issuing Bank an amount equal
to such Lender's respective participation in immediately available funds, not
later than 1:00 P.M. New York City time on the Business Day (under the laws of
the jurisdiction of the Issuing Bank) after the date notified by the Agent. In
addition, in the event that any Lender fails to make available to the Agent the
amount of any such Lender's participation in such Letter of Credit Obligations
as provided in this Section 3.6, the Agent may, but shall not be obligated to,
fund the amount of such Defaulting Lender's participation in such Letter of
Credit and recover such amount on demand from such Defaulting Lender in
accordance with Section 2.5 hereof. In the event that any Lender fails to make
available to the Agent the amount of such Lender's participation in such Letter
of Credit as provided in this Section 3.6, and the Agent does not elect to fund
to the Issuing Bank such Defaulting Lender's participation in such letter of
Credit, the Issuing Bank shall be entitled to recover such amount on demand from
such Lender together with interest at the Federal Funds Rate for the first three
Business Days while such amount remains unpaid and thereafter at the Prime
Lending Rate. The Agent shall distribute to each other Lender which has paid all
amounts payable by it under this Section 3.6 with respect to any Letter of
Credit issued by the Issuing Bank such other Lender's Proportionate Share of all
payments subsequently received by the Agent from the Borrower in reimbursement
of drawings honored by the Issuing Bank under such Letter of Credit when such
payments are received.
3.7 Nature of Issuing Bank's Duties. In determining whether to pay
under any Letter of Credit, the Issuing Bank shall be responsible only to
determine that the documents and certificates required to be delivered under
that Letter of Credit have been delivered and that they comply on their face
with the requirements of that Letter of Credit. As between the Borrower, the
Issuing Bank and each other Lender, the Borrower assumes all risks of the acts
and omissions of the Issuing Bank (except to the extent that it is finally
judicially determined that such acts or omissions were the result of the Issuing
Bank's gross negligence or willful misconduct), or misuse of the Letters of
Credit by the respective beneficiaries of such Letters of Credit.
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<PAGE> 43
In furtherance and not in limitation of the foregoing, neither the Issuing Bank,
the Agent nor any of the other Lenders shall be responsible (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effects of any document
submitted by any party in connection with the application for and issuance of or
any drawing honored under such Letters of Credit even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged, (ii) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such 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, (iii) for failure of the
beneficiary of any such Letter of Credit to strictly comply with conditions
required in order to draw upon such Letter of Credit, (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex, telecopy or otherwise, whether or not they be
in cipher, (v) for errors in interpretation of technical terms, (vi) for any
loss or delay in the transmission or otherwise of any document required in order
to make a drawing under any such Letter of Credit, or of the proceeds thereof,
(vii) for the misapplication by the beneficiary of any such Letter of Credit of
the proceeds of any drawing honored under such Letter of Credit, and (viii) for
any consequences arising from causes beyond the control of the Issuing Bank, the
Agent or the other Lenders. None of the above shall affect, impair, or prevent
the vesting of any of the Issuing Bank's rights or powers hereunder. Any action
taken or omitted to be taken by the Issuing Bank under or in connection with any
Letter of Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not create for the Issuing Bank any liability to the
Borrower, the Agent or any Lender.
3.8 Obligations Absolute. The obligations of the Borrower to
reimburse the Issuing Bank for drawings honored under the Letters of Credit and
the obligations of the Lenders under Section 3.6 hereof shall be unconditional
and irrevocable and shall be paid strictly in accordance with the terms of this
Credit Agreement under all circumstances including, without limitation, the
following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit;
(b) the existence of any claim, set-off, defense or other right which
the Borrower or any Affiliate of the Borrower may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such beneficiary or transferee may be acting), the Issuing
Bank, any Lender or any other Person, whether in connection with this Credit
Agreement, the transactions contemplated herein or any unrelated transaction;
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<PAGE> 44
(c) any draft, demand, certificate or any other documents presented
under any 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;
(d) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Credit Documents;
(e) payment by the Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
(f) failure of any drawing under a Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of any
drawing; or
(g) the fact that a Default or an Event of Default shall have occurred
and be continuing;
provided, however, that the Borrower shall have no obligation to reimburse the
Issuing Bank, and the Lenders shall have no obligation under Section 3.6 hereof,
in the event of the Issuing Bank's willful misconduct or gross negligence in
determining whether documents presented under the Letter of Credit comply with
the terms of such Letter of Credit.
ARTICLE 4. Interest, Fees and Expenses
4.1 Interest on Prime Rate Loans. Subject to the provisions of
Section 4.3 hereof, interest on Prime Rate Loans shall be payable monthly as of
the end of each month at an interest rate per annum equal to the Prime Lending
Rate plus the Prime Rate Spread. The "Prime Rate Spread" shall be equal to the
percentage per annum set forth below opposite the Interest Coverage Ratio
maintained by the Consolidated Entity for the Consolidated Entity's most
recently ended four full fiscal quarters for which Financial Statements of the
Consolidated Entity have been delivered to the Agent pursuant to Section 7.1(a)
or 7.1(c), as applicable:
<TABLE>
<CAPTION>
==============================================================
Ratio: Prime Rate Spread
- --------------------------------------------------------------
<S> <C>
< 1.75 to 1.00 0.75%
- --------------------------------------------------------------
< 2.00 to 1.00 and 0.50%
> 1.75 to 1.00
_
- --------------------------------------------------------------
> 2.00 to 1.00 0.25%
_
==============================================================
</TABLE>
In the event of any change in the Prime Lending Rate, the rate hereunder shall
change, effective as of the day the Prime Lending
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<PAGE> 45
Rate changes. In the event of any change in the Interest Coverage Ratio of the
Consolidated Entity for the most recently ended four full fiscal quarters of the
Consolidated Entity, the Prime Rate Spread shall change effective as of the
first calendar month beginning after the date on which the most recent Financial
Statements of the Consolidated Entity were required to be delivered to the Agent
pursuant to Section 7.1(a) or 7.1(c), as applicable. Each determination by the
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
4.2 Interest on Eurodollar Rate Loans. Subject to the provisions of
Section 4.3 hereof, interest on Eurodollar Rate Loans shall be payable on the
last day of each Interest Period with respect to such Eurodollar Rate Loan (and,
with respect to Eurodollar Rate Loans having an Interest Period in excess of
three months, on the last day of each three month interval during such Interest
Period), at the date of conversion of such Eurodollar Rate Loan (or a portion
thereof) to a Prime Rate Loan and at maturity of such Eurodollar Rate Loan at an
interest rate per annum equal during the Interest Period for such Eurodollar
Rate Loan to the Adjusted Eurodollar Rate for the Interest Period in effect for
such Eurodollar Rate Loan plus the Eurodollar Rate Spread. The "Eurodollar Rate
Spread" shall be equal to the percentage per annum set forth below opposite the
Interest Coverage Ratio maintained by the Consolidated Entity for the
Consolidated Entity's most recently ended four full fiscal quarters for which
Financial Statements of the Consolidated Entity have been delivered to the Agent
pursuant to Section 7.1(a) or 7.1(c), as applicable, as calculated on the date
two (2) Business Days prior to the applicable Interest Period:
<TABLE>
<CAPTION>
====================================================================
Ratio: Eurodollar Rate Spread
- --------------------------------------------------------------------
<S> <C>
<1.75 to 1.00 2.25%
- --------------------------------------------------------------------
<2.00 to 1.00 and 2.00%
>1.75 to 1.00
_
- --------------------------------------------------------------------
>2.00 to 1.00 1.75%
_
====================================================================
</TABLE>
After maturity of any Eurodollar Rate Loan (whether by acceleration or
otherwise), interest with respect to such Eurodollar Rate Loan shall be payable
upon demand. In the event of any change in the Interest Coverage Ratio of the
Consolidated Entity for the most recently ended four full fiscal quarters of the
Consolidated Entity, the Eurodollar Rate Spread shall change effective as of the
first day of the first Interest Period beginning after the date on which the
most recent Financial Statements of the Consolidated Entity were required to be
delivered to the Agent pursuant to Section 7.1(a) or 7.1(c), as applicable. The
Agent upon determining the Adjusted Eurodollar Rate for any Interest Period
shall promptly notify the Borrower
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<PAGE> 46
and the Lenders by telephone (confirmed promptly in writing) or in writing
thereof. Each determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
4.3 Interest After Event of Default. Interest on any amount of
matured principal under the Revolving Loans, and interest on the amount of
principal under the Revolving Loans outstanding as of the date an Event of
Default occurs, and at all times thereafter until the earlier of the date upon
which (i) all Obligations have been paid and satisfied in full or (ii) such
Event of Default shall no longer be continuing, shall be payable on demand at a
rate per annum equal to the rate at which the Revolving Loans are bearing
interest pursuant to Sections 4.1 and 4.2 above, plus two percent (2.00%) per
annum. In the event of any change in said applicable interest rate, the rate
hereunder shall change, effective as of the day the applicable interest rate
changes, so as to remain two percent (2.00%) per annum above the then applicable
interest rate.
4.4 Reimbursement of Expenses
(a) From and after the Closing Date, the Borrower shall promptly
reimburse the Agent for all Expenses of the Agent as the same are incurred by
the Agent and upon receipt of invoices therefor and, if requested by the
Borrower, such reasonable backup materials and information as the Borrower shall
reasonably request.
(b) After the occurrence and during the continuance of a Default, the
Borrower shall promptly reimburse the Agent and the Lenders for all costs, fees
and expenses incurred by them in connection with any workout, restructuring,
renegotiation or refinancing of the Loans and the other Obligations under the
Credit Agreement and the other Credit Documents.
4.5 Unused Line Fee. Promptly following the last Business Day of each
month hereafter and on the Expiration Date, the Borrower shall pay to the Agent
for the pro rata benefit of each of the Lenders a non-refundable fee equal to
the Unused Line Fee Percentage of (a) the Revolving Credit Commitment less (b)
the sum of (i) the aggregate face amount of outstanding Letters of Credit and
(ii) the aggregate outstanding principal balance of the Revolving Loans, which
fee shall accrue from the date of the Original Credit Agreement until the
Expiration Date (the "Unused Line Fee"). The "Unused Line Fee Percentage" shall
be equal to the percentage set forth below opposite the Interest Coverage Ratio
maintained by the Consolidated Entity for the Consolidated Entity's most
recently ended four full fiscal quarters for which Financial Statements of the
Consolidated Entity have been delivered to the Agent pursuant to Section 7.1(a)
or 7.1(c), as applicable:
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<PAGE> 47
<TABLE>
<CAPTION>
=====================================================================
Ratio: Unused Line Fee Percentage
=====================================================================
<S> <C>
<1.75 to 1.00 0.50%
_
=====================================================================
>1.75 to 1.00 0.375%
=====================================================================
</TABLE>
In the event of any change in the Interest Coverage Ratio of the Consolidated
Entity for the most recently ended four full fiscal quarters of the Consolidated
Entity, the Unused Line Fee Percentage shall change effective as of the first
calendar month beginning after the date on which the most recent Financial
Statements of the Consolidated Entity were required to be delivered to the Agent
pursuant to Section 7.1(a) or 7.1(c), as applicable.
4.6 Letter of Credit Fees
(a) The Agent, for the ratable benefit of the Lenders, shall be
entitled to charge to the account of the Borrower (i) on the first Business Day
of each month, a fee (the "Letter of Credit Fee"), in an amount equal to the
Letter of Credit Fee Percentage of the daily weighted average amount of
outstanding Letter of Credit Obligations during the immediately preceding month
and (ii) as and when incurred by the Agent or any Lender, any charges, fees,
costs and expenses charged to the Agent or any Lender for the Borrower's account
by any Issuing Bank (other than any fees charged to the Agent or any Lender
which would be duplicative of the Letter of Credit Fee paid to the Agent for the
benefit of the Lenders) (the "Issuing Bank Fees") in connection with the
issuance of any Letters of Credit by the Issuing Bank, and the Agent shall pay
the charges owing to such Issuing Bank upon receipt of such amounts from the
Borrower. The "Letter of Credit Fee Percentage" shall be equal to the percentage
set forth below opposite the Interest Coverage Ratio maintained by the
Consolidated Entity for the Consolidated Entity's most recently ended four full
fiscal quarters for which Financial Statements of the Consolidated Entity have
been delivered to the Agent pursuant to Section 7.1(a) or 7.1(c), as applicable:
<TABLE>
<CAPTION>
======================================================================
Ratio: Letter of Credit Fee Percentage
======================================================================
<S> <C>
<1.75 to 1.00 2.25%
_
======================================================================
<2.00 to 1.00 and 2.00%
_
>1.75 to 1.00
======================================================================
>2.00 to 1.00 1.75%
======================================================================
</TABLE>
In the event of any change in the Interest Coverage Ratio of the Consolidated
Entity for the most recently ended four full fiscal quarters of the Consolidated
Entity, the Letter of Credit Fee Percentage shall change effective for Letters
of Credit issued on
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<PAGE> 48
or after the first day of the first calendar month beginning after the date on
which the most recent Financial Statements of the Consolidated Entity were
required to be delivered to the Agent pursuant to Section 7.1(a) or 7.1(c), as
applicable. For the avoidance of doubt, the Letter of Credit Fed Percentage
shall not change with respect to any Letters of Credit issued and outstanding
prior to the effective day of such change. Each determination by the Agent of
Letter of Credit Fees and Issuing Bank Fees hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(b) Letter of Credit Fees on Letter of Credit Obligations outstanding
as of the date an Event of Default occurs, and at all times thereafter until the
earlier of the date upon which (i) all Obligations have been paid and satisfied
in full or (ii) such Event of Default shall no longer be continuing, shall be
payable on demand at a rate equal to the rate at which the Letter of Credit Fees
are charged pursuant to Section 4.6(a) above, plus two percent (2.00%).
4.7 Early Termination Fee. In the event that the Total Commitments
shall be reduced to zero and the Credit Agreement terminated pursuant to Section
2.6 hereof on or prior to the first anniversary of the date hereof, the Borrower
shall pay to the Agent for the account of the Lenders a termination fee (the
"Early Termination Fee") in an amount equal to one percent (1.00%) of the amount
of the Total Commitments as of the date hereof.
4.8 Special Provisions Relating to Eurodollar Rate Loans
(a) Continuation. With respect to any Borrowing consisting of
Eurodollar Rate Loans, the Borrower may (so long as no Default or Event of
Default has occurred and is continuing), subject to the provisions of Section
4.8(c), elect to maintain such Borrowing or any portion thereof as consisting of
Eurodollar Rate Loans by selecting a new Interest Period for such Borrowing,
which new Interest Period shall commence on the last day of the immediately
preceding Interest Period. Each selection of a new Interest Period shall be made
by notice given not later than 12:00 P.M. New York City time on the third
Business Day prior to the date of any such continuation relating to Eurodollar
Rate Loans, by the Borrower to the Agent. Such notice by the Borrower of a
continuation (a "Notice of Continuation") shall be by telephone or facsimile
transmission, and if by telephone, promptly confirmed in writing substantially
in the form of Exhibit G, in each case specifying (i) the date of such
continuation, (ii) the Type of Revolving Loans subject to such continuation,
(iii) the aggregate amount of Revolving Loans subject to such continuation and
(iv) the duration of the selected Interest Period. The Borrower may elect to
maintain more than one Borrowing consisting of Eurodollar Rate Loans by
combining such Borrowings into one Borrowing and selecting a new Interest Period
pursuant to this Section 4.8(a); provided,
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<PAGE> 49
however, that each of the Borrowings so combined shall consist of Revolving
Loans having Interest Periods ending on the same date. If the Borrower shall
fail to select a new Interest Period for any Borrowing consisting of Eurodollar
Rate Loans in accordance with this Section 4.8(a), such Revolving Loans will
automatically, on the last day of the then existing Interest Period therefor,
convert into Prime Rate Loans. The Agent shall give each Lender prompt notice by
telephone or facsimile transmission of each Notice of Continuation.
(b) Conversion. The Borrower may on any Business Day (so long as no
Default or Event of Default has occurred and is continuing), upon notice (each
such notice, a "Notice of Conversion") given to the Agent, and subject to the
provisions of Section 4.8(c), convert the entire amount of or a portion of all
Revolving Loans of one Type comprising the same Borrowing into Revolving Loans
of another Type; provided, however, that any conversion of any Eurodollar Rate
Loans into Revolving Loans of another Type shall be made on, and only on, the
last day of an Interest Period for such Eurodollar Rate Loans and, upon
conversion of any Prime Rate Loans into Revolving Loans of another Type, the
Borrower shall pay accrued interest to the date of conversions on the principal
amount converted. Each such Notice of Conversion shall be given not later than
12:00 P.M. New York City time on the Business Day prior to the date of any
proposed conversion into Prime Rate Loans and on the third Business Day prior to
the date of any proposed conversion into Eurodollar Rate Loans. Subject to the
restrictions specified above, each Notice of Conversion shall be by telephone or
facsimile transmission, and if by telephone, promptly confirmed in writing
substantially in the form of Exhibit H, in each case specifying (i) the
requested date of such conversion, (ii) the Type of Revolving Loans to be
converted, (iii) the portion of such Type of Revolving Loan to be converted,
(iv) the Type of Revolving Loan such Revolving Loans are to be converted into
and (v) if such conversion is into Eurodollar Rate Loans, the duration of the
Interest Period of such Revolving Loan. Each conversion shall be in an aggregate
amount for the Revolving Loans of all Lenders of not less than $5,000,000 or an
integral multiple of $100,000 in excess thereof. The Borrower may elect to
convert the entire amount of or a portion of all Revolving Loans of one Type
comprising more than one Borrowing into Revolving Loans of another Type by
combining such Borrowings into one Borrowing consisting of Revolving Loans of
another Type; provided, however, that if the Borrowings so combined consist of
Eurodollar Rate Loans, such Revolving Loans shall have Interest Periods ending
on the same date.
(c) Certain Limitations on Eurodollar Rate Loans. The right of the
Borrower to maintain, select, continue or convert Eurodollar Rate Loans shall be
limited as follows:
(i) If the Agent is advised by Bankers Trust Company that it is
not offering U.S. dollar deposits (in the
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<PAGE> 50
applicable amounts) in the London interbank market, or the Agent determines
that adequate and fair means do not otherwise exist for ascertaining the
Eurodollar Rate for Eurodollar Rate Loans comprising any requested
Borrowing, continuation or conversion, the right of the Borrower to select
or maintain Eurodollar Rate Loans for such Borrowing or any subsequent
Borrowing shall be suspended until the Agent shall notify the Borrower and
the Lenders that the circumstances causing such suspension no longer
exists, and each Revolving Loan comprising such Borrowing shall be made as
a Prime Rate Loan.
(ii) If the Majority Lenders shall, at least one Business Day
before the date of any requested Borrowing, continuation or conversion,
notify the Agent that the Eurodollar Rate for Revolving Loans comprising
such Borrowing will not adequately reflect the cost to such Lenders of
making or funding their respective Revolving Loans for such Borrowing, the
right of the Borrower to select Eurodollar Rate Loans for such Borrowing
shall be suspended until the Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist, and
each Revolving Loan comprising such Borrowing shall be made as a Prime Rate
Loan.
(iii) If at any time any Lender determines (which determination
shall, absent manifest error, be conclusive and binding on all parties)
that the making, continuation or conversion of any Revolving Loan as a
Eurodollar Rate Loan has become unlawful or impermissible by reason of
compliance by that Lender with any law, governmental rule, regulation or
order of any Governmental Authority (whether or not having the force of law
or would result in costs or penalties), then, and in any such event, such
Lender may give notice of that determination in writing, to the Borrower
and the Agent and the Agent shall promptly transmit the notice to each
other Lender. Until such Lender gives notice otherwise, the right of the
Borrower to select Eurodollar Rate Loans from that Lender shall be
suspended and each Eurodollar Rate Loan outstanding from that Lender shall
automatically and immediately convert to a Prime Rate Loan.
(iv) There shall not be outstanding at any one time more than an
aggregate of eight (8) Revolving Loans which consist of Eurodollar Rate
Loans.
(d) Compensation. (i) Each Notice of Continuation and Notice
of Conversion shall be irrevocable by and binding on the Borrower. In the case
of any Borrowing, continuation or conversion that the related Notice of
Borrowing, Notice of Continuation or Notice of Conversion specifies is to be
comprised of Eurodollar Rate Loans, the Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result of any
failure to fulfill, on or before the date for such Borrowing, continuation or
conversion specified in such
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<PAGE> 51
Notice of Borrowing, Notice of Continuation or Notice of Conversion, the
applicable conditions set forth in Article 5, including, without limitation, any
loss (excluding loss of anticipated profits), cost or expense incurred by reason
of the liquidation or re-employment of deposits or other funds acquired by such
Lender to fund the Revolving Loan to be made by such Lender as part of such
Borrowing, continuation or conversion.
(ii) If any payment of principal of, or conversion or
continuation of, any Eurodollar Rate Loan is made other than on the last day of
the Interest Period for such Loan as a result of a payment, prepayment,
conversion or continuation of such Loan or acceleration of the maturity of the
Revolving Notes pursuant to Article 9 hereof or for any other reason, the
Borrower shall, upon demand by any Lender (with a copy of such demand to the
Agent), pay to the Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses which it may
reasonably incur as a result of such payment, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Loan.
(iii) Calculation of all amounts payable to a Lender under this
Section 4.8(d) shall be made as though such Lender elected to fund all
Eurodollar Rate Loans by purchasing U.S. dollar deposits in its Eurodollar
Lending Office's interbank eurodollar market.
4.9 Indemnification in Certain Events. If after the Closing Date,
either (i) any change in or in the interpretation of any law or regulation is
introduced, including, without limitation, with respect to reserve requirements,
applicable to Bankers Trust Company, BT Delaware or any other banking or
financial institution from whom any of the Lenders borrows funds or obtains
credit (a "Funding Bank"), the Agent or any of the Lenders, or (ii) the Agent, a
Funding Bank or any of the Lenders complies with any future guideline or request
from any central bank or other Governmental Authority or (iii) the Agent, a
Funding Bank or any of the Lenders determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or the Agent, a Funding Bank or any of the Lenders complies with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, and in the
case of any event set forth in this clause (iii), such adoption, change or
compliance has or would have the direct or indirect effect of reducing the rate
of return on any of the Lenders' capital as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but for
such
46
<PAGE> 52
adoption, change or compliance (taking into consideration the Agent's or such
Funding Bank's or Lender's policies as the case may be with respect to capital
adequacy) by an amount deemed by such Lender to be material, and any of the
foregoing events described in clauses (i), (ii) or (iii) increases the cost to
the Agent, the Issuing Bank or any of the Lenders of (A) funding or maintaining
the Total Commitments or (B) issuing, making or maintaining any Letter of Credit
or of purchasing or maintaining any participation therein, or reduces the amount
receivable in respect thereof by the Agent, the Issuing Bank or any Lender, then
the Borrower shall upon demand by the Agent, pay to the Agent, for the account
of each applicable Lender or, as applicable, the Issuing Bank or a Funding Bank,
additional amounts sufficient to indemnify the Lenders against such increase in
cost or reduction in amount receivable. A certificate as to the amount of such
increased cost and setting forth in reasonable detail the calculation thereof
shall be submitted to the Borrower by the Agent, or the applicable Lender,
Issuing Bank or Funding Bank, and shall be conclusive absent manifest error.
4.10 Net Payments
(a) All payments by the Borrower hereunder to or for the benefit of
any Lender, the Issuing Bank, the Syndication Agent or the Agent shall be made
without setoff, counterclaim or other defense. Except as provided in Section
4.10(b), all such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments, or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding any tax imposed on or
measured by the net income or profits of the Lender, the Issuing Bank, the
Syndication Agent or the Agent, as the case may be, pursuant to the laws of the
jurisdiction in which it is organized) together with all interest, penalties or
similar liabilities with respect thereto (collectively, "Covered Taxes"). If the
Borrower shall be required by law to deduct any Covered Taxes from any sum
payable hereunder to any Lender, the Issuing Bank, the Syndication Agent or the
Agent, (A) the sum payable shall be increased as may be necessary so that after
making all required deductions of Covered Taxes (including deductions of Covered
Taxes applicable to additional sums payable under this Section 4.10) such
Lender, the Issuing Bank, the Syndication Agent or the Agent, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (B) the Borrower shall make such deductions and (C) the
Borrower shall pay the full amount so deducted to the relevant taxation
authority or other authority in accordance with applicable law. The Borrower
shall furnish to the Agent within 45 days after the date the payment of any
Covered Taxes is due certified copies of tax receipts evidencing such payment by
the Borrower. The Borrower agrees to indemnify and hold harmless the Lender, the
Issuing Bank, the Syndication Agent and the Agent and
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<PAGE> 53
reimburse each of them, as the case may be, for the amount of any Covered Taxes
so levied or imposed and paid by them.
(b) Each Foreign Lender shall deliver to the Agent and the Borrower
(i) two valid, duly completed copies of IRS Form 1001 or 4224 or successor
applicable form, as the case may be, and any other required form, certifying in
each case that such Foreign Lender is entitled to receive payments under this
Credit Agreement or the Revolving Notes payable to it without deduction or
withholding of any United States federal income taxes or with such withholding
imposed at a reduced rate (the "Reduced Rate"), and (ii) a valid, duly completed
IRS Form W-8 or W-9 or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding tax. Each such
Foreign Lender shall also deliver to the Agent and the Borrower two further
copies of said Form 1001 or 4224 and W-8 or W-9, or successor applicable forms,
or other manner of required certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or otherwise is required to
be resubmitted as a condition to obtaining an exemption from a required
withholding of United States federal income tax or entitlement to having such
withholding imposed at the Reduced Rate or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Borrower and the Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower and the Agent, certifying (i) in the
case of a Form 1001 or 4224 that such Foreign Lender is entitled to receive
payments under this Credit Agreement or the Revolving Notes payable to it
without deduction or withholding of any United States federal income taxes,
unless in any such case any change in a tax treaty to which the United States is
a party, or any change in law or regulation of the United States or official
interpretation thereof has occurred after the Initial Funding Date and prior to
the date on which any such delivery would otherwise be required that renders all
such forms inapplicable or that would prevent such Foreign Lender from duly
completing and delivering any such form with respect to it, and such Foreign
Lender advises the Borrower and the Agent that it is not capable of receiving
payments without any deduction or withholding at the Reduced Rate, or (ii) in
the case of a Form W-8 or W-9, establishing an exemption from United States
backup withholding tax.
4.11 Affected Lenders. If the Borrower is obligated to pay to any
Lender any amount under Sections 4.9 or 4.10 hereof or if any Lender is a
Defaulting Lender, the Borrower may, if no Default or Event of Default then
exists, replace such Lender with another lender acceptable to the Agent, and
such Lender hereby agrees to be so replaced subject to the following:
(a) The obligations of the Borrower hereunder to the Lender to be
replaced (including such increased or additional costs incurred from the date of
notice to the Borrower of such increase or additional costs through the date
such Lender is
48
<PAGE> 54
replaced hereunder) shall be paid in full to such Lender concurrently with such
replacement;
(b) If such replacement is a result of increased costs under Sections
4.9 or 4.10, the replacement Lender shall be a bank or other financial
institution that is not subject to such increased costs which caused the
Borrower's election to replace any Lender hereunder, and each such replacement
Lender shall execute and deliver to the Agent such documentation satisfactory to
the Agent pursuant to which such replacement Lender is to become a party hereto,
conforming to the provisions of Section 11.6 hereof, with a Commitment equal to
that of the Lender being replaced and shall make Revolving Loans in the
aggregate principal amount equal to the aggregate outstanding principal amount
of the Revolving Loans of the Lender being replaced;
(c) Upon such execution of such documents referred to in clause (b)
and repayment of the amounts referred to in clause (a), the replacement lender
shall be a "Lender" with a Commitment as specified hereinabove and the Lender
being replaced shall cease to be a "Lender" hereunder, except with respect to
indemnification provisions under this Credit Agreement, which shall survive as
to such replaced Lender;
(d) The Agent shall reasonably cooperate in effectuating the
replacement of any Lender under this Section 4.11, but at no time shall the
Agent be obligated to initiate any such replacement; and
(e) Any Lender replaced under this Section 4.11 shall be replaced at
the Borrower's sole cost and expense and at no cost or expense to the Agent or
any of the Lenders.
(f) If Borrower proposes to replace any Lender pursuant to this
Section 4.11 because the Lender seeks reimbursement under either Section 4.9 or
4.10, then it must also replace any other Lender who seeks similar levels of
reimbursement (as a percentage of such Lender's Commitment) under such Sections.
4.12 Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off or
otherwise) on account of the Revolving Loans made by it or its participation in
the Letter of Credit Obligations in excess of its Proportionate Share of
payments on account of the Revolving Loans or Letter of Credit Obligations
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such participations in the Revolving Loans made by them or in their
participation in Letters of Credit as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and each such Lender shall repay to the
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<PAGE> 55
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect to the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 4.12 may, to the fullest extent permitted by
law, exercise all of its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
4.13 Calculations. All calculations of (i) interest hereunder and (ii)
fees, including, without limitation, Unused Line Fees and Letter of Credit Fees,
shall be made by the Agent, on the basis of a year of 360 days, or, if such
computation would cause the interest and fees chargeable hereunder to exceed the
Highest Lawful Rate, 365/366 days, in each case to the extent applicable for the
actual number of days elapsed (including the first day but excluding the last
day) occurring in the period for which such interest or fees are payable. Each
determination by the Agent of an interest rate or payment hereunder shall be
conclusive and binding for all purposes, absent manifest error.
ARTICLE 5. Conditions Precedent
5.1 Conditions Precedent to Effectiveness. This amendment and
restatement of the 1996 Credit Agreement shall be effective upon the
satisfaction of the following conditions precedent:
(a) Closing Documents List. The Agent and the Lenders shall have
received duly executed originals of each of the agreements, opinions, reports,
approvals, consents, certificates and other documents set forth on the Closing
Documents List attached hereto as Schedule A.
(b) Material Adverse Change. (i) No change, occurrence, event or
development or event involving a prospective change that is reasonably likely to
have a Material Adverse Effect shall have occurred and be continuing, (ii) there
shall not have occurred a substantial impairment of the financial markets
generally that is reasonably likely to materially and adversely affect the
transactions contemplated hereby, in each case as determined by the Agent and
each Lender in its sole discretion, or (iii) there shall not have occurred a
change in any law or regulation (or the implementation of any law or regulation)
affecting any of the Lenders that is reasonably likely to materially increase
the cost and expense to such Lender of acting as a Lender hereunder.
(c) Fees and Expenses. The Agent and each of the Lenders shall have
received payment in full of those Fees and Expenses referred to in the Amendment
and Restatement Fee Letter and in
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<PAGE> 56
Article 4 hereof payable to them on or before the Effective Date (or an
irrevocable authorization to pay such Fees or Expenses and other fees and
expenses out of the proceeds of the initial Revolving Loans).
(d) Consents and Approvals. Except for (i) the filing of Uniform
Commercial Code financing statements, (ii) consents or authorizations which have
been obtained or filings which have been made, and which in either case are in
full force and effect or (iii) consents or authorizations the failure to obtain
or filings the failure to make could not reasonably be expected to have a
Material Adverse Effect, no consent or authorization of, permit from, filing
with or other act by or in respect of, any Governmental Authority or any other
Person shall be required in connection with the borrowings hereunder, the grant
of the Liens pursuant to the Credit Documents, or the continuing operations of
the Borrower, the enforcement of the Agent's or the Lenders' rights under the
Credit Documents, or with the execution, delivery, performance, validity or
enforceability of this Credit Agreement, the Revolving Notes, the other Credit
Documents, the Indenture or any other documents executed in connection herewith
or therewith.
(e) Material Litigation. No material litigation shall have been
instituted against the Borrower, and no material litigation shall have been
instituted by any Person (including, but not limited to, the Borrower) relating
to the transactions contemplated by the Credit Agreement.
(f) Existing Indebtedness. The terms and conditions of any
Indebtedness (including, without limitation, maturities, interest rates,
prepayment and redemption requirements, covenants, defaults, remedies, security
provisions and subordination provisions) of the Borrower to remain outstanding
after the Closing Date shall be satisfactory to the Lenders in all respects, and
the Lenders shall be satisfied that the Borrower is not subject to any material
contractual obligations or other restrictions that would be violated by the
transactions contemplated by this Credit Agreement, the other Credit Documents,
the Indenture or any other documents executed in connection with the
Recapitalization.
(g) Additional Documents. The Borrower shall have executed and
delivered to the Agent and the Lenders all documents which the Agent or any
Lender determines are reasonably necessary to consummate the transactions
contemplated hereby.
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<PAGE> 57
5.2. Conditions Precedent to Effectiveness and to Each Revolving Loan
and Letter of Credit. On (i) the Effective Date and (ii) the date of the making
of any Revolving Loan or the issuance of any Letter of Credit, both before and
after giving effect thereto and to the application of the proceeds therefrom,
the following statements shall be true to the satisfaction of the Agent (and
each request for a borrowing of a Revolving Loan and request for a Letter of
Credit, and the acceptance by the Borrower of the proceeds of such Revolving
Loan or issuance of such Letter of Credit, shall constitute a representation and
warranty by the Borrower that on the date of such Revolving Loan or issuance of
such Letter of Credit before and after giving effect thereto and to the
application of the proceeds therefrom such statements are true):
(a) All representations and warranties contained in this Credit
Agreement and the other Credit Documents shall be true and correct on and as of
the date of such Notice of Borrowing or Letter of Credit Request as if then
made, other than representations and warranties that relate solely to an earlier
date;
(b) No Default or Event of Default shall have occurred and be
continuing, or would result from the making of the requested Revolving Loan or
the issuance of the requested Letter of Credit; and
(c) No event has occurred which has had or could reasonably be
expected to have a Material Adverse Effect.
ARTICLE 6. Representations and Warranties
To induce the Agent, the Syndication Agent, the Lenders and the Issuing
Bank to enter into this Credit Agreement and to make available the credit
facilities contemplated hereby, the Borrower, with respect to itself and each of
its Subsidiaries, hereby represents and warrants to the Agent, the Syndication
Agent, the Lenders and the Issuing Bank as follows:
6.1 Organization and Qualification. The Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation, (ii) has the power
and authority to own its properties and assets and to transact the businesses in
which it presently is, or proposes to be, engaged and (iii) is duly qualified
and is authorized to do business and is in good standing in each jurisdiction
where it presently is, or proposes to be, engaged in business and where the
failure to be so qualified and authorized could have a Material Adverse Effect.
Schedule B lists all jurisdictions in which the Borrower and its Subsidiaries
are qualified to do business as foreign corporations as of the Effective Date.
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6.2 Authority. The Borrower and each of its Subsidiaries has the
requisite corporate power and authority to execute, deliver and perform each of
the Credit Documents to which it is a party. All corporate action necessary for
the execution, delivery and performance of any of the Credit Documents has been
taken.
6.3 Enforceability. This Credit Agreement and each Credit Document is
the legal, valid and binding obligation of the Borrower or of any Subsidiary of
the Borrower which is a party thereto, enforceable in accordance with its terms.
6.4 No Conflict. The execution, delivery and performance of each
Credit Document by the Borrower or any of its Subsidiaries are not in
contravention of any Requirement of Law or any indenture, contract, lease,
agreement, instrument or other commitment to which it is a party or by which it
or any of its properties are bound and will not, except as contemplated herein,
result in the imposition of any Liens upon any of its properties.
6.5 Consents and Filings. No consent, authorization, permit or filing
is required in connection with the execution, delivery and performance of this
Credit Agreement or any Credit Document, or the continuing operations of the
Borrower and its Subsidiaries, except (i) those that have been obtained or made
and (ii) filings necessary to create, perfect or retain the perfection of Liens
against the Collateral.
6.6 Financial Data. The Borrower has furnished to the Lenders the
following Financial Statements, which have been prepared in accordance with GAAP
(except, in the case of (ii) below, with respect to footnotes) consistently
applied throughout the periods involved: (i) balance sheets as of, and
statements of operations, shareholder's equity and cash flows for the fiscal
year ended December 28, 1996 audited by independent certified public
accountants, and accompanied by an unqualified opinion thereof and (ii) an
unaudited balance sheet as of, and unaudited statements of operations,
shareholder's equity and cash flows for the period ending fiscal February 1996.
Since the date of these Financial Statements, there have been no adverse changes
in the condition, financial or otherwise, of the Borrower as shown on the
balance sheet of the Borrower described above, other than changes in the
ordinary course of business. In addition, the Borrower has furnished to the
Lenders certain financial data which include projections. The assumptions upon
which the projections were based were reasonable at the time such projections
were prepared and are reasonable as of the Effective Date, and such projections
were prepared by the Borrower in good faith.
6.7 Subsidiaries. The only direct or indirect Subsidiaries of the
Borrower as of the Effective Date are those listed on Schedule B. The Borrower
is the record and beneficial owner of all of the shares of capital stock of each
of the
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Subsidiaries listed on Schedule B. There are no proxies, irrevocable or
otherwise, with respect to such shares, and no equity securities of any of the
Subsidiaries are or may become required to be issued by reason of any options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any capital stock of any Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any Subsidiary is or may
become bound to issue additional shares of its capital stock or securities
convertible into or exchangeable for such shares. All of such shares so owned by
the Borrower are owned by them free and clear of any Liens.
6.8 No Judgment or Litigation. Except as set forth on Schedule B, no
judgments, orders, writs or decrees are outstanding against the Borrower or any
of the Subsidiaries nor is there now pending or, to the best of the Borrower's
knowledge after diligent inquiry, threatened any litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against the
Borrower or any of the Subsidiaries. No judgments, orders, writs or decrees are
outstanding against the Borrower or any of the Subsidiaries nor is there now
pending or, to the best of the Borrower's knowledge after diligent inquiry,
threatened any litigation, contested claim, investigation, arbitration, or
governmental proceeding by or against the Borrower or any of the Subsidiaries,
in any case which could have a Material Adverse Effect.
6.9 No Defaults. Neither the Borrower nor any of the Subsidiaries is
in default under any term of any Material Contract. The Borrower knows of no
dispute regarding any Material Contract.
6.10 Labor Matters
(a) There are no controversies pending or, to the best of the
Borrower's knowledge after diligent inquiry, threatened between the Borrower or
any of the Subsidiaries and any of their respective employees which, in any
case, could have a Material Adverse Effect.
(b) Neither the Borrower nor any of the Subsidiaries is engaged in any
unfair labor practice which could have a Material Adverse Effect. There is (i)
no unfair labor practice complaint pending against the Borrower or any of the
Subsidiaries or, to the best knowledge of the Borrower, threatened against any
of them, before the National Labor Relations Board, and no grievance or
significant arbitration proceeding arising out of or under collective bargaining
agreements is so pending against the Borrower or any of the Subsidiaries or, to
the best knowledge of the Borrower, threatened against any of them, (ii) no
strike, labor dispute, slowdown or stoppage pending against either of the
Borrower or any of the Subsidiaries or, to the best knowledge of
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the Borrower, threatened against any of them and (iii) no union representation
question with respect to the employees of the Borrower or any Subsidiaries and
no union organizing activities.
6.11 Compliance with Law. Neither the Borrower nor any of the
Subsidiaries has violated or failed to comply with any Requirement of Law or any
requirement of any self regulatory organization which could have a Material
Adverse Effect.
6.12 ERISA. None of the Borrower, any Subsidiary and any ERISA
Affiliate maintains or contributes to any Plan other than those listed on
Schedule B. Each Plan has been and is being maintained and funded in accordance
with its terms and in compliance with all provisions of ERISA and the Code
applicable thereto. The Borrower, each of the Subsidiaries and each ERISA
Affiliate have fulfilled all obligations related to the minimum funding
standards of ERISA and the Internal Revenue Code for each Plan, are in
compliance with the currently applicable provisions of ERISA and of the Internal
Revenue Code and have not incurred any liability (other than routine liability
for premiums) under Title IV of ERISA. No Termination Event has occurred nor has
any other event occurred that may result in a Termination Event. No event or
events have occurred in connection with which the Borrower, any of the
Subsidiaries, any ERISA Affiliate, any fiduciary of a Plan or any Plan, directly
or indirectly, could be subject to any liability, individually or in the
aggregate, under ERISA, the Internal Revenue Code or any other Requirement of
Law or under any agreement, instrument, statute, rule of law or regulation
pursuant to or under which any such entity has agreed to indemnify or is
required to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of, any such statute,
regulation or order. The Borrower has delivered or caused to be delivered to the
Agent: (i) a copy of each Plan (or, where any such plan is not in writing, a
complete description thereof) (and, if applicable, related trust agreements or
other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of the Borrower or the
Subsidiaries; (ii) the most recent determination letter issued by the Internal
Revenue Service with respect to each Plan; (iii) for the three most recent plan
years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Plan; (iv) all actuarial reports prepared for the
last three plan years for each Plan; (v) a listing of all Multiemployer Plans,
with the aggregate amount of the most recent annual contributions required to be
made by the Borrower or any ERISA Affiliate to each such plan and copies of the
collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to the Borrower or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan; and (vii) the
aggregate amount of the most recent annual payments made to former employees of
the Borrower or any ERISA Affiliate under any Retiree Health Plan.
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6.13 Compliance with Environmental Laws. (i) The operations of the
Borrower and each of the Subsidiaries are not in violation of any applicable
federal, state or local environmental, health and safety statutes, regulations,
directions, ordinances, criteria and guidelines; (ii) the Borrower has not
received notice that any of the operations of the Borrower or any of the
Subsidiaries is the subject of any judicial or administrative proceeding
alleging the violation of any federal, state or local environmental, health or
safety statute, regulation, direction, ordinance, criteria or guideline; (iii)
none of the operations of the Borrower or any of the Subsidiaries is the subject
of any federal, state or local investigation involving allegations or potential
allegations that the Borrower or any of the Subsidiaries disposed of any
hazardous or toxic waste, substance or constituent or other pollutant,
contaminant or substance (including, without limitation, petroleum) at any site
that may require remedial action, or any federal, state or local investigation
evaluating whether any remedial action is needed to respond to a release or
threatened release of any hazardous or toxic waste, substance or constituent, or
other pollutant, contaminant or substance (including, without limitation,
petroleum) into the environment; (iv) neither the Borrower nor any of the
Subsidiaries have filed any notice under any federal, state or local law
indicating past or present treatment, storage or disposal of a hazardous waste
or reporting a spill or release or threatened release of a hazardous or toxic
waste, substance or constituent, or other pollutant, contaminant or substance
(including, without limitation, petroleum) into the environment; and (v) neither
the Borrower nor any of the Subsidiaries has any contingent liability of which
the Borrower has knowledge or reasonably should have knowledge in connection
with any release or threatened release of any hazardous or toxic waste,
substance or constituent, or other pollutant, contaminant or substance
(including, without limitation, petroleum) into the environment, nor has the
Borrower or any of the Subsidiaries received any notice, letter or other
indication of potential liability arising from the disposal of any hazardous or
toxic waste, substance or constituent or other pollutant, contaminant or
substance (including, without limitation, petroleum) into the environment which,
in any such case referred to in this Section 6.13 or in the aggregate, could
have a Material Adverse Effect.
6.14 Intellectual Property. The Borrower possesses or has the legal
right to use such assets, licenses, patents, patent applications, copyrights,
service marks, trademarks (including, without limitation, the "'W' and design")
and trade names as are necessary or advisable to continue to conduct its present
and proposed business activities and such assets, licenses, patents, patent
applications, copyrights, service marks, trademarks and trade names are valid
and in full force and effect.
6.15 Licenses and Permits. The Borrower and each of the Subsidiaries
have obtained and hold in full force and effect, all
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franchises, licenses, leases, permits, certificates, authorizations,
qualifications, easements, rights of way and other rights and approvals which
are necessary or advisable for the operation of its businesses as presently
conducted and as proposed to be conducted, except those with respect to which
the failure to so obtain and hold would not have a Material Adverse Effect.
Neither of the Borrower nor any of the Subsidiaries is in violation of the terms
of any such franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, right or approval.
6.16 Title to Property. All Real Estate is identified on Schedule B.
The Borrower has good and marketable title in fee simple to, or a valid
leasehold interest in, all its Real Estate, and good title to all its other
property, and none of such property is subject to any Lien except as permitted
by Section 8.8.
6.17 Investment Company. Neither the Borrower nor any of the
Subsidiaries is (i) an investment company or a company controlled by an
investment company within the meaning of the Investment Company Act of 1940, as
amended, (ii) a holding company or a Subsidiary company of a holding company, or
an Affiliate of a holding company or of a Subsidiary company of a holding
company, within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other law which purports to regulate or
restrict its ability to borrow money or to consummate the transactions
contemplated by this Credit Agreement or the other Credit Documents or to
perform its obligations hereunder or thereunder.
6.18 Taxes and Tax Returns.
(a) Except as set forth on Schedule B, the Borrower and the
Subsidiaries (and any affiliated group of which the Borrower or any of the
Subsidiaries are now or have been members) has timely filed (inclusive of any
permitted extensions) with the appropriate taxing authorities all returns
(including, without limitation, information returns) in respect of taxes
required to be filed through the Effective Date and will timely file (inclusive
of any permitted extensions) any such returns required to be filed on and after
the Effective Date. The information filed is complete and accurate in all
material respects. All deductions taken by the Borrower as reflected in such
income tax returns have been taken in accordance with applicable laws and
regulations, except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made in
accordance with GAAP. Except as specified in Schedule B, neither the Borrower
nor any of the Subsidiaries, nor any group of which the Borrower or any of the
Subsidiaries are now or were members, have requested any extension of time
within which to file returns (including without limitation information returns)
in respect of any taxes.
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(b) All taxes, assessments, fees and other governmental charges in
respect of periods beginning prior to the Effective Date, have been timely paid,
or will be timely paid, or an adequate reserve has been established therefor, as
set forth in Schedule B or in the Financial Statements, and neither the Borrower
nor any of the Subsidiaries has any liability for taxes in excess of the amounts
so paid or reserves so established.
(c) Except as set forth in Schedule B, no deficiencies for taxes have
been claimed, proposed or assessed by any taxing or other Governmental Authority
against the Borrower or any of their Subsidiaries and no tax liens have been
filed. Except as set forth in Schedule B, there are no pending or, to the best
of the Borrower's knowledge, threatened audits, investigations or claims for or
relating to any liability in respect of taxes, and there are no matters under
discussion with any governmental authorities with respect to taxes which are
likely to result in a material additional liability for taxes. Either the
federal income tax returns of the Borrower have been audited by the Internal
Revenue Service and such audits have been closed, or the period during which any
assessments may be made by the Internal Revenue Service has expired without
waiver or extension, for all years up to and including the fiscal year ended
1991. Except as set forth in Schedule B, no extension of a statute of
limitations relating to taxes, assessments, fees or other governmental charges
is in effect with respect to the Borrower or the Subsidiaries.
(d) Except as set forth on Schedule B, neither the Borrower nor any of
its Subsidiaries has any obligation under written tax sharing agreement or
agreement regarding payments in lieu of taxes.
6.19 Material Contracts. Schedule B contains a true, correct and
complete list of all the Material Contracts currently in effect on the Effective
Date. None of the Material Contracts contains any burdensome restrictions on the
Borrower or any of its Subsidiaries or any of their respective properties. All
of the Material Contracts are in full force and effect, and no defaults
currently exist thereunder.
6.20 Affiliate Transactions. Except as set forth on Schedule B, neither
the Borrower nor any Subsidiary is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of the Borrower or
any Subsidiary is a party except (i) in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's or such Subsidiary's business and
(ii) upon fair and reasonable terms no less favorable to the Borrower and such
Subsidiary than it could obtain in a comparable arm's-length transaction with an
unaffiliated Person.
6.21 Accuracy and Completeness of Information. All factual information
furnished by or on behalf of the Borrower or
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any of the Subsidiaries in writing to the Agent, any Lender or the Auditors for
purposes of or in connection with this Credit Agreement or any Credit Documents,
or any transaction contemplated hereby or thereby is or will be true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any material fact
necessary to make such information not misleading at such time.
6.22 Recording Taxes. All mortgage recording taxes, recording fees and
other charges payable in connection with the filing and recording of the Credit
Documents have either been paid in full by the Borrower or arrangements for the
payment of such amounts satisfactory to the Agent shall have been made.
6.23 Solvency. The fair saleable value of the assets of the Borrower
exceeds all its probable liabilities, including those to be incurred pursuant to
this Credit Agreement, the other Credit Documents, the Senior Subordinated Notes
and the Indenture. The Borrower (i) does not have unreasonably small capital in
relation to the business in which it is or proposes to be engaged and (ii) has
not incurred, and does not believe that it will incur, after giving effect to
the transactions contemplated by this Credit Agreement, debts beyond its ability
to pay as such debts become due.
6.24 No Change. There has been no development or event nor any
prospective development or event, which has had or could reasonably be expected
to have a Material Adverse Effect.
ARTICLE 7. Affirmative Covenants
Until termination of this Credit Agreement and payment and satisfaction
of all Obligations due hereunder:
7.1 Financial Reporting. The Borrower shall timely deliver to each
Lender the following information:
(a) Annual Financial Statements. As soon as available, but not later
than 90 days after each fiscal year end: (i) the annual audited Financial
Statements of the Consolidated Entity; (ii) a comparison in reasonable detail to
the prior year audited Financial Statements; (iii) the Auditors' unqualified
opinion, "Management Letter" and statement indicating that the Auditors have not
obtained knowledge of the existence of any Default or Event of Default during
their audit; (iv) a narrative discussion of the consolidated financial condition
and results of operations and the consolidated liquidity and capital resources
of the Consolidated Entity for such fiscal year, prepared by the chief financial
officer of the Borrower; and (v) a compliance certificate substantially in the
form of Exhibit B with an attached schedule of calculations (A) demonstrating
compliance with the financial covenants set forth in Sections 8.1, 8.2 and 8.6
and (B) setting forth the Interest Coverage Ratio of the
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Consolidated Entity for the most recently completed four full fiscal quarters of
the Consolidated Entity. To the extent that the Borrower's annual report on Form
10-K contains any of the foregoing items, the Lenders will accept the Borrower's
Form 10-K in lieu of such items.
(b) Projections. Not later than 45 days after each fiscal year end,
monthly projections of Borrower's financial condition and results of operations
for the next succeeding fiscal year, together with annual projections for the
next two succeeding fiscal years, in each case containing projected
consolidating balance sheets, statements of operations, statements of cash flows
and statements of changes in shareholders equity, together with a statement in
reasonable detail setting forth the assumptions upon which such projections are
based.
(c) Quarterly Financial Statements. As soon as available, but not later
than 45 days after the end of each of the first three fiscal quarters: (i)
Financial Statements of the Consolidated Entity as of the fiscal quarter then
ended, and for the fiscal year to date; (ii) a comparison in reasonable detail
to the Financial Statements for the corresponding periods of the prior fiscal
year; (iii) the certification of the chief executive officer or chief financial
officer of the Borrower that such Financial Statements have been prepared in
accordance with GAAP (other than with respect to footnotes and subject to
year-end audit adjustments); (iv) a narrative discussion of the consolidated
financial condition and results of operations and the consolidated liquidity and
capital resources of the Consolidated Entity for such fiscal quarter and fiscal
year to date, prepared by the chief financial officer of the Borrower; and (v) a
compliance certificate substantially in the form of Exhibit B with an attached
schedule of calculations (A) demonstrating compliance with the financial
covenants set forth in Sections 8.1, 8.2 and 8.6 and (B) setting forth the
Interest Coverage Ratio of the Consolidated Entity for the most recently
completed four full fiscal quarters of the Consolidated Entity. To the extent
that the Borrower's quarterly report on Form 10-Q contains any of the foregoing
items, the Lenders will accept the Borrower's Form 10-Q in lieu of such items.
(d) Monthly Financial Statements. As soon as available, but not later
than 30 days after the end of each of the fiscal months of January, February,
April, May, July, August, October and November and within 45 days after the end
of each of the fiscal months of March, June, September and December: (i) a
balance sheet for the Consolidated Entity as at the end of such month and for
the fiscal year to date and statements of operations and cash flows for such
month and for the fiscal year to date; (ii) a comparison to the balance sheet,
statement of operations and statement of cash flows for the same periods in the
prior year; (iii) a certification by the chief executive officer or chief
financial officer of the Borrower that such
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balance sheet, statement of operations and statement of cash flows have been
prepared in accordance with GAAP (other than with respect to footnotes and
subject to year-end audit adjustments); and (iv) a compliance certificate
substantially in the form of Exhibit B with an attached schedule of calculations
demonstrating compliance with the financial covenants set forth in Section 8.1,
8.2 and 8.6 and calculations evidencing (a) the Acquisition Basket as of the end
of such fiscal month and (b) the Capital Asset Sale Proceeds received by the
Borrower and the amount of Capital Asset Sale Proceeds designated as Transferred
Sale Proceeds, in each case during such fiscal month.
(e) Monthly Comparison to Prior Projections. As soon as available, but
not later than 30 days after the end of each of the fiscal months of January,
February, April, May, July, August, October and November and within 45 days
after the end of each of the fiscal months of March, June, September and
December, a comparison of actual results of operations, cash flow and capital
expenditures for the Borrower for such month and for the period from the
beginning of the current fiscal year through the end of such month with amounts
previously projected for those periods (see Section 7.1(b)) and with actual
results for corresponding periods in the previous fiscal year.
(f) Tax Returns. A copy of the state and federal income tax returns of
the Borrower and each of its Subsidiaries within thirty (30) days after they are
filed with the appropriate taxing authorities, if and when requested by any
Lender.
(g) Public Filings. Promptly upon the earlier of the mailing or filing
thereof, copies of all 10-Ks, 10-Qs, 8-Ks, proxy statements, annual reports,
quarterly reports, registration statements and any other filings or other
communications made by the Borrower to holders of its publicly traded securities
or the Securities Exchange Commission from time to time pursuant to the
Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as
amended.
7.2 Collateral Reporting. The Borrower shall timely deliver to the
Agent the following certificates and reports:
(a) Weekly Borrowing Base Certificates. (i) Weekly, before 12:00 noon
on the second Business Day of each week, and at any other time requested by the
Agent, (1) a borrowing base certificate (the "Borrowing Base Certificate"),
which shall be: (A) completed substantially in the form of Exhibit C, detailing
the Borrower's Eligible Accounts Receivable and Eligible Inventory as of each
Friday of the immediately preceding week (or as of such other date as the Agent
may request), (B) prepared by or under the supervision of the Borrower's chief
executive officer or chief financial officer and certified by such officer
subject only to adjustment upon completion of the normal year-end audit of
physical inventory and (C) attached to such additional schedules and other
information as the Agent may request; and (2)
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(X) an Accounts Receivable reconciliation report (beginning
balance+sales-collections), (Y) a report detailing Inventory balances by
category and (Z) an accounts payable balance and book overdraft report, in each
case as of Saturday of the immediately preceding week. The Agent may, but shall
not be obligated to, rely on each Borrowing Base Certificate and any other
schedules or reports in determining the eligibility of Accounts and Inventory.
(ii) Monthly, before 12:00 noon on the ninth Business Day of each
fiscal month, and at any other time requested by the Agent, (1) a Borrowing Base
Certificate which shall be: (A) completed substantially in the form of Exhibit
C, detailing (x) the Borrower's Eligible Accounts Receivable and Eligible
Inventory as of the last day of the immediately preceding fiscal month (the
"Monthly Report") and (y) the Borrower's Eligible Accounts Receivable as of the
previous Friday and the Borrower's Eligible Inventory as of the last day of the
immediately preceding fiscal month updated to reflect the percentages set forth
in the Monthly Report, (B) prepared by or under the supervision of the
Borrower's chief executive officer or chief financial officer and certified by
such officer subject only to adjustment upon completion of the normal year-end
audit of physical inventory, and (C) attached to such additional schedules and
other information as the Agent may request (including, without limitation, an
accounts receivable agings report for the prior fiscal month); and (2) (W) an
Accounts Receivable summary agings report by location, (X) an Accounts
Receivable summary agings report for the Borrower's top twenty customer
accounts, (Y) a report of Inventory balances by location (including third- party
locations) and (Z) an accounts payable agings report (when available from the
Borrower's computerized recordkeeping system), in each case as of the last day
of the immediately preceding fiscal month. The Agent may, but shall not be
obligated to, rely on each Borrowing Base Certificate and any other schedules or
reports in determining the eligibility of Accounts and Inventory.
(b) Further Assurances. When requested by the Agent (or by a Lender
through the Agent), any further information regarding the Collateral, business
affairs and financial condition of the Borrower or any of its Subsidiaries.
7.3 Notification Requirements. The Borrower shall timely give the Agent
and each of the Lenders the following notices:
(a) Notice of Defaults. Promptly, and in any event within two (2)
Business Days after becoming aware of the occurrence of a Default or Event of
Default, a certificate of the chief executive officer or chief financial officer
of the Borrower specifying the nature thereof and the Borrower's proposed
response thereto, each in reasonable detail.
(b) Proceedings or Adverse Changes. Promptly, and in any event within
five (5) Business Days after the Borrower becomes
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aware of (i) any proceeding being instituted or threatened to be instituted by
or against the Borrower or any of its Subsidiaries in any federal, state, local
or foreign court or before any commission or other regulatory body (federal,
state, local or foreign), (ii) any order, judgment or decree in excess of
$1,000,000 being entered against the Borrower or any of its Subsidiaries or any
of their respective properties or assets or (iii) any actual or prospective
change, development or event which, in any such case, has had or could
reasonably be expected to have a Material Adverse Effect, a written statement
describing such proceeding, order, judgment, decree, change, development or
event and any action being taken with respect thereto by the Borrower or any
such Subsidiary.
(c) ERISA Notices.
(i) within ten (10) days after the Borrower, any Subsidiary or
any ERISA Affiliate knows or has reason to know that a Termination
Event has occurred, a written statement of the chief financial officer
of the Borrower describing such Termination Event and the action, if
any, which the Borrower or other such entities have taken, are taking
or propose to take with respect thereto, and when known, any action
taken or threatened by the Internal Revenue Service, DOL or PBGC with
respect thereto;
(ii) within ten (10) days after the Borrower, any Subsidiary
or any ERISA Affiliate knows or has reason to know that a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the
Internal Revenue Code) has occurred, a statement of the chief financial
officer of the Borrower describing such transaction and the action
which the Borrower or other such entities have taken, are taking or
propose to take with respect thereto;
(iii) within thirty (30) days after the filing thereof with
the DOL, Internal Revenue Service or PBGC, copies of each annual report
(form 5500 series), including Schedule B thereto, filed with respect to
each Benefit Plan;
(iv) within thirty (30) days after receipt by the Borrower,
any Subsidiary or any ERISA Affiliate of each actuarial report for any
Benefit Plan or Multiemployer Plan and each annual report for any
Multiemployer Plan, copies of each such report;
(v) within three (3) days after the filing thereof with the
Internal Revenue Service, a copy of each funding waiver request filed
with respect to any Benefit Plan and all communications received by the
Borrower, any Subsidiary or any ERISA Affiliate with respect to such
request;
(vi) within ten (10) days upon the occurrence thereof,
notification of any increase in the benefits of any existing
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Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which the Borrower, any Subsidiary or any
ERISA Affiliate was not previously contributing;
(vii) within three (3) days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of the PBGC's intention to terminate
a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice;
(viii) within ten (10) days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Internal Revenue
Code, copies of each such letter;
(ix) within ten (10) days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of a notice regarding the imposition
of withdrawal liability, copies of each such notice;
(x) within ten (10) days after the Borrower, any Subsidiary or
any ERISA Affiliate fail to make a required installment or any other
required payment under Section 412 of the Internal Revenue Code on or
before the due date for such installment or payment, a notification of
such failure; and
(xi) within three (3) days after the Borrower, any Subsidiary
or any ERISA Affiliate knows (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan, a written statement setting forth any
such event or information.
For purposes of this Section 7.3(c), the Borrower, any Subsidiary
and any ERISA Affiliate shall be deemed to know all facts known by the
administrator of any Plan of which such entity is the plan sponsor.
(d) Environmental and Health and Safety Notices; Violations of Law.
Promptly, and in any event within ten (10) Business Days after receipt by the
Borrower or any of its Subsidiaries of any formal or informal notice, complaint
or order alleging actual or prospective violation of any environmental, health
or safety Requirement of Law or any other Requirement of Law which could have a
Material Adverse Effect, or alleging responsibility for a cleanup, together with
a copy of such notice, complaint, or order and a written statement describing
any action being taken with respect thereto by the Borrower or any such
Subsidiary.
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(e) Material Contracts. Promptly, and in any event within ten (10)
Business Days after any Material Contract of the Borrower or any of its
Subsidiaries is terminated or amended or any new Material Contract is entered
into, a written statement describing such event, with copies of amendments or
new contracts, and an explanation of any actions being taken with respect
thereto.
(f) Interest Rate Agreements and Lumber Hedging Agreements. The
Borrower shall provide the Agent, (i) promptly, and in any event within five (5)
Business Days after a default by any party under any Interest Rate Agreement or
Lumber Hedging Agreement, with a written statement describing such default and
an explanation of any actions being taken with respect thereto, and (ii) with
such other information regarding any Interest Rate Agreements or Lumber Hedging
Agreements as the Agent may reasonably request.
7.4 Corporate Existence. The Borrower shall, and shall cause each of
the Subsidiaries to, (i) maintain its corporate existence (except that
Subsidiaries may merge with each other and with the Borrower (provided that the
Borrower is the surviving entity) with the prior written consent of the Agent,
maintain in full force and effect all licenses, bonds, franchises, leases,
trademarks and qualifications to do business, and all patents, contracts and
other rights necessary or advisable to the profitable conduct of their
businesses, (ii) continue in, and limit their operations to, the same general
lines of business as presently conducted by it and (iii) comply with all
Requirements of Law, except those Requirements of Law the failure to so comply
with would not have a Material Adverse Effect.
7.5 ERISA. The Borrower shall establish, maintain and operate all
Plans to comply in all material respects with the provisions of ERISA, Internal
Revenue Code, and all other Requirements of Law, other than to the extent that
Borrower is in good faith contesting by appropriate proceedings the validity or
application of any such provision, law, rule, regulation or interpretation.
7.6 Environmental and Other Matters. The Borrower and its
Subsidiaries will conduct their businesses so as to comply in all material
respects with all applicable federal, state or local environmental laws,
regulations, directions, ordinances, criteria and guidelines, including, without
limitation, environmental, land use, occupational safety or health laws,
regulations, directions, ordinances, criteria, guidelines, requirements or
permits in all jurisdictions in which any of them is or may at any time be doing
business, except to the extent that the Borrower or any of the Subsidiaries are
contesting, in good faith by appropriate legal proceedings, any such law,
regulation, direction, ordinance, criteria, guideline, or interpretation thereof
or application thereof; provided, further, that the Borrower and each of the
Subsidiaries shall comply with the order
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of any court or other Governmental Authority relating to such laws unless the
Borrower or the Subsidiaries shall currently be prosecuting an appeal or
proceedings for review and shall have secured a stay of enforcement or execution
postponing enforcement or execution pending such appeal or proceedings for
review. The Borrower shall promptly take all actions necessary to prevent the
imposition of any Liens on any of its properties arising out of or related to
any environmental matters. At the request of the Agent, and at the sole cost and
expense of the Borrower, the Borrower shall provide the Agent with any
additional information or reports relating to environmental matters and any
potential related liability resulting therefrom as the Agent may reasonably
request. In addition, the Borrower shall provide the Agent, at the Borrower's
sole cost and expense, with copies of any environmental audits, surveys or
reports conducted in connection with the purchase or sale by the Borrower of any
real property.
7.7 Insurance; Casualty Loss. The Borrower agrees to maintain, and
to cause each of the Subsidiaries to maintain, public liability insurance, third
party property damage insurance and casualty insurance on the Collateral under
such policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. All liability policies of the Borrower and its
Subsidiaries are to name the Agent as an additional insured and all casualty
policies covering the Collateral are to name the Agent as the loss payee in case
of loss and are to contain such other provisions as the Agent may reasonably
require to fully protect the Agent's interest in the Collateral and to any
payments to be made under such policies. The Borrower shall provide written
notice to the Lenders of the occurrence of any of the following events within
five (5) Business Days after the occurrence of such event: any asset or property
owned or used by the Borrower or any of the Subsidiaries is (i) damaged or
destroyed, or suffers any other loss, or (ii) condemned, confiscated or
otherwise taken, in whole or in part, or the use thereof is otherwise diminished
so as to render impracticable or unreasonable the use of such asset or property
for the purposes to which such asset or property were used immediately prior to
such condemnation, confiscation or taking, by exercise of the powers of
condemnation or eminent domain or otherwise, and in either case the amount of
the damage, destruction, loss or diminution in value which is in excess of
$1,000,000 (collectively, a "Casualty Loss"; provided, however, that for
purposes of the definition of Capital Expenditures only, "Casualty Loss" shall
mean any of the foregoing regardless of the amount of the damage, destruction,
loss or diminution in value). The Borrower shall diligently file and prosecute
its claim or claims for any award or payment in connection with a Casualty Loss.
In the event of a Casualty Loss, the Borrower shall pay to the Agent, promptly
upon receipt thereof, any and all insurance proceeds and payments received by
the Borrower or any of the Subsidiaries on account of damage, destruction, loss,
condemnation or eminent domain proceedings. The Agent may, at
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its election and in its sole discretion, either (a) apply the proceeds realized
from Casualty Losses to payment of accrued and unpaid interest or outstanding
principal under the Revolving Loans or (b) pay such proceeds to the Borrower to
be used to repair, replace or rebuild the asset or property or portion thereof
that was the subject of the Casualty Loss. After the occurrence and during the
continuance of an Event of Default, (i) no settlement on account of any such
Casualty Loss shall be made without the consent of the Lenders and (ii) the
Agent may participate in any such proceedings and the Borrower shall deliver to
the Agent such documents as may be requested by the Agent to permit such
participation and shall consult with the Agent, its attorneys and agents in the
making and prosecution of such claim or claims. The Borrower hereby irrevocably
authorizes and appoints the Agent its attorney-in-fact, after the occurrence and
continuance of an Event of Default, to collect and receive for any such award or
payment and to file and prosecute such claim or claims, which power of attorney
shall be irrevocable and shall be deemed to be coupled with an interest, and the
Borrower shall, upon demand of the Agent, make, execute and deliver any and all
assignments and other instruments sufficient for the purpose of assigning any
such award or payment to the Agent for the benefit of the Lenders, free and
clear of any encumbrances of any kind or nature whatsoever.
7.8 Taxes. The Borrower agrees to pay, when due, and to cause each
of the Subsidiaries to pay when due, all taxes lawfully levied or assessed
against the Borrower, any Subsidiary or any of the Collateral before any penalty
or interest accrues thereon; provided, however, that, unless such taxes have
become a federal tax or ERISA Lien on any of the assets of the Borrower or any
Subsidiary, no such tax need be paid if the same is being contested, in good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have been made
therefor as required in order to be in conformity with GAAP.
7.9 Compliance With Laws. The Borrower agrees to comply, and to
cause each of the Subsidiaries to comply, with all Requirements of Law
applicable to the Collateral or any part thereof, or to the operation of its
business, unless (a) the Borrower contests any such Requirements of Law in a
reasonable manner and in good faith or (b) any such non-compliance would not
have a Material Adverse Effect.
7.10 Use of Proceeds. The Revolving Loans made to the Borrower
hereunder shall be used by the Borrower solely (i) for working capital, general
business and capital expenditure requirements of the Borrower, including,
without limitation, payment of Letter of Credit Obligations and (ii) to the
limited extent contemplated by Section 8.20(c) hereof. The Borrower shall not
use any portion of the proceeds of any such Loans for the purpose of purchasing
or carrying any "margin stock" (as defined in Regulations G and U of the Board
of Governors of the
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Federal Reserve System) in any manner which violates the provisions of
Regulation G, U or X of said Board of Governors or for any other purpose in
violation of any applicable statute or regulation, or of the terms and
conditions of this Credit Agreement.
7.11 Fiscal Year. The Borrower agrees to maintain its fiscal year as
a year ending on the last Saturday in December unless required by law, in which
case the Borrower will give the Agent at least thirty (30) days prior written
notice thereof.
7.12 Intellectual Property. The Borrower shall do and cause to be
done all things necessary to preserve and keep in full force and effect all
registrations of patents, copyrights, trademarks, service marks and other marks,
trade names or other trade rights that are necessary for the operation of the
business of the Borrower (including, without limitation, the "'W' and design"
and "Wickes" trademarks).
7.13 Maintenance of Property. The Borrower agrees to keep, and to
cause each of the Subsidiaries to keep, all property useful and necessary to its
respective businesses in good working order and condition (ordinary wear and
tear excepted) in accordance with their past operating practices and not to
commit or suffer any waste with respect to any of its properties.
7.14 Books and Records; Inspections. The Borrower shall maintain
books and records pertaining to the Collateral in such detail, form and scope as
is consistent with good business practice, and agrees that such books and
records will reflect the Lenders' interest in its Accounts. The Agent or its
agents may (or, if requested by the Majority Lenders, shall) enter upon the
premises of the Borrower at any time and from time to time, during normal
business hours and upon reasonable notice under the circumstances, and at any
time at all on and after the occurrence of a Default which continues beyond the
expiration of any grace or cure period applicable thereto, and which has not
otherwise been waived by the Agent, for the purposes of (i) inspecting and
verifying the Collateral, (ii) inspecting and/or copying (at the Borrower's
expense) any and all records pertaining thereto, and (iii) discussing the
affairs, finances and business of the Borrower with any officers, employees and
directors of the Borrower or with the Auditors.
7.15 Further Assurances. The Borrower shall take, and shall cause
each of the Subsidiaries to take, all such further actions and execute all such
further documents and instruments as the Agent may at any time reasonably
determine in its sole discretion to be necessary or desirable to further carry
out and consummate the transactions contemplated by the Credit Documents, to
cause the execution, delivery and performance of the Credit Documents to be duly
authorized and to perfect or protect the Liens (and the priority status thereof)
of the Agent on the Collateral.
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ARTICLE 8. Negative Covenants
Until termination of the Credit Agreement and payment and
satisfaction of all Obligations due hereunder, the Borrower agrees that:
8.1 Fixed Charge Coverage Ratio. The Consolidated Entity shall
maintain during each of the following periods a ratio of Adjusted EBITDA to
Fixed Charges (the "Fixed Charge Coverage Ratio) of not less than the ratio set
forth below opposite such period:
<TABLE>
<CAPTION>
Last Four Full Fiscal
Quarters ending: Ratio:
- ----------------------------------------------------------------------
<S> <C>
last day of fiscal March 1997 1.10 to 1.00
last day of fiscal June 1997 1.10 to 1.00
last day of fiscal September 1997 1.10 to 1.00
last day of fiscal December 1997 1.10 to 1.00
last day of fiscal March 1998 1.10 to 1.00
last day of fiscal June 1998 1.10 to 1.00
last day of fiscal September 1998 1.10 to 1.00
last day of fiscal December 1998 1.10 to 1.00
last day of fiscal March 1999 1.10 to 1.00
last day of fiscal June 1999 1.10 to 1.00
last day of fiscal September 1999 1.10 to 1.00
last day of fiscal December 1999 1.10 to 1.00
last day of fiscal March 2000 1.20 to 1.00
last day of fiscal June 2000 1.20 to 1.00
last day of fiscal September 2000 1.20 to 1.00
last day of fiscal December 2000 1.20 to 1.00
last day of fiscal March 2001 and 1.25 to 1.00
last day of each fiscal quarter
thereafter
</TABLE>
; provided that, if the Consolidated Entity's Fixed Charge Coverage Ratio for
any one period set forth above ending on or prior to December 31, 1999, is less
than 1.10 to 1.00 but not less than 1.00 to 1.00, then no Default or Event of
Default shall be deemed to have occurred hereunder solely by virtue of such
ratio so long as (i) Unused Availability during the fiscal
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quarter succeeding such period remains at all times no less than $15,000,000
(measured on an average weekly basis) and (ii) the Consolidated Entity's Fixed
Charge Coverage Ratio for such subsequent fiscal quarter is not less than 1.10
to 1.00; provided, further, that the Headquarters Lease Build-Out Expenditure
shall not be included in determining compliance with this Section 8.1 so long
as, if requested by the Agent, the Headquarters Lease is collaterally assigned
to the Agent as additional security for the repayment of the Obligations (the
"Headquarters Lease Assignment") and such assignment is duly filed and recorded
in the appropriate recording office.
8.2 Consolidated Net Worth. As of each of the following dates, the
Borrower shall have an Consolidated Net Worth of not less than the amount set
forth below opposite each such date:
<TABLE>
<CAPTION>
As of last day of fiscal month: Amount
- ----------------------------------------------------------------
<S> <C>
March 1997 $14,282,000
June 1997 $15,739,000
September 1997 $20,144,000
December 1997 $21,420,000
March 1998 $16,920,000
June 1998 $18,831,000
September 1998 and each The sum of (i) seventy-five
December, March, June and percent (75%) of the
September thereafter Borrower's cumulative Net
Income for the period from
December 29, 1997 to such
date and (ii) the Borrower's
Consolidated Net Worth as of
the last day of fiscal March
1997.
</TABLE>
8.3 [Reserved]
8.4 [Reserved]
8.5 [Reserved]
8.6 Capital Expenditures. The Borrower shall not make payments for
Capital Expenditures during any fiscal year in excess of $6,000,000; provided
that (i) the aggregate amount of payments for Capital Expenditures permitted
under Sections 8.20(b)(ii) and 8.20(c) hereof shall not be included in
determining compliance with this Section 8.6 and (ii) the Headquarters Lease
Build-Out Expenditure shall not be included in determining compliance with this
Section 8.6 so long as, if
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requested by the Agent, the Headquarters Lease is collaterally assigned to the
Agent as additional security for the repayment of the Obligations and such
assignment is duly filed and recorded in the appropriate recording office. To
the extent that the Borrower does not use all or any portion of the amounts
allowed for payments for Capital Expenditures under this Section 8.6 during any
fiscal year, it may be carried forward to the immediately following fiscal year
and used for Capital Expenditures during such immediately following fiscal year.
The Borrower shall not make any Capital Expenditures that are not directly
related to the businesses conducted on the Closing Date by the Borrower.
8.7 Additional Indebtedness. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, incur, create, assume
or suffer to exist any Indebtedness other than:
(a) Indebtedness arising under this Credit Agreement and the other
Credit Documents;
(b) Indebtedness under the Senior Subordinated Notes and the
Indenture;
(c) Indebtedness under Interest Rate Agreements and Lumber Hedging
Agreements, in each case the terms and conditions of which are satisfactory to
the Agent, including, with respect to each Lumber Hedging Agreement, the
matching of term and notional amount thereof with an actual written
price/purchase commitment entered into between Borrower and one of its
customers; provided that the number of Lumber Hedging Agreements outstanding at
any one time shall not exceed 120;
(d) Indebtedness described on Schedule B and any refinancing of
such Indebtedness; provided that the aggregate principal amount of such
Indebtedness is not increased and such refinancing is on terms and conditions no
more restrictive than the terms and conditions of the Indebtedness being
refinanced; and
(e) other Indebtedness not to exceed $5,000,000 in the aggregate
outstanding at any one time, such Indebtedness to be from parties and to have
terms and conditions satisfactory to the Agent.
8.8 Liens. The Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, mortgage, assign, pledge, transfer,
create, incur, assume, suffer to exist or otherwise permit any Lien or judgment
(whether as a result of a purchase money or title retention transaction, or
other security interest, or otherwise) to exist on any of its property, assets,
revenues or goods, whether real, personal or mixed, whether now owned or
hereafter acquired, except for:
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(a) Liens granted to the Lenders by the Borrower pursuant to any
Credit Document;
(b) Liens listed on Schedule B;
(c) Purchase Money Liens;
(d) Pre-existing Liens on assets acquired pursuant to Section 8.20
hereof, so long as such Liens attach only to the specific assets so acquired;
(e) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, landlords and other similar Liens arising by
operation of law or otherwise, not waived in connection herewith, for amounts
that are not yet due and payable or which are being diligently contested in good
faith by the Borrower by appropriate proceedings;
(f) Attachment or judgment Liens individually or in the aggregate
not in excess of $1,000,000 (exclusive of (i) any amounts that are duly bonded
to the reasonable satisfaction of the Agent or (ii) any amount adequately
covered by insurance as to which the insurance company has not disclaimed or
disputed in writing its obligations for coverage);
(g) Liens for taxes, assessments or other governmental charges not
yet due and payable or which are being diligently contested in good faith by the
Borrower by appropriate proceedings, provided that in any such case an adequate
reserve is being maintained by the Borrower for the payment of same;
(h) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment insurance
not to exceed an aggregate of $1,000,000 outstanding at any one time;
(i) Deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds, utility payments and other obligations of like nature arising
in the ordinary course of business not to exceed an aggregate of $2,000,000
outstanding at any one time;
(j) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially detract
from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or any Subsidiary; and
(k) Liens on cash or securities maintained in any Lumber Hedging
Account in favor of the financial institution at which such account is
maintained; provided that the amount of such cash
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and the market value of such securities are acceptable to the Agent; and
(l) Extensions and renewals of the foregoing permitted Liens;
provided that the aggregate amount of such extended or renewed Liens is not
increased and such extended or renewed Liens are on terms and conditions no more
restrictive than the terms and conditions of the Liens being extended or
renewed.
8.9 Sale of Assets. The Borrower shall not, and shall not permit any
of its Subsidiaries to, without the prior consent of the Agent, directly or
indirectly, sell, lease, assign, transfer or otherwise dispose of any assets
other than (i) Accounts sold by the Borrower pursuant to that certain Wickes
Lumber Charge Plan Retail Accounts Merchant Agreement, dated April 15, 1988, as
amended through the date hereof, between the Borrower and WCI Financial Corp. or
any replacement agreement in form and substance reasonably satisfactory to the
Agent, (ii) Inventory in the ordinary course of business, (iii) individual items
of property with a fair market value of less than $500,000 in the aggregate
during any fiscal year and (iv) obsolete or worn out property disposed of in the
ordinary course of business, so long as, with respect to subsections (i) through
(iv) above, (a) all such dispositions are for fair value, (b) all cash received
for all such dispositions is used to repay the Revolving Loans, and (c) the
aggregate consideration for such dispositions is paid in full in cash at the
time of disposition, provided that, with respect to any such disposition of
assets otherwise permitted hereunder (other than dispositions pursuant to
subsections (i) or (ii) above), the Borrower may receive a promissory note from
the purchaser thereof in an amount equal to no greater than twenty percent (20%)
of the aggregate consideration for such disposition so long as (i) such
promissory note has a final maturity date no greater than two years from the
date of such disposition, (ii) each such promissory note is pledged to the Agent
as additional security for the repayment of the Obligations, and (iii) the
outstanding aggregate principal amount of all such promissory notes received by
the Borrower pursuant to this Section 8.9 does not at any time exceed
$1,000,000. Notwithstanding the foregoing, the Borrower may sell the Real Estate
and other capital assets listed on Schedule 8.9 (subject to clauses (a) and (c)
above); provided that, the Net Cash Proceeds thereof are used by the Borrower to
either (i) make Permitted Acquisitions as provided in Section 8.20(c), (ii)
acquire other capital assets to be used by the Borrower in the conduct of the
Borrower's business as presently conducted or (iii) repay the Revolving Loans.
8.10 Corporate Changes. The Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, merge, consolidate or
otherwise alter or modify the Borrower's or any Subsidiary's Governing Documents
(unless such alteration or modification would not have a Material Adverse
Effect), corporate names, mailing addresses, principal places of business,
structure, status or existence, or enter into or engage in any
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operation or activity materially different from that presently being conducted
by the Borrower or Subsidiary; provided that, with the consent of the Agent (who
shall notify each Lender), any Subsidiary may be merged or consolidated with or
into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or any wholly-owned Subsidiary; provided, further, that,
upon 30 days prior written notice to the Agent and the prior execution, filing
and delivery to the Agent of any financing statements or other instruments or
documents required by the Agent to evidence such change and to ensure the
continued enforceability of the Credit Documents and the continued perfection of
the Agent's security interest in the Collateral, the Borrower may change its
corporate name from "Wickes Lumber Company" to "Wickes Inc."
8.11 Guaranties. The Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, assume, guaranty, endorse, or
otherwise become liable upon the obligations of any other Person, including,
without limitation, any Subsidiary or Affiliate of the Borrower, except (i) by
the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, (ii) by the giving of
indemnities in connection with the sale of Inventory or other asset dispositions
permitted hereunder and (iii) in connection with the incurrence of Indebtedness
permitted to be incurred pursuant to Section 8.7 hereof.
8.12 Restricted Payments. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, (a) declare or pay
any dividend (other than dividends payable solely in common stock of the
Borrower) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of capital stock of
the Borrower or any warrants, options or rights to purchase any such capital
stock, whether now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of the Borrower or any of its Subsidiaries except that any
Subsidiary may declare and pay dividends to the Borrower or any other
subsidiary; or (b) make any optional payment or prepayment on or redemption
(including, without limitation, by making payments to a sinking or analogous
fund) or repurchase of any Indebtedness (other than Indebtedness pursuant to
this Credit Agreement); provided that any Subsidiary may make payments on
account of Indebtedness owing to the Borrower or any other Subsidiary.
8.13 Investments. The Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, make any Investment in any
Person, whether in cash, securities, or other property of any kind including,
without limitation, any Subsidiary or Affiliate of the Borrower, other than:
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(a) Advances or loans made in the ordinary course of business to
employees of the Borrower or its Subsidiaries for travel, entertainment,
relocation and similar expenses not to exceed $750,000 in the aggregate
outstanding at any one time;
(b) Existing Advances;
(c) Cash Equivalents;
(d) Interest-bearing demand or time deposits (including
certificates of deposit) which are insured by the Federal Deposit Insurance
Corporation ("FDIC") or a similar federal insurance program; provided, however,
that the Borrower may, in the ordinary course of its business, maintain in their
disbursement accounts from time to time amounts in excess of then applicable
FDIC or other program insurance limits;
(e) Promissory notes received by the Borrower as provided in
Section 8.9;
(f) Such other Investments not to exceed $2,500,000 in the
aggregate as the Agent may approve in writing in its sole discretion; and
(g) to the extent permitted under Section 8.20(c) hereof.
8.14 Affiliate Transactions. (a) The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, enter into any
transaction with (including, without limitation, the purchase, sale or exchange
of property or the rendering of any service to) any Subsidiary or Affiliate of
the Borrower ("Affiliate Transaction") except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business, as the case may be, and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than could be obtained in a
comparable arm's-length transaction with an unaffiliated Person (the "Fairness
Conditions").
(b) Notwithstanding Section 8.14(a) above, the Borrower shall not,
and shall not permit any of its Subsidiaries to, enter into Affiliate
Transactions with aggregate consideration in excess of $250,000 in any fiscal
year after fiscal year 1993 unless a majority of the members of the Board of
Directors of the Borrower who are not officers, employees or Affiliates of the
Borrower or any of its Subsidiaries shall have determined, prior to the time the
Borrower or such Subsidiary, as the case may be, enters into such Affiliate
Transactions, that such Affiliate Transactions satisfy the Fairness Conditions
and such determination is evidenced by a resolution of the Board of Directors;
provided that, the Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into Affiliate Transactions with aggregate consideration
in excess of $500,000 in any fiscal year after fiscal year 1993 unless, in
addition to
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the requirements set forth above, the Borrower delivers to the Agent, at least
thirty (30) days prior to the time the Borrower or such Subsidiary enters into
such Affiliate Transactions, a detailed summary of all material terms,
provisions and conditions thereof.
8.15 Prohibited Transactions Under ERISA. The Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly:
(a) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction which could result in a civil penalty or excise tax
described in Sections 406 of ERISA or 4975 of the Internal Revenue Code for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the DOL;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the Internal Revenue Code), whether or not waived;
(c) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
(d) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan where such event would result in any liability of the Borrower, any
Subsidiary or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any ERISA Affiliate to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any ERISA Affiliate to fail, to pay any
required installment or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or other
payment;
(g) amend, or permit any ERISA Affiliate to amend, a Plan
resulting in an increase in current liability for the plan year such that either
of the Borrower, any Subsidiary or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the Internal Revenue Code;
(h) withdraw, or permit any ERISA Affiliate to withdraw, from any
Multiemployer Plan where such withdrawal may result in any liability of any such
entity under Title IV of ERISA; or
(i) allow any representation made in Section 6.15 to be untrue at
any time during the term of this Credit Agreement.
8.16 Additional Bank Accounts. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or
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indirectly, open, maintain or otherwise have any checking, savings or other
accounts at any bank or other financial institution, or any other account where
money is or may be deposited or maintained with any Person, other than the
Disbursement Account, Lumber Hedging Accounts and the Blocked Accounts and other
accounts set forth on Schedule B. Notwithstanding the foregoing, until such time
as the Agent otherwise directs, the Borrower may open and maintain an additional
bank account (the "Contingency Account") to be used exclusively for funding the
emergency cash needs of its facilities; provided that (i) no single facility
receive in excess of $1,000 from the Contingency Account in any given month and
(ii) no group of Facilities receive in excess of $10,000 in the aggregate from
the Contingency Account in any given month.
8.17 Excess Cash. The Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, maintain in the aggregate in all
of the checking, savings or other accounts (other than the Disbursement Account,
the Blocked Accounts, the BT Account and the payroll accounts) of the Borrower
or elsewhere, total cash balances and investments permitted by Section 8.14
hereof in excess of $150,000 at any time during which any Revolving Loans are
outstanding hereunder, of which amount no more than $5,000 may be maintained in
the Contingency Account at any time.
8.18 Material Amendments of Material Contracts. The Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
without the prior written consent of the Agent, amend, modify, cancel or
terminate or permit the amendment, modification, cancellation or termination of,
any of the Material Contracts, unless such amendment, modification, cancellation
or termination would not have a Material Adverse Effect.
8.19 Additional Negative Pledges. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective, or permit any of the
Subsidiaries to create or otherwise cause or suffer to exist or become
effective, directly or indirectly, (i) any prohibition or restriction (including
any agreement to provide equal and ratable security to any other Person in the
event a Lien is granted to or for the benefit of the Agent and the Lenders) on
the creation or existence of any Lien upon the assets of the Borrower or the
Subsidiaries or (ii) any contractual obligation which may restrict or inhibit
the Agent's rights or ability to sell or otherwise dispose of the Collateral or
any part thereof after the occurrence of an Event of Default.
8.20 Additional Subsidiaries; Acquisitions. (a) The Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
form or acquire any new Subsidiaries.
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(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, acquire any assets of any Person except:
(i) The Borrower may acquire Inventory, Equipment, supplies
and related items in the ordinary course of business and may make Capital
Expenditures as permitted by Section 8.6 hereof; and
(ii) with the prior written consent of the Agent and the
Required Lenders, the Borrower may acquire building material centers;
provided that upon the consummation of any such acquisition, the Agent
must have a perfected security interest in any Accounts, Inventory and
Equipment so acquired.
(c) Notwithstanding Section 8.20(a) and 8.20(b) hereof, but
subject to all of the other provisions of this Credit Agreement and the other
Credit Documents (including, without limitation, Section 7.4 hereof), the
Borrower may from time to time make Permitted Acquisitions with an aggregate
purchase price not to exceed from the Effective Date through the Expiration Date
the amount of the Acquisition Basket; provided that any such assets consisting
of Accounts, Inventory, Equipment, Intangible or capital stock, notes or other
securities are not subject to any Liens and are pledged to the Agent for the
benefit of the Lenders and the Issuing Bank as additional security for the
repayment of the Obligations. At the option of the Borrower, to the extent that
assets acquired by the Borrower pursuant to this Section 8.20(c) consist of or
include Eligible Accounts or Eligible Inventory (as determined by the Agent
after completion of an audit satisfactory to the Agent), the dollar amount of
such Eligible Accounts and Eligible Inventory (after application of applicable
advance rates) may be added to the Borrowing Base (up to a maximum Borrowing
Base at any time of no greater than the Total Commitments) (such added amount,
the "Incremental Borrowing Base Amount") and the Incremental Borrowing Base
Amount shall be subtracted from the purchase price of such assets in calculating
the Borrower's compliance with the Acquisition Basket.
8.21 Hedging Transactions. The Borrower shall not, and shall not
permit any of its Subsidiaries to, engage in any speculative hedging or similar
transactions (other than Interest Rate Agreements and Lumber Hedging Agreements,
to the extent otherwise permitted hereunder).
8.22 Activities of Subsidiaries.
(a) LTC. The Borrower shall not permit LTC to engage in any
business or activity (including, without limitation, the incurrence of
Indebtedness or trade liabilities) with any Person (other than the Borrower in
connection with the LTC Sublicense Agreement).
(b) GLC. The Borrower shall not permit GLC to engage in any
business or activity (including, without limitation, the
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incurrence of any Indebtedness or the encumbrance of any of its assets) other
than the operation of building material supply centers (and activities
reasonably related thereto) and those activities contemplated by the Consignment
Agreement.
ARTICLE 9. Events of Default and Remedies
9.1 Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) failure of the Borrower to pay (i) any interest, Fees,
Expenses or other Obligations (other than principal) within three (3) Business
Days of when due, in each case whether at stated maturity, by acceleration, or
otherwise, or (ii) any principal when due, whether at stated maturity, by
acceleration or otherwise;
(b) failure of the Borrower to perform, comply with or observe any
term, covenant or agreement applicable to it contained in any Pledge Agreement,
the Security Agreement (other than in subsections 4(c), (f), (h), (j) and (l)
thereof) or in Sections 7.2(a), 7.3, 7.4 or 7.10 or Article 8 hereof;
(c) any representation or warranty made or deemed to be made by
the Borrower in this Credit Agreement or in any other Credit Document (and in
any statement or certificate given in writing under this Credit Agreement or any
other Credit Document), shall be false or misleading in any material respect
when made or deemed to be made;
(d) failure of the Borrower to comply with any provisions
contained in this Credit Agreement or any other Credit Document, other than as
set forth in Section 9.1(a), 9.1(b) and 9.1(c), and such failure shall continue
without cure for a period of thirty (30) consecutive days after notice thereof
is given to the Borrower by the Agent or the Majority Lenders;
(e) dissolution, liquidation, winding up or cessation of the
Borrower's businesses, or the failure of the Borrower to meet its debts as they
mature, or the calling of one or more meetings of the Borrower's major creditors
for purposes of obtaining a moratorium on payment or a compromise of the
Borrower's debts;
(f) the insolvency of any Credit Party or the commencement by or
against the Borrower of any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceedings under any federal or state law and, in the
event any such proceeding is commenced against the Borrower, such proceeding is
not dismissed within thirty (30) days;
(g) the occurrence of a Change of Control;
(h) the occurrence of a default or event of default (in each case
which shall continue beyond the expiration of any
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applicable grace periods) which permits, or could permit, the acceleration of
the maturity of, any note, agreement or instrument evidencing any other
Indebtedness of the Borrower or any of the Subsidiaries, and the aggregate
principal amount of all such Indebtedness with respect to which a default or an
event of default has occurred, or the maturity of which is permitted to be
accelerated, exceeds $2,500,000; or
(i) any material covenant, agreement or obligation of any party
contained in or evidenced by any of the Credit Documents shall cease to be
enforceable in accordance with its terms, or any party (other than the Agent,
the Syndication Agent or the Lenders) to any Credit Document shall deny or
disaffirm its obligations under any of the Credit Documents, or any Credit
Document shall be cancelled, terminated, revoked or rescinded without the
express prior written consent of the Agent, or any action or proceeding shall
have been commenced by any Person (other than the Agent, the Syndication Agent
or any Lender) seeking to cancel, revoke, rescind or disaffirm the obligations
of any party to any Credit Document, or any court or other Governmental
Authority shall issue a judgment, order, decree or ruling to the effect that any
of the obligations of any party to any Credit Document are illegal, invalid or
unenforceable.
9.2 Acceleration and Cash Collateralization. Upon the occurrence and
during the continuance of an Event of Default, the Agent may take any or all of
the following actions, without prejudice to the rights of the Agent or any
Lender to enforce its claims against the Borrower:
(a) Acceleration. Upon the written request of the Majority
Lenders, and by delivery of written notice to the Borrower from the Agent, all
Obligations shall be declared to be immediately due and payable (except with
respect to any Event of Default set forth in Section 9.1(f) hereof, in which
case all Obligations shall automatically become immediately due and payable
without the necessity of any request of the Majority Lenders or notice or other
demand to the Borrower) without presentment, demand, protest or any other action
or obligation of the Agent or any Lender.
(b) Termination of Commitments. Upon the written request of the
Majority Lenders, and by delivery of written notice to the Borrower from the
Agent, the Commitments of all the Lenders shall be immediately terminated and,
at all times thereafter, all Revolving Loans made by any Lender pursuant to this
Credit Agreement shall be at such Lender's sole discretion, unless such Event of
Default is waived in accordance with Section 11.10.
(c) Cash Collateralization. On demand of the Agent or the
Majority Lenders the Borrower shall immediately deposit with the Agent for each
Letter of Credit then outstanding, cash or Cash Equivalents in an amount equal
to 110% of the greatest amount drawable thereunder.
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9.3 Rescission of Acceleration. After acceleration of the maturity
of the Revolving Loans, if the Borrower pays all accrued interest and all
principal due (other than by reason of the acceleration) and all Defaults and
Events of Default are otherwise waived in accordance with Section 11.10, the
Majority Lenders may elect in their sole discretion, to rescind the acceleration
and return any cash collateral. (This Section is intended only to bind all of
the Lenders to a decision of the Majority Lenders and not to confer any right on
the Borrower, even if the described conditions for the Majority Lenders'
election may be met.)
9.4 Remedies. Upon the occurrence and during the continuance of an
Event of Default, the Agent may do any or all of the following:
(a) remove all documents, instruments, files and records
(including the copying of any computer records) relating to the Accounts or use
(at the expense of the Borrower) such supplies or space of the Borrower at the
Borrower's place of business necessary to properly administer and collect the
Accounts thereon;
(b) accelerate or extend the time of payment, compromise, issue
credits, or bring suit on the Accounts (in the name of the Borrower or the
Lenders) and otherwise administer and collect the Accounts;
(c) sell, assign and deliver the Accounts and any returned,
reclaimed or repossessed merchandise, with or without advertisement, at public
or private sale, for cash, on credit or otherwise; and
(d) foreclose the security interests created pursuant to the
Credit Documents by any available judicial procedure, or take possession of any
or all of the Collateral without judicial process and enter any premises where
any Collateral may be located for the purpose of taking possession of or
removing the same.
Any Lender may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by the Borrower. If notice of
intended disposition of any Collateral is required by law, it is agreed that
five (5) Business Days notice shall constitute reasonable notification. The
Borrower will assemble the Collateral and make it available to the Agent at such
locations as the Agent may specify, whether at the premises of the Borrower or
elsewhere, and will make available to the Agent the premises and facilities of
the Borrower for the purpose of the Agent's taking possession of, removing or
putting the Collateral in saleable form.
9.5 Right of Setoff. In addition to and not in limitation of all
rights of offset that any Lender or the Issuing Bank may
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have under applicable law, upon the occurrence of any Event of Default, and
whether or not any Lender or the Issuing Bank has made any demand or the
Obligations of any Credit Party have matured, each Lender and the Issuing Bank
shall have the right to appropriate and apply to the payment of the Obligations
of such Credit Party all deposits and other obligations then or thereafter owing
by such Lender or the Issuing Bank to such Credit Party. Each Lender or the
Issuing Bank exercising such rights shall notify the Agent thereof and any
amount received as a result of the exercise of such rights shall be shared in
accordance with Section 4.12.
9.6 License for Use of Software and Other Intellectual Property.
Unless expressly prohibited by the licensor thereof, if any, the Agent is hereby
granted a license to use all computer software programs, data bases, processes
and materials used by the Borrower in connection with its businesses or in
connection with the Collateral. The Agent agrees not to use any such license
prior to the occurrence of an Event of Default without giving the Borrower prior
notice.
9.7 Deficiencies; Remedies Cumulative. The cash proceeds resulting
from the Agent's exercise of any of the foregoing rights shall be applied by the
Agent and the Lenders in accordance with Section 2.10. The Borrower shall remain
liable to the Agent and the Lenders for any deficiencies, and the Agent and the
Lenders in turn agree to remit to the Borrower or its successors or assigns, any
surplus resulting therefrom. The foregoing remedies are not intended to be
exhaustive and the full or partial exercise of any of them shall not preclude
the full or partial exercise of any other available remedy under the Credit
Agreement, under any other Credit Document, at equity or at law.
ARTICLE 10. The Agent
10.1 Appointment of Agent.
(a) Each Lender hereby designates BTCC as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder of any
Revolving Note or participation in any Letter of Credit by the acceptance of a
Revolving Note or participation shall be deemed irrevocably to authorize, the
Agent to take such action on its behalf under the provisions of this Credit
Agreement and the Revolving Notes and any other instruments and agreements
referred to herein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental there- to. The Agent shall hold all Collateral and all payments of
principal, interest, Fees, charges and Expenses received pursuant to this Credit
Agreement or any other Credit Document for the benefit of the Lenders to be
distributed as provided herein. The Agent may perform any of its duties
hereunder by or through its agents or employees.
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(b) The provisions of this Article 10 are solely for the benefit
of the Agent and the Lenders, and none of the Credit Parties shall have any
rights as a third party beneficiary of any of the provisions hereof (other than
Section 10.9). In performing its functions and duties under this Agreement, the
Agent shall act solely as agent of the Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship of agency or
trust with or for any Credit Party.
10.2 Nature of Duties of Agent. The Agent shall have no duties or
responsibilities except those expressly set forth in this Credit Agreement and
the other Credit Documents. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its or their
gross negligence or willful misconduct. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
this Credit Agreement or the other Credit Documents a fiduciary relationship in
respect of any Lender; and nothing in this Credit Agreement or the other Credit
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Credit Agreement or the
other Credit Documents except as expressly set forth herein or therein.
10.3 Lack of Reliance on Agent.
(a) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial or other condition and
affairs of each Credit Party in connection with the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the creditworthiness
of each Credit Party, and, except as expressly provided in this Agreement, the
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Revolving
Loans or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement or the
Revolving Notes or the financial or other condition of any Credit Party. The
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Credit Agreement or the Revolving Notes, or the financial condition of any
Credit Party, or the existence or possible existence of any Default or
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Event of Default, unless specifically requested to do so in writing by any
Lender.
10.4 Certain Rights of the Agent. The Agent shall have the right to
request instructions from the Majority Lenders at any time. If the Agent shall
request instructions from the Majority Lenders with respect to any act or action
(including the failure to act) in connection with this Credit Agreement, the
Agent shall be entitled to refrain from such act or taking such action unless
and until the Agent shall have received instructions from the Majority Lenders,
and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Majority Lenders.
10.5 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person. The Agent may consult with legal counsel (including
counsel for the Borrower with respect to matters concerning the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
10.6 Indemnification of Agent. To the extent the Agent is not
reimbursed and indemnified by the Borrower, each Lender will reimburse and
indemnify the Agent, in proportion to its respective Commitment, for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind or nature whatsoever (including all Expenses) which
may be imposed on, incurred by or asserted against the Agent in performing its
duties hereunder, in any way relating to or arising out of this Agreement,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct.
10.7 The Agent in its Individual Capacity. With respect to its
obligation to lend under this Credit Agreement, the Revolving Loans made by it
and the Revolving Notes issued to it, and its participation in Letters of Credit
issued hereunder, the Agent shall have the same rights and powers hereunder as
any other Lender or holder of a Revolving Note or participation interests and
may exercise the same as though it was not performing the duties specified
herein; and the terms "Lenders,"
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"Majority Lenders," "holders of Revolving Notes," or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, acquire
equity interests in, and generally engage in any kind of banking, trust,
financial advisory or other business with the Borrower or any Affiliate of the
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from the Borrower for services in connection
with this Credit Agreement and otherwise without having to account for the same
to the Lenders.
10.8 Holders of Notes. The Agent may deem and treat the payee of any
Revolving Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof shall have been filed with
the Agent. Any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the holder of any
Revolving Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Revolving Note or of any Revolving Note or
Revolving Notes issued in exchange therefor.
10.9 Successor Agent.
(a) The Agent may, upon five (5) Business Days' notice to the
Lenders and the Borrower, resign at any time (effective upon the appointment of
a successor Agent pursuant to the provisions of this Section 10.9) by giving
written notice thereof to the Lenders and the Borrower. Such resignation of the
Agent shall also operate as a resignation of Bankers Trust Company as Issuing
Bank. Upon any such resignation, the Majority Lenders shall have the right, upon
five (5) days' notice and approval by the Borrower (which approval shall not be
unreasonably withheld), to appoint a successor Agent which shall also serve as
successor Issuing Bank. If no successor Agent (i) shall have been so appointed
by the Majority Lenders, and (ii) shall have accepted such appointment, within
thirty (30) days after the retiring Agent's giving of notice of resignation,
then, upon five (5) days' notice, the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall also serve as successor Issuing
Bank.
(b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Credit Agreement. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this Credit
Agreement.
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(c) In the event of a material breach by the Agent of its duties
hereunder, the Agent may be removed by the Majority Lenders (other than the
Agent in its individual capacity and without giving effect to any Revolving
Loans or Commitments made by the Agent in its individual capacity) for cause and
the provisions of this Section 10.9 shall apply to the appointment of a
successor Agent. Removal of BT Commercial Corporation as Agent shall also
operate as a removal of Bankers Trust Company as Issuing Bank.
10.10 Collateral Matters.
(a) Each Lender authorizes and directs the Agent to enter into the
Collateral Documents for the benefit of the Lenders. Each Lender hereby agrees,
and each holder of any Revolving Note by the acceptance thereof will be deemed
to agree, that, except as otherwise set forth herein, any action taken by the
Majority Lenders in accordance with the provisions of this Credit Agreement or
the Collateral Documents, and the exercise by the Majority Lenders of the powers
set forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Lenders. The
Agent is hereby authorized on behalf of all of the Lenders, without the
necessity of any notice to or further consent from any Lender, from time to time
prior to an Event of Default, to take any action with respect to any Collateral
or Collateral Documents which may be necessary to perfect and maintain perfected
the security interest in and liens upon the Collateral granted pursuant to the
Collateral Documents.
(b) The Lenders hereby authorize the Agent, at its option and in
its discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments of all Lenders and payment
and satisfaction of all of the Obligations at any time arising under or in
respect of this Credit Agreement or the Credit Documents or the transactions
contemplated hereby or thereby, (ii) constituting property being sold or
disposed of upon receipt of the proceeds of such sale by the Agent if the
Borrower certifies to the Agent that the sale or disposition is made in
compliance with Section 8.9 hereof (and the Agent may rely conclusively on any
such certificate, without further inquiry) or (iii) if approved, authorized or
ratified in writing by the Majority Lenders, unless such release is required to
be approved by all of the Lenders hereunder. Upon request by the Agent at any
time, the Lenders will confirm in writing the Agent's authority to release
particular types or items of Collateral pursuant to this Section 10.10.
(c) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Credit Agree- ment, or consented to in
writing by the Majority Lenders or all of the Lenders, as applicable, and upon
at least five (5) Business Days' prior written request by the Borrower, the
Agent shall (and is hereby irrevocably authorized by the Lenders to)
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execute such documents as may be necessary to evidence the release of the Liens
granted to the Agent for the benefit of the Lenders herein or pursuant hereto
upon the Collateral that was sold or transferred; provided 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 upon (or obligations of the Borrower or any
Subsidiary in respect of) all interests retained by the Borrower or any
Subsidiary, including (without limitation) the proceeds of the sale, all of
which shall continue to constitute part of the Collateral. In the event of any
sale or transfer of Collateral, or any foreclosure with respect to any of the
Collateral, the Agent shall be authorized to deduct all of the Expenses
reasonably incurred by the Agent from the proceeds of any such sale, transfer or
foreclosure.
(d) The Agent shall have no obligation whatsoever to the Lenders
or to any other Person to assure that the Collateral exists or is owned by the
Borrower or any Subsidiary or is cared for, protected or insured or that the
Liens granted to the Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or to continue exercising at
all or in any manner or under any duty of care, disclosure or fidelity any of
the rights, authorities and powers granted or available to the Agent in this
Section 10.10 or in any of the Collateral 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 as one of the
Lenders and that the Agent shall have no duty or liability whatsoever to the
Lenders, except for its gross negligence or willful misconduct.
10.11 Actions with Respect to Defaults. In addition to the Agent's
right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such action with respect to a Default or Event
of Default as shall be directed by the Majority Lenders; provided that until the
Agent shall have received such directions, 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 and in the best
interests of the Lenders.
10.12 Delivery of Information. The Agent shall not be required to
deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by the Agent from the
Borrower, any Subsidiary, the Majority Lenders, any Lender or any other Person
under or in connection with this Credit Agreement or any other Credit Document
except (i) as specifically provided in this
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Credit Agreement or any other Credit Document and (ii) as specifically requested
from time to time in writing by any Lender with respect to a specific document,
instrument, notice or other written communication received by and in the
possession of the Agent at the time of receipt of such request and then only in
accordance with such specific request.
10.13 Syndication Agent. The Borrower, the Agent, the Issuing Bank
and each Lender acknowledge that, other than any rights expressly reserved to
the Syndication Agent under this Credit Agreement, the Syndication Agent (in
such capacity and not in its capacity as a Lender) has no obligations hereunder
and shall not be responsible or accountable to any other party hereto for any
action or failure to act hereunder.
ARTICLE 11. Miscellaneous
11.1 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO WHICH IT
IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON- EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE
BORROWER AT ITS ADDRESS SET FORTH IN SECTION 11.5 OR AT SUCH OTHER ADDRESS OF
WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION;
(e) WAIVES THE RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR
CROSS-CLAIM IN RESPECT OF, AND ALL STATUTES OF LIMITATIONS WHICH MAY BE RELEVANT
TO, SUCH ACTION OR PROCEEDING; AND
(f) WAIVES DUE DILIGENCE, DEMAND, PRESENTMENT AND PROTEST AND ANY
NOTICES THEREOF AS WELL AS NOTICE OF NONPAYMENT.
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11.2 JURY TRIAL. THE BORROWER, THE AGENT, THE SYNDICATION AGENT,
THE ISSUING BANK AND THE LENDERS EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS CREDIT AGREEMENT, THE CREDIT
DOCUMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
11.3 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS CREDIT AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
11.4 Delays; Partial Exercise of Remedies. No delay or omission of
the Agent, the Issuing Bank or the Lenders to exercise any right or remedy
hereunder, whether before or after the happening of any Event of Default, shall
impair any such right or shall operate as a waiver thereof or as a waiver of any
such Event of Default. No single or partial exercise by the Agent, the Issuing
Bank or the Lenders of any right or remedy shall preclude any other or further
exercise thereof, or preclude any other right or remedy.
11.5 Notices. Except as otherwise provided herein, all notices and
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to the Agent, the Syndication Agent or any of the
Lenders, then to BT Commercial Corporation, 14 Wall Street, New York, NY 10005,
Attention: Credit Department, Bruce Addison, if to the Issuing Bank, then to
Bankers Trust Company, 14 Wall Street, New York, NY 10005, Attention: Bruce
Addison, and if to the Borrower, then to the Borrower at 706 N. Deerpath Drive,
Vernon Hills, Illinois 60061, Attention: Chief Financial Officer, with a copy to
Kirschner, Main, Graham, Tanner & Demont, One Independent Drive, Suite 2000,
Jacksonville, Florida 32201, Attention: Kenneth M. Kirschner, or by facsimile
transmission, promptly confirmed in writing sent by first class mail, if to the
Agent, the Syndication Agent or any of the Lenders, at (212) 618-2640, and if to
the Borrower at (847) 367-3750, with a copy to Kirschner, Main, Graham, Tanner &
Demont at (904) 358-2199, Attention: Kenneth M. Kirschner, or, in any such case,
to another location designated in accordance with this Section 11.5. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail or by overnight delivery service, when received at the above
stated addresses or when delivery is refused and (ii) if sent by facsimile
transmission, when receipt of such transmission is acknowledged.
11.6 Assignability.
(a) The Borrower shall not have the right to assign this Credit
Agreement or any interest therein except with the prior written consent of the
Agent and each Lender.
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(b) Any Lender may make, carry or transfer Revolving Loans at, to
or for the account of, any of its branch offices or the office of an Affiliate
of such Lender except to the extent such transfer would result in increased
costs to the Borrower.
(c) A Lender may, with the consent of the Agent and with the
consent of the Borrower (which may not be unreasonably withheld), assign to one
or more banks or other financial institutions all or a portion of its rights and
obligations under this Credit Agreement and the Revolving Notes; provided that
(i) for each such assignment, the parties thereto shall execute and deliver to
the Agent, for its acceptance and recording in the Register (as defined below),
an Assignment and Assumption Agreement, together with any Revolving Note or
Revolving Notes subject to such assignment and a processing and recordation fee
of $2,500 and (ii) no such assignment shall be for less than $5,000,000 of a
Lender's Commitment, unless it is to a then- current holder of a Revolving Note.
Upon execution and delivery of the Assignment and Assumption Agreement to the
Agent, from and after the date specified as the effective date in the Assignment
and Assumption Agreement (the "Acceptance Date"), (x) the assignee thereunder
shall be a party hereto, and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Assumption
Agreement, such assignee shall have the rights and obligations of a Lender
hereunder and (y) the assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Assumption Agreement, relinquish its rights (other than any rights it may have
pursuant to Section 11.8 hereof which will survive) and be released from its
obligations under this Credit Agreement (and, in the case of an Assignment and
Assumption Agreement covering all or the remaining portion of an assigning
Lender's rights and obligations under this Credit Agreement, such Lender shall
cease to be a party hereto).
(d) By executing and delivering an Assignment and Assumption
Agreement, the assignee thereunder confirms and agrees as follows: (i) other
than as provided in such Assignment and Assumption Agreement, the 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 Credit Agreement, the
Revolving Notes or any other instrument or document furnished pursuant hereto,
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Credit Parties or the performance or observance by the Borrower or any
other Credit Parties of any of its obligations under this Credit Agreement or
any other instru- ment or document furnished pursuant hereto, (iii) such
assignee confirms that it has received a copy of this Credit Agreement, together
with copies of the Financial Statements referred to in
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Section 7.1 hereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Assumption Agreement, (iv) such assignee will, 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 Credit 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 Credit Agreement as are delegated to the Agent by the terms hereof,
together with such powers 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 Credit Agreement are required to be
performed by it as a Lender.
(e) The Agent shall maintain at its address referred to in Section
11.5 hereof a copy of each Assignment and Assumption Agreement delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the Revolving Loans
owing to, each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register and copies of each Assignment and Assumption shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Assumption Agreement
executed by an assigning Lender, together with the Revolving Note or Revolving
Notes subject to such assignment, the Agent shall, if such Assignment and
Assumption Agreement has been completed and is in substantially the form of
Exhibit F hereto, (i) accept such Assignment and Assumption Agreement, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Borrower. Within five (5) Business Days after its receipt
of such notice, the Borrower shall execute and deliver to the Agent in exchange
for the surrendered Revolving Note or Revolving Notes a new Revolving Note or
Revolving Notes to the order of the assignee in an amount equal to the
Commitment or Commitments assumed by it pursuant to such Assignment and
Assumption Agreement and, if the assigning Lender has retained a Commitment or
Commitments hereunder, a new Revolving Note or Revolving Notes to the order of
the assigning Lender in an amount equal to the Commitment or Commitments
retained by it hereunder. Such new Revolving Note or Revolving Notes shall
re-evidence the Indebtedness outstanding under the old Revolving Note or
Revolving Notes and shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Revolving Note or Revolving
Notes, and
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shall otherwise be in substantially the form of the Revolving Note or Revolving
Notes subject to such assignments.
(g) Each Lender may sell participations (without the consent of
the Agent, the Borrower or any other Lender) to one or more parties in or to all
or a portion of its rights and obligations under this Credit Agreement
(including, without limitation, all or a portion of its Commitment, the
Revolving Loans owing to it and the Revolving Note or Revolving Notes held by
it); provided that (i) such Lender's obligations under this Credit Agreement
(including, without limitation, its Commitment to the Borrower hereunder) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Revolving Note for all purposes of this Credit
Agreement, (iv) the Borrower, the Agent, and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Credit Agreement and (v) such Lender shall not
transfer, grant, assign or sell any participation under which the participant
shall have rights to approve any amendment or waiver of this Credit Agreement
except to the extent such amendment or waiver would (A) extend the final
maturity date or the date for the payments of any installment of fees or
principal or interest of any Revolving Loans or Letter of Credit reimbursement
obligations in which such participant is participating, (B) reduce the amount of
any installment of principal of the Revolving Loans or Letter of Credit
reimbursement obligations in which such participant is participating, (C) except
as otherwise expressly provided in this Credit Agreement, reduce the interest
rate applicable to the Revolving Loans or Letter of Credit reimbursement
obligations in which such participant is participating, or (D) except as
otherwise expressly provided in this Credit Agreement, reduce any Fees payable
hereunder.
(h) Each Lender agrees that, without the prior written consent of
the Borrower and the Agent, it will not make any assignment hereunder in any
manner or under any circumstances that would require registration or
qualification of, or filings in respect of, any Revolving Loan, Revolving Note
or other Obligation under the securities laws of the United States of America or
of any jurisdiction.
(i) In connection with the efforts of any Lender to assign its
rights or obligations or to participate interests, such Lender may disclose any
information in its possession regarding the Borrower.
11.7 Confidentiality. Each Lender agrees that it will use its
reasonable best efforts not to disclose without the prior consent of the
Borrower (other than to its employees, auditors, or counsel, or to another
Lender if the disclosing Lender or such disclosing Lender's holding or parent
company in its sole
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discretion determines that any such party should have access to such
information) any information with respect to the Borrower or any of its
Subsidiaries, which is furnished pursuant to this Credit Agreement and which is
designated by the Borrower to the Lenders in writing as confidential, provided,
that any Lender may disclose any such information (a) as has become generally
available to the public, (b) as may be required or appropriate in any report,
statement or testimony submitted to any Governmental Authority having or
claiming to have jurisdiction over such Lender, (c) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, (d) in order to comply with any Requirement of Law, and (e) to any
prospective or actual transferee or participant in connection with any
contemplated transfer or participation of any of the Revolving Notes or
Commitment or any interest therein by such Lender.
11.8 Indemnification. The Borrower shall and hereby agrees to
indemnify, defend and hold harmless the Agent, the Syndication Agent, the
Issuing Bank and each of the Lenders and their respective directors, officers,
agents, employees and counsel from and against (a) any and all losses, claims,
damages, liabilities, deficiencies, judgments or expenses incurred by any of
them (except to the extent that it is finally judicially determined to have
resulted from their own gross negligence or willful misconduct) arising out of
or by reason of any litigations, investigations, claims or proceedings which
arise out of or are in any way related to (i) this Credit Agreement or the
transactions contemplated thereby, (ii) the issuance of the Letters of Credit,
(iii) the failure of the Issuing Bank to honor a drawing under any Letter of
Credit, as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority, (iv)
any actual or proposed use by the Borrower of the proceeds of the Revolving
Loans or (v) the Agent's, the Syndication Agent's, the Issuing Bank's or the
Lenders' entering into this Credit Agreement, the other Credit Documents or any
other agreements and documents relating hereto, including, without limitation,
amounts paid in settlement, court costs and the fees and disbursements of
counsel incurred in connection with any such litigation, investigation, claim or
proceeding or any advice rendered in connection with any of the foregoing and
(b) any such losses, claims, damages, liabilities, deficiencies, judgments or
expenses incurred in connection with any remedial or other action taken by the
Borrower or any of the Lenders in connection with compliance by the Borrower or
any of the Subsidiaries, or any of their respective properties, with any
federal, state or local environmental laws, acts, rules, regulations, orders,
directions, ordinances, criteria or guidelines. If and to the extent that the
Obligations of the Borrower hereunder are unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of such Obligations which is permissible under applicable law. The
Borrower's Obligations hereunder shall survive any termination of this
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Credit Agreement and the other Credit Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
their Obligations set forth in this Credit Agreement. In addition, the Borrower
shall, upon demand, pay to the Agent and any Lender all costs and expenses
(including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Agent or such Lender in (i) enforcing or
defending its rights under or in respect of this Credit Agreement, the other
Credit Documents or any other document or instrument now or hereafter executed
and delivered in connection herewith, (ii) in collecting the Revolving Loans,
(iii) in foreclosing or otherwise collecting upon the Collateral or any part
thereof and (iv) obtaining any legal, accounting or other advice in connection
with any of the foregoing.
11.9 Entire Agreement; Successors and Assigns. This Credit
Agreement and the other Credit Documents constitute the entire agreement among
the Borrower, the Agent, the Syndication Agent and the Lenders, supersedes any
prior agreements among them, and shall bind and benefit the Borrower and the
Lenders and their respective successors and permitted assigns.
11.10 Amendments and Waivers. No amendment or waiver of any
provision of this Credit Agreement, any part of Schedule B or Schedule C, or any
other Credit Document shall be effective unless in writing and signed by the
Majority Lenders (or by the Agent on their behalf), except that:
(a) the consent of the Required Lenders is required to (i)
increase the advance rates for Eligible Accounts Receivable and Eligible
Inventory above the levels in effect on the Effective Date, or (ii) amend or
waive Sections 8.9, 8.12 or 8.20 or amend Section 9.1 (other than Section 9.1(a)
to the extent covered by Section 11.10(b)(iii) below);
(b) the consent of all the Lenders is required to (i) increase the
Commitments, (ii) reduce the principal of, or interest on, the Revolving Notes,
any Letter of Credit reimbursement obligations or any Fees hereunder (other than
Fees that are exclusively for the account of the Agent or the Issuing Bank),
(iii) postpone any date fixed for any payment in respect of principal of, or
interest on, the Revolving Notes, any Letter of Credit reimbursement obligations
or any Fees hereunder, (iv) change the percentage of the Commitments, or any
minimum requirement necessary for the Lenders or the Majority Lenders to take
any action hereunder, (v) amend or waive Sections 11.10(a) or 11.10(b), or
change the definitions of Majority Lenders or Required Lenders or (vi) except as
otherwise expressly provided in this Credit Agreement, and other than in
connection with the financing, refinancing, sale or other disposition of any
asset of the Borrower permitted under this Credit Agreement, release any Liens
in favor of the Lenders on a material portion of the Collateral;
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(c) the consent of the Agent or the Issuing Bank, as the case may
be, shall be required for any amendment, waiver or consent affecting the rights
or duties of the Agent or the Issuing Bank under any Credit Document, in
addition to the consent of the Lenders otherwise required by this section; and
(d) the Agent may, without the consent of any of the Lenders,
amend Schedule C as provided in the definition of "Qualified Account Debtors."
Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower shall not be required for any amendment, modification or waiver of the
provisions of Article 10 (other than Section 10.9) or any amendment or
modification of Schedule C pursuant to Section 11.10(d) above. The Borrower and
the Lenders hereby authorize the Agent to modify (i) this Credit Agreement by
unilaterally amending or supplementing Annex I to reflect assignments of the
Commitments and (ii) any of the Collateral Documents by unilaterally amending or
supplementing any of the schedules thereto to reflect any addition to, or change
in the status of, any of the Collateral expressly permitted thereunder.
11.11 Nonliability of Agent and Lenders. The relationship between
the Borrower and the Lenders, the Agent and the Syndication Agent shall be
solely that of borrower and lender. None of the Agent, the Syndication Agent or
any Lender shall have any fiduciary responsibilities to the Borrower. None of
the Agent, the Syndication Agent or any Lender undertakes any responsibility to
the Borrower to review or inform the Borrower of any matter in connection with
any phase of the Borrower's business or operations.
11.12 Independent Nature of Lenders' Rights. The amounts payable at
any time hereunder to each Lender under such Lender's Revolving Note or Notes
shall be a separate and independent debt.
11.13 Counterparts. This Credit Agreement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
11.14 Effectiveness. This Credit Agreement shall become effective on
the date on which all of the parties hereto shall have signed a copy hereof
(whether the same or different copies) and shall have delivered the same to the
Agent pursuant to Section 11.5 or, in the case of the Lenders, shall have given
to the Agent written, telecopied or telex notice (actually received) at such
office that the same has been signed and mailed to it.
11.15 Severability. In case any provision in or obligation under
this Credit Agreement or the Revolving Notes or the other Credit Documents shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and
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enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
11.16 Headings Descriptive. The headings of the several sections and
subsections of this Credit Agreement, and the Table of Contents, are inserted
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Credit Agreement.
11.17 Maximum Rate. Notwithstanding anything to the contrary
contained elsewhere in this Credit Agreement or in any other Credit Document,
the Borrower, the Agent and the Lenders hereby agree that all agreements among
them under this Credit Agreement and the other Credit Documents, whether now
existing or hereafter arising and whether written or oral, are expressly limited
so that in no contingency or event whatsoever shall the amount paid, or agreed
to be paid, to the Agent or any Lender for the use, forbearance, or detention of
the money loaned to the Borrower and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance and
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to the Borrower. All sums paid or agreed to be paid to
the Agent or any Lender for the use, forbearance, or detention of the
Obligations and other Indebtedness of the Borrower to the Agent or any Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Indebtedness until payment
in full so that the actual rate of interest on account of all such Indebtedness
does not exceed the Highest Lawful Rate throughout the entire term of such
Indebtedness. The terms and provisions of this Section shall control every other
provision of this Credit Agreement and all agreements among the Borrower, the
Agent and the Lenders.
11.18 Release of Headquarters Lease Assignment. Upon a sale of the
Borrower's Headquarters for Net Cash Proceeds of no less than $6,000,000 (which
proceeds shall be applied as provided in Section 8.9 hereof), the Agent shall
release the Headquarters Lease Assignment. For the avoidance of doubt, for
purposes of determining the amount of Net Cash Proceeds received by the
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Borrower from the sale of the Borrower's Headquarters, the Headquarters Lease
Build-Out Expenditure shall not be deemed an expense incurred in connection with
such sale.
11.19 Existing Agreements Superseded. As set forth in Section 1.4
hereof, the 1996 Credit Agreement is superseded by this Credit Agreement, which
has been executed in renewal, amendment, restatement and modification, but not
in extinguishment of, the obligations under the 1996 Credit Agreement.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
BORROWER:
WICKES LUMBER COMPANY,
a Delaware corporation
By:
------------------------------------
Title:
AGENT:
BT COMMERCIAL CORPORATION,
As Agent
By:
------------------------------------
Vice President
SYNDICATION AGENT:
NATIONSBANK OF GEORGIA, N.A.
As Syndication Agent
By:
------------------------------------
Title:
ISSUING BANK:
BANKERS TRUST COMPANY
By:
------------------------------------
Title:
LENDERS:
BT COMMERCIAL CORPORATION
By:
------------------------------------
Vice President
<PAGE> 104
NATIONSBANK OF GEORGIA, N.A.
By:
------------------------------------
Title:
LASALLE NATIONAL BANK
By:
------------------------------------
Title:
BANKAMERICA BUSINESS CREDIT, INC.
By:
------------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
------------------------------------
Title:
BTM CAPITAL CORPORATION
By:
------------------------------------
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
By:
------------------------------------
Title:
<PAGE> 105
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
BT COMMERCIAL CORPORATION $20,000,000.00
Domestic Lending Office:
BT Commercial Corporation
14 Wall Street
New York, New York 10005
Eurodollar Lending Office:
BT Commercial Corporation
14 Wall Street
New York, New York 10005
Address for Notices:
BT Commercial Corporation
14 Wall Street
New York, New York 10005
Attn: Bruce Addison
Telecopy No: (212) 618-2640
</TABLE>
[CONTINUED]
I-1
<PAGE> 106
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
LASALLE NATIONAL BANK $20,000,000.00
Domestic Lending Office:
LaSalle National Bank
135 S. LaSalle Street
Suite 509
Chicago, IL 60603
Eurodollar Lending Office:
LaSalle National Bank
135 S. LaSalle Street
Suite 509
Chicago, IL 60603
Address for Notices:
LaSalle National Bank
135 S. LaSalle Street
Suite 509
Chicago, IL 60603
Attn: Chris Clifford
Telecopy No.: (312) 904-6450
</TABLE>
[CONTINUED]
I-2
<PAGE> 107
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
THE CIT GROUP/BUSINESS CREDIT, INC. $20,000,000.00
Domestic Lending Office:
The CIT Group/Business Credit, Inc.
900 Ashwood Parkway
Atlanta, GA 30338
Eurodollar Lending Office:
The CIT Group/Business Credit, Inc.
900 Ashwood Parkway
Atlanta, GA 30338
Address for Notices:
The CIT Group/Business Credit, Inc.
900 Ashwood Parkway
Atlanta, GA 30338
Attn: Uri Tooch
Telecopy No.: (770) 551-7899
</TABLE>
[CONTINUED]
I-3
<PAGE> 108
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
BANKAMERICA BUSINESS CREDIT, INC. $20,000,000.00
Domestic Lending Office:
BankAmerica Business Credit, Inc.
40 East 52nd Street
Second Floor
New York, New York 10022
Eurodollar Lending Office:
BankAmerica Business Credit, Inc.
40 East 52nd Street
Second Floor
New York, New York 10022
Address for Notices:
BankAmerica Business Credit, Inc.
44 East 52nd Street
Second Floor
New York, New York 10022
Attn: Patrick J. Wilson
Telecopy No.: (212) 836-5167
</TABLE>
[CONTINUED]
I-4
<PAGE> 109
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
THE FIRST NATIONAL BANK OF BOSTON $20,000,000.00
Domestic Lending Office:
First National Bank of Boston
100 Federal Street
Boston, MA 02110
Eurodollar Lending Office:
First National Bank of Boston
100 Federal Street
Boston, MA 02110
Address for Notices:
First National Bank of Boston
100 Federal Street
Boston, MA 02110
Attn: Mark Forti
Telecopy No.: (617) 434-6241
</TABLE>
[CONTINUED]
I-5
<PAGE> 110
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
NATIONSBANK OF GEORGIA, N.A. $20,000,000.00
Domestic Lending Office:
NationsBank of Georgia, N.A.
P.O. Box 3406
Atlanta, GA 30302
or
600 Peachtree Street
13th Floor
Atlanta, GA 30308
Eurodollar Lending Office:
NationsBank of Georgia, N.A.
P.O. Box 3406
Atlanta, GA 30302
or
600 Peachtree Street
13th Floor
Atlanta, GA 30308
Address for Notices:
NationsBank of Georgia, N.A.
P.O. Box 3406
Atlanta, GA 30302
or
600 Peachtree Street
13th Floor
Atlanta, GA 30308
Attn: Robert Walker
Telecopy No.: (404) 607-6437
</TABLE>
[CONTINUED]
I-6
<PAGE> 111
ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
BTM CAPITAL CORPORATION $10,000,000.00
Domestic Lending Office:
BTM Capital Corporation
311 S. Wacker Drive
Suite 1575
Chicago, IL 60606
Eurodollar Lending Office:
BTM Capital Corporation
311 S. Wacker Drive
Suite 1575
Chicago, IL 60606
Address for Notices:
BTM Capital Corporation
311 S. Wacker Drive
Suite 1575
Chicago, IL 60606
Attn: James Torkelson
Telecopy No.: (312) 554-7551
</TABLE>
Total Commitments: $130,000,000
I-7
<PAGE> 112
EXHIBIT A
FORM OF AMENDED AND RESTATED REVOLVING NOTE
$_____________
FOR VALUE RECEIVED, the undersigned, WICKES LUMBER COMPANY, a Delaware
corporation ("Borrower"), promises to pay to the order of [Payee Lender] (the
"Lender") at c/o BT COMMERCIAL CORPORATION, as Agent for the Lenders, 14 Wall
Street, New York, New York 10005, in lawful money of the United States of
America and in immediately available funds, the principal amount of _________
Million Dollars ($___________), or such lesser amount as may then constitute the
unpaid aggregate principal amount of the Revolving Loans on the Expiration Date.
Borrower further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the dates and at the rate specified in Article 4 of the Credit Agreement (as
defined below).
If any payment on this promissory note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day, and with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
This promissory note is one of the Revolving Notes referred to in the Second
Amended and Restated Credit Agreement, dated as of April 8, 1997 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Borrower, the Lender, certain other financial institutions
parties thereto, Bankers Trust Company, as Issuing Bank, Nationsbank of Georgia,
N.A., as syndication agent and BT Commercial Corporation, as agent ("Agent"),
and is subject to, and entitled to, all provisions and benefits thereof and is
subject to optional and mandatory prepayment in whole or in part as provided
therein. This promissory note is issued, together with other Revolving Notes, to
amend and restate without interruption or novation all indebtedness evidenced by
certain notes under the 1996 Credit Agreement. Capitalized terms used herein
without definition shall have the meanings given to such terms in the Credit
Agreement. The Credit Agreement, among other things, provides [after giving
effect to the Assignment and Assumption Agreement executed by the Lender and
[name of assigning Lender] as of date hereof] 1/ for the making of Revolving
Loans by the Lender to Borrower from time to time in an aggregate amount not to
exceed at any time outstanding the U.S. dollar amount first above mentioned.
- ------------------------------
1. To be used for replacement Revolving Notes.
A-1
<PAGE> 113
Upon the occurrence of any one or more of the Events of Default specified in the
Credit Agreement which have not been waived in accordance with the terms of the
Credit Agreement, the Agent shall, upon the written, telecopied or telex request
of the Majority Lenders, and by delivery of written notice to Borrower from the
Agent, take any or all of the following actions, without prejudice to the rights
of the Agent, the Lender or any holder of this Note to enforce its claims
against Borrower: (a) declare all Obligations due hereunder to be immediately
due and payable (except with respect to any Event of Default set forth in
Section 9.1(f) of the Credit Agreement, in which case all Obligations due
hereunder shall automatically become immediately due and payable without the
necessity of any notice or other demand) without presentment, demand, protest or
any other action or obligation of the Lender; (b) immediately terminate the
Credit Agreement and the Commitments thereunder; and at all times thereafter,
all loans and advances made by the Lender pursuant to the Credit Agreement shall
be at the Lender's sole discretion, unless such Event of Default is waived.
This promissory note is secured by security agreements and other collateral
documents [and re-evidences the indebtedness outstanding on the date hereof with
respect to the Revolving Loans which indebtedness has been assigned to the
Lender pursuant to Section 11.6 of the Credit Agreement]. (1)
Borrower hereby waives presentment, demand, protest and notice of any kind. No
failure to exercise, and no delay in exercising any rights hereunder on the part
of the holder hereof shall operate as a waiver of such rights.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS PROMISSORY NOTE SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
WICKES LUMBER COMPANY
By:
------------------------
Title:
Attest:
- ---------------------
- ---------------------
(2) To be used for replacement Revolving Notes.
A-2
<PAGE> 114
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
____________________, 199_
BT Commercial Corporation, as Agent
14 Wall Street
New York, NY 10005
Ladies and Gentlemen:
I hereby certify to you as follows:
(a) I am the duly elected [Title] of Wickes Lumber Company, a Delaware
corporation ("Borrower"). Capitalized but undefined terms used in this
Certificate shall have the meanings assigned to them in the Second Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of April 8, 1997
among the Borrower, the financial institutions parties thereto, Bankers Trust
Company, as Issuing Bank, Nationsbank of Georgia, N.A., as Syndication Agent,
and you, as Agent.
(b) I have reviewed the terms of the Credit Agreement, and have made, or
have caused to be made under my supervision, a review in reasonable detail of
the transactions and the condition of the Borrower during the immediately
preceding [year/quarter/month].
(c) The review described in paragraph (b) above did not disclose the
existence during or at the end of such [year/quarter/month], and I have no
knowledge of the existence as of the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Attachment 1 to this Certificate (1).
I further certify that, based on the review described in paragraph (b)
above, neither the Borrower nor any of the Subsidiaries at any time during or at
the end of such
- ------------------------
(3) Attachment 1 must describe in detail the nature of the condition or
event, the period during which it has existed and the action the Borrower
proposes to take or has taken with respect thereto.
Ex. B-1
<PAGE> 115
[year/quarter/month], except as specifically described in Attachment 2 to this
Certificate 1/, did any of the following:
(d) Changed its respective corporate name, or transacted business under
any trade name, style, or fictitious name, other than those previously described
to you and set forth in the Credit Agreement.
(e) Changed the location of its chief executive office, or changed the
location of or disposed of any of its assets (other than pursuant to the sale of
inventory in the ordinary course of its business), or established any new asset
locations.
(f) Changed its capital structure.
(g) Materially changed the terms upon which it sells goods (including
sales on consignment) or provides services, nor has any vendor or trade supplier
to the Borrower during or at the end of such [year/quarter/month] decreased the
terms upon which it supplies goods to the Borrower.
(h) Permitted or suffered to exist any Liens or encumbrances on any of
its properties, whether real or personal, other than as specifically permitted
in the Credit Agreement.
(i) Received any notices of any kind from any federal, state or local
agency, tribunal or other authority regulating or having responsibility for any
environmental matters.
- ------------------------
4. Attachment 2 must describe in detail the exceptions, if any, to the
statements contained in paragraphs (d) through (j) of the Certificate.
Ex. B-2
<PAGE> 116
(j) Became aware of, obtained knowledge of, or received notification of,
any breach or violation of any material covenant contained in any instrument or
agreement in respect of indebtedness for money borrowed by the Borrower or any
of the Subsidiaries.
THE FOREGOING CERTIFICATIONS are made and delivered this _________ day of
_____________, 199_.
Very truly yours,
WICKES LUMBER COMPANY
-----------------------------
By:
Title:
Ex. B-3
<PAGE> 117
EXHIBIT C
FORM OF BORROWING BASE CERTIFICATE
OFFICER'S CERTIFICATE CERTIFYING BORROWING BASE CERTIFICATE
I, _____________________, in my capacity as _________________ of Wickes
Lumber Company, a Delaware corporation (the "Borrower"), hereby certify in
connection with the Second Amended and Restated Credit Agreement (the "Credit
Agreement"), dated as of April 8, 1997, among the Borrower, BT Commercial
Corporation (the "Agent"), Nationsbank of Georgia, N.A., as syndication agent,
the lenders party thereto and the Issuing Bank (as defined therein) that I am
the duly elected ________________ of the Borrower and that the information and
each calculation set forth in the attached Borrowing Base Certificate are, to
the best of my knowledge, true, correct and complete (subject to year-end audit
adjustments) as of the date hereof and are calculated in accordance with the
Credit Agreement. Unless otherwise defined herein, all terms used herein shall
have the meanings ascribed to them in the Credit Agreement.
Executed this ____ day of WICKES LUMBER COMPANY
_______________, 199__ By:
-------------------------
Title:
Ex. C-1
<PAGE> 118
EXHIBIT D
FORM OF COLLATERAL ACCESS AGREEMENT
BT COMMERCIAL CORPORATION
14 Wall Street
New York, New York 10005
To be delivered to the Landlord
signatory below
Re: Financing of Wickes Lumber Company
Ladies and Gentlemen:
We have been asked by Wickes Lumber Company (the "Company") to act as
agent for a syndicate of lenders under certain revolving credit facilities
provided to the Company. The revolving credit facilities are secured by certain
assets of the Company, including the Company's Inventory (as defined below). We
understand that the Company leases certain real property (the "Facility") from
you pursuant to a lease agreement (the "Agreement").
In connection with loans made or to be made to the Company, the lenders
will be lending, in part, against the value of the Company's inventory (the
"Company's Inventory"), including that portion of the Company's Inventory now or
in the future located at the Facility. Therefore, we will be making customary
Uniform Commercial Code filings on behalf of the lenders with respect to the
Company's Inventory located at the Facility. In addition, we request your
acknowledgement, and cooperation, for preserving and enforcing the lenders'
security interests. In order to expedite the consummation of the proposed credit
facilities, we would appreciate your signing and returning the enclosed copy of
this letter to us, care of the following address:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022
Attention: _______________
Telephone: _______________
By signing and returning the enclosed copy of this letter you confirm and
acknowledge the following matters to us:
1. You will allow us, or our auditors or our other designees, reasonable
access to the Facility in order to inspect the Company's Inventory and verify
the amount. In addition, if we elect to remove the Company's Inventory from the
Facility ourselves, you will grant us access to the Facility at reasonable times
to do so.
Ex. D-1
<PAGE> 119
2. In the event that the Company defaults in its obligations under the
Agreement and/or you terminate the Agreement for any reason, including a default
by the Company, you will notify us in writing of this fact prior to your
retaking possession of the Facility and you will allow us to either (i)
undertake to cure any and all defaults under the Agreement and assume the
Company's obligations under the Agreement, or (ii) enter the facility in order
to remove the Company's Inventory, provided that we pay you reasonable rent
relating to the storage of the Company's Inventory at the Facility for the
period from when we enter the Facility until we remove the Company's Inventory
from the Facility. In any case, you confirm and acknowledge to us that you do
not have any claim to or lien upon any of the Company's Inventory.
We would appreciate your confirming to us your agreement to the foregoing
provisions of this letter by signing and returning to us the enclosed additional
copy of this letter to the address shown above.
[THIS SPACE INTENTIONALLY BLANK]
Ex. D-2
<PAGE> 120
Although the Company is not a party to this agreement, it has signed
below to indicate its acknowledgment of and agreement to the provisions of this
letter.
Very truly yours,
BT COMMERCIAL CORPORATION,
as Agent
By:
----------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
[LANDLORD]
By:
----------------------------------
Name:
Title:
Landlord Name:
-----------------------
Address:
-----------------------------
ACKNOWLEDGED AND AGREED:
WICKES LUMBER COMPANY
By:
---------------------------------
Name:
Title:
Ex. D-3
<PAGE> 121
EXHIBIT E
FORM OF NOTICE OF BORROWING
__________ ___, 199__
BT Commercial Corporation, as Agent
14 Wall Street - Level C
New York, New York 10005
Attention: Bruce Addison
Ladies and Gentlemen:
The undersigned, Wickes Lumber Company, a Delaware corporation
("Borrower"), refers to the Second Amended and Restated Credit Agreement, dated
as of April 8, 1997, among Borrower, certain financial institutions parties
thereto, Bankers Trust Company, as Issuing Bank, Nationsbank of Georgia, N.A.,
as syndication agent, and BT Commercial Corporation, as agent (the "Credit
Agreement"). Capitalized terms used herein shall have the meanings given in the
Credit Agreement.
The Borrower hereby gives you irrevocable notice of its request for a
borrowing under the Credit Agreement (the "Proposed Borrowing") as follows:
(i) The requested date of the Proposed Borrowing is ____________,
199__.
(ii) The Type of Loans comprising the Proposed Borrowing are:
[ ] Prime Rate Loans in the amount of
$________________.
[ ] Eurodollar Rate Loans in the amount of
$________________.
(iii) The aggregate amount of the Proposed Borrowing is
$______________.
(iv) The account at which proceeds of the Proposed Borrowing are to be
made available is as follows:
The undersigned hereby certifies that, except as described in
Attachment 1 hereto in connection with a Proposed Borrowing of Agent
Advances under Section 2.2(b)(ii), the following statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:
EX. E-1
<PAGE> 122
(A) the representations and warranties contained in the Credit
Agreement and in each other document executed in connection
therewith are true and correct in all material respects before and
after giving effect to the Proposed Borrowing and to the
application of the proceeds therefrom, as though made on and as of
such date, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which
case such representations and warranties shall have been true and
accurate on and as of such earlier date);
(B) no event has occurred and is continuing, or would result from such
Proposed Borrowing or from the application of the proceeds
therefrom, which constitutes a Default or an Event of Default;
(C) no event has occurred which has had or could reasonably be
expected to have a Material Adverse Effect;
(D) all of the other conditions to the Proposed Borrowing set forth in
Article 5 of the Credit Agreement have been fulfilled; and
(E) the Proposed Borrowing satisfies all limitations set forth in the
Credit Agreement (including, without limitation, availability
under the Borrowing Base).
If notice of this Proposed Borrowing has been given previously by
telephone, this notice should be considered a written confirmation.
WICKES LUMBER COMPANY
By:
--------------------------------
Name:
Title:
Ex. E-2
<PAGE> 123
EXHIBIT F
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment and
Assumption") is to be effectuated by the completion and execution of the
Assignment Execution Form attached hereto. A copy of the terms of the Assignment
and Assumption does not need to be physically attached to the Assignment
Execution Form, but rather these terms are incorporated therein by reference.
Terms defined in the Assignment Execution Form (or in the Credit Agreement
described therein) are used herein as therein defined.
The Assignor and the Assignee agree as follows:
1. Assignment; Effect of Certain Dates.
For value received, without recourse, representation or warranty (except
as expressly set forth herein) the Assignor sells and assigns to the Assignee,
and the Assignee purchases and assumes from the Assignor, all of the Assignor's
right, title and interest in and to, and all of the Assignor's obligations with
respect to, the Assigned Share under the Credit Agreement. On the date the Agent
has confirmed by telecopy to the Assignor that the Agent has received a fully
completed Assignment Execution Form signed by the Assignor and the Assignee (the
"Contract Date"), the obligations of the Assignor and the Assignee hereunder
shall be irrevocable as between themselves unless and until a party whose
consent hereto is required by the Credit Agreement (a "Required Party") gives
written notice (as provided in this paragraph) to the Assignor that such
Required Party's consent will not be given. Upon its receipt of a fully
completed Assignment Execution Form signed by the Assignor and the Assignee, the
Agent will send a copy of such Assignment Execution Form to each Required Party,
and will request each Required Party either (i) to execute the Assignment
Execution Form and redeliver it to the Agent or (ii) to notify the Agent in
writing that it will not execute the Assignment Execution Form, in either case
prior to 12:00 noon (New York City time) on the Business Day which is two
Business Days prior to the Settlement Date (as defined in Section 9 hereof). Any
Required Party which has not delivered to the Agent an executed Assignment
Execution Form by such time will be deemed not to have consented to the
Assignment Execution Form and this Assignment and Assumption will thereupon be
null and void; in addition, the Agent will promptly notify the Assignor and the
Assignee if it has received a notice from a Required Party that such Required
Party's consent will not be given, and this Assignment and Assumption will
thereafter be null and void. Once a Required Party has evidenced its consent by
delivery to the Agent of its executed Assignment Execution Form, such consent
may not be withdrawn, and upon execution and delivery by all Required Parties,
it is irrevocably agreed that this Assignment and Assumption will become
effective on the
Ex. F-1
<PAGE> 124
Settlement Date and the Agent will change its books and records to reflect this
Assignment and Assumption. No (i) failure of any party to settle on the
Settlement Date any amount owed hereunder, (ii) dispute respecting settlement,
or (iii) bankruptcy, insolvency or other condition whatsoever respecting any
person shall in any way impair, reduce or otherwise affect the transfer of the
Assigned Share to the Assignee, and the release of the Assignor, as contemplated
by this Assignment and Assumption.
2. Rights and Obligations of Assignee; Release of Assignor.
From and after the Settlement Date, the Assignee shall be entitled to all
rights, powers and privileges of, and shall perform all of the duties and
obligations of, the Assignor under the Credit Agreement and all related
documents, to the extent of the Assigned Share, including without limitation (i)
the right to receive all payments in respect of the Assigned Share which are
unpaid on the Settlement Date or become payable from and after the Settlement
Date, whether on account of principal, interest, fees, indemnities, increased
costs, additional amounts or otherwise, (ii) the right to vote and to instruct
the Agent under the Credit Agreement to the extent of the Assigned Share, (iii)
the right to set off and to appropriate and apply deposits of the Borrower (and
any other obligor) as set forth in the Credit Agreement or any related document,
(iv) the right to receive notices, requests, demands and other communications
from the Agent, the Borrower and/or any other party required to give notices,
requests, demands or other communications, (v) the obligation to fund all
payments required to be made by a lender holding the Assigned Share [and (vi)
the obligation to provide to the Agent any withholding tax forms and other
information prescribed by the Internal Revenue Service of the United States
certifying as to the Assignee's status for purposes of determining exemption
from United States withholding taxes with respect to all payments to be made to
the Assignee under the Credit Agreement or such other documents as are necessary
to indicate that all such payments are subject to such rates at a rate reduced
by an applicable tax treaty.] (1) The Assignor will deliver to the Assignee any
notice of borrowing received by the Assignor on or after the Contract Date but
before the Settlement Date if the borrowing date specified in such notice is on
or after the Settlement Date. From and after the Settlement Date, the Assignor
shall be released from all duties and obligations under the Credit Agreement and
all related documents to the extent of the Assigned Share.
3. Representations and Warranties of Assignor.
- ----------------------
(5) If the Assignee is organized under the laws of a jurisdiction
outside the United States.
Ex. F-2
<PAGE> 125
The Assignor (a) represents and warrants that it is the legal and
beneficial owner of the Assigned Share, and that such Assigned Share is free and
clear of any adverse claim; and (b) except for the representations and
warranties in subclause (a) above and in Section 4 below, makes no
representation or warranty and assumes no responsibility whatsoever regarding
the assignment affected hereby, including, without limitation, with respect to
any statements, warranties or representations made in or in connection with the
Credit Agreement or any other instrument or document furnished pursuant thereto
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto, or the financial condition of the Borrower, any guarantor or
any other person, or the performance or observance by the Borrower or any
guarantor or any other party of any of its obligations under the Credit
Agreement or any other instrument or document furnished pursuant thereto.
4. Mutual Representations and Warranties.
Each of the Assignor and the Assignee represents and warrants to the
other party as of the Contract Date and the Settlement Date as follows:
(a) it is duly organized and validly existing and has full power and
authority, and has taken or will take all action necessary, to
execute and deliver the Assignment Execution Form and to fulfill
its obligations under, and to consummate the transactions
contemplated by, this Assignment and Assumption;
(b) the making and performance by it of this Assignment and Assumption
do not and will not violate any law or regulation of the
jurisdiction of its incorporation or any other law or regulation
applicable to it; provided that neither party makes any
representation or warranty respecting the Securities Act of 1933,
as amended;
(c) the Assignment Execution Form has been duly executed and delivered
by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as limited by (i)
bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and (ii) general equitable
principles; and
(d) all approvals, authorizations or other actions by, or filings
with, any governmental authority, if any, necessary for the
validity or enforceability of its obligations under this
Assignment and Assumption have been obtained or taken, as the case
may be.
5. Representations and Warranties of Assignee.
Ex. F-3
<PAGE> 126
(a) The Assignee (i) confirms that it has received a copy of the
Credit Agreement, any amendments or waivers thereto and other
instruments or documents furnished pursuant thereto, and any
related documents, which have in each case been requested by it,
together with copies of any financial statements requested by it,
and that it has, independently and without reliance on the
Assignor, the Agent or any other lender and based on such
documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Assignment and
Assumption; (ii) agrees that it will, independently and without
reliance upon the Assignor, the Agent 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 the Credit Agreement and any
other instruments or documents furnished pursuant thereto, and any
related documents; (iii) represents that it is eligible to become
an assignee of the Assigned Share pursuant to the terms, if any,
of the Credit Agreement which limit assignees to persons having
specified characteristics or falling within certain classes; and
(iv) appoints the Agent to act in the capacity set forth in the
Credit Agreement.
(b) If the Assignee is a person subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Assignee
represents and warrants that the execution, delivery and
performance of this Assignment and Assumption, and the purchase of
the Assigned Share, will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"), other than
a prohibited transaction which is covered by a currently effective
class exemption granted by the U.S. Department of Labor pursuant
to Section 408(a) of ERISA and Section 4975(c)(2) of the Code.
6. Single Net Payment.
Unless the Assignor and Assignee agree otherwise, on the Settlement Date
a single, net, final payment shall be made, which shall be in an amount mutually
agreed upon by the Assignor and the Assignee, taking into account the then
outstanding principal amount, if any, of the Assigned Share, any fees payable to
or by the Assignee, and all accrued fees, interest and other amounts payable
under the Credit Agreement or any related documents.
Ex. F-4
<PAGE> 127
7. Governing Law.
THIS ASSIGNMENT AND ASSUMPTION SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
8. Counterparts; Amendments; Binding Effect.
The Assignment Execution Form may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument. The terms hereof may
not be amended or modified except in a writing executed by the Assignor, the
Assignee and, in the case of any change other than a change in the Settlement
Date, all Required Parties. Any change in the Settlement Date to an earlier date
than that specified on the Assignment Execution Form shall require the consent
of the Agent and any Required Party which has not previously consented to the
Assignment Execution Form. The terms hereof shall bind and inure to the benefit
of and be enforceable by the parties executing (or deemed to have consented to)
the Assignment Execution Form and their respective successors and permitted
assigns.
9. Schedule of Dates.
Unless otherwise agreed to by the parties and specified on the Assignment
Execution Form, the following schedule will apply, as appropriate:
<TABLE>
<CAPTION>
Consent of Borrower
and/or Other Parties Consent of Agent
Required Only Required
-------- -------------
<S> <C> <C>
Contract Date Date Agent Date Agent
acknowledges receipt acknowledges receipt
(by facsimile (by facsimile
transmission) of transmission) of
executed Assignment executed Assignment
Execution Form by Execution Form by
both Assignor and both Assignor and
Assignee Assignee
Settlement Date 5 Business Days 3 Business Days
after Contract Date after Contract Date
</TABLE>
The Settlement Date specified in the Assignment Execution Form
may not be earlier than the Settlement Date set forth in the
Schedule above unless the Required Parties and the Agent consent
in writing to such earlier date.
Ex. F-5
<PAGE> 128
10. Waiver of Jury Trial.
THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS ASSIGNMENT AND
ASSUMPTION, OR THE ACTIONS OF EITHER OF THEM IN THE PERFORMANCE OR ENFORCEMENT
THEREOF.
11. Effectiveness of Notices.
Notices required to be given and other documents required to be delivered
pursuant to the terms hereof shall be deemed given or delivered when actually
received unless sent by facsimile transmission, in which case such notice or
other document shall be deemed given or delivered when sent (as established by
sender's facsimile transmission machine print-out or similar mechanical record).
[ASSIGNMENT EXECUTION FORM FOLLOWS]
Ex. F-6
<PAGE> 129
ASSIGNMENT EXECUTION FORM
This Assignment Execution Form incorporates by reference all of the terms
and conditions of the Assignment and Assumption Agreement which is attached as
an Exhibit to the Credit Agreement described below. By executing this Assignment
Execution Form, and pursuant to the terms of such Assignment and Assumption
Agreement, the Assignor sells and assigns to the Assignee, and the Assignee
purchases and assumes from the Assignor, in each case without recourse,
representation or warranty (except as set forth in the Assignment and Assumption
Agreement), all of the Assignor's right, title and interest in and to, and all
of the Assignor's obligations with respect to, the Assigned Share (as calculated
herein), and the Assignor is released from such obligations. The terms of the
Assignment and Assumption Agreement do not need to be physically attached to
this Assignment Execution Form.
1. Credit Agreement:
Title:
Date:
Name of Borrower(s):
Name of Agent:
(If more than one Agent, use name of Administrative Agent.)
2. Name of Assignor:
3. Name of Assignee:
4. Contract Date: __________, 199__. ____________ Agent's
Confirmation of Receipt.
(The Agent must enter the date of delivery to it of this
Assignment Execution Form, executed by Assignor and Assignee, and
MUST INITIAL AND RETURN A COPY OF THIS PAGE TO ASSIGNOR.)
5. Settlement Date: __________, 199__.
(Select the date payment is to be made; unless a different date
is written here, the Settlement Date will be 3 Business Days (5
Business Days if Borrower and/or other parties' consent is
required) after the Contract Date.) The Settlement Date may not
be earlier than the date specified in the preceding sentence
unless the Required Parties and the Agent consent in writing to
such earlier date.)
Ex. F-7
<PAGE> 130
6. Assigned Share:
a. Total Credit
Agreement
Commitment for
All Lenders as $___________
of Contract
Date
b. Assigned Share
(9 decimal
places) %
c. Amount of
Assigned Share
of Total
Commitments
(a x b = c) $
d. Total Credit
Agreement
Amounts
Outstanding
for All
Lenders as of
Contract Date $
e. Outstanding
Amount of
Assigned
Revolving
Loans
(d x b = e) $
8. Sales Price of Assigned Share: See Schedule I (Schedule I may be
omitted when form is sent to the Agent and the Required Parties.)
Ex. F-8
<PAGE> 131
Consent to/Acknowledged by
as of _______________, 19__: NAME OF ASSIGNOR
BT COMMERCIAL CORPORATION By:
as Agent Name:
Title:
Address for Notices:
By:
Name:
Title:
Telephone No:
Address for Notices: Fax No:
14 Wall Street
New York, New York 10005 Payment Instructions:
Attention:
Telephone No: (212) ________
Fax No: (212) ________
Consent to/Acknowledged by
as of _______________, 19__: NAME OF ASSIGNEE
WICKES LUMBER COMPANY, By:
as Borrower Name:
Title:
Address for Notices:
By:
Name:
Title:
Telephone No:
Address for Notices: Fax No:
706 N. Deerpath Drive
Vernon Hills, Illinois 60061 Lending Office:
Telephone No: (708) 367-3400
Fax No: (708) 367-3750
Payment Instructions:
Ex. F-9
<PAGE> 132
Schedule I
Attached to Assignment
Execution Form executed
by _______________________, as Assignor
and _______________________, as Assignee
Principal Amount to be paid for Assigned Share $___________________
Portion of Interest to be retained by Assignor _____ of 1%
per annum
Portion of _______________ Fee to be retained
by Assignor _____ of 1%
per annum
Upfront Fee to be paid to Assignee $___________________
Recordation Fee to be paid by Assignee $___________________
Any portion of interest or fees retained by the Assignor will be payable by the
Assignee to the Assignor on the day on which the applicable interest and fees
are paid under the Credit Agreement. The Assignee shall not be relieved of its
obligation to pay such amounts if the Assignee transfers the Assigned Share to
another party unless the Assignor executes an agreement specifically releasing
the Assignee from its obligations hereunder.
Ex. F-10
<PAGE> 133
EXHIBIT G
FORM OF NOTICE OF CONTINUATION
__________ ___, 199__
BT Commercial Corporation, as Agent
14 Wall Street - Level C
New York, New York 10005
Attention:
Ladies and Gentlemen:
The undersigned, Wickes Lumber Company, a Delaware corporation
("Borrower"), refers to the Second Amended and Restated Credit Agreement, dated
as of April 8, 1997, among Borrower, certain financial institutions parties
thereto, Bankers Trust Company, as Issuing Bank, Nationsbank of Georgia, N.A.,
as syndication agent, and BT Commercial Corporation, as agent (the "Credit
Agreement"). Capitalized terms used herein shall have the meanings given in the
Credit Agreement.
The Borrower hereby gives you irrevocable notice that it requests a
Continuation of Eurodollar Rate Loans under the Credit Agreement (the "Proposed
Continuation") as follows:
(i) The amount of Eurodollar Rate Loans, the last day of each current Interest
Period and proposed new Interest Period for each Eurodollar Rate Loan
covered by this request are as follows:
Date of Proposed Proposed New
Amount of Loan Conversion Interest Period
- -------------- ---------- ---------------
(ii) The aggregate amount of Eurodollar Rate Loans subject to such Continuation
is $_________________.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Continuation:
Ex. G-1
<PAGE> 134
(A) the representations and warranties contained in the Credit Agreement and in
each other document executed in connection therewith are true and correct
in all material respects before and after giving effect to the Proposed
Continuation, as though made on and as of such date, except to the extent
that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
(B) no event has occurred and is continuing, or would result from such Proposed
Continuation, which constitutes a Default or an Event of Default;
(C) no event has occurred which has had or could reasonably be expected to have
a Material Adverse Effect; and
(D) the Proposed Continuation satisfies all conditions and limitations set
forth in the Credit Agreement (including, without limitation, availability
under the Borrowing Base).
If notice of this Proposed Continuation has been given previously by
telephone, then this notice should be considered a written confirmation.
WICKES LUMBER COMPANY
By:
----------------------
Name:
Title:
Ex. G-2
<PAGE> 135
EXHIBIT H
FORM OF NOTICE OF CONVERSION
__________ ___, 199__
BT Commercial Corporation, as Agent
14 Wall Street - Level C
New York, New York 10005
Attention:
Ladies and Gentlemen:
The undersigned, Wickes Lumber Company, a Delaware corporation
("Borrower"), refers to the Second Amended and Restated Credit Agreement, dated
as of April 8, 1997, among Borrower, certain financial institutions parties
thereto, Bankers Trust Company, as Issuing Bank, Nationsbank of Georgia, N.A.,
as syndication agent, and BT Commercial Corporation, as agent (the "Credit
Agreement"). Capitalized terms used herein shall have the meanings given such
terms in the Credit Agreement.
The Borrower hereby gives you irrevocable notice that it requests a
Conversion of Revolving Loans of one Type into Revolving Loans of another Type
under the Credit Agreement (a "Proposed Conversion") as follows:
Conversion of Eurodollar Rate Loans to Prime Rate Loans
The amount of Revolving Loans and the last day of the current Interest
Period for Eurodollar Rate Loans for which Borrower requests Conversion to
Prime Rate Loans are as follows:
Amount of Loan End of Current Interest Period
Conversion of Prime Rate Loans to Eurodollar Rate Loans
The amount of Revolving Loans, the date of the Proposed Conversion, and the
proposed Interest Period for each Prime Rate Loan for which the Borrower
requests Conversion to a Eurodollar Rate Loan are as follows:
Date of Proposed Proposed New
Amount of Loan Conversion Interest Period
Ex. H-1
<PAGE> 136
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in the Credit Agreement and in
each other document executed in connection therewith are true and correct
in all material respects before and after giving effect to the Proposed
Conversion, as though made on and as of such date, except to the extent
that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
(B) no event has occurred and is continuing, or would result from such Proposed
Conversion, which constitutes a Default or an Event of Default; and
(C) no event has occurred which has had or could reasonably be expected to have
a Material Adverse Effect;
(D) the Proposed Conversion satisfies all conditions and limitations set forth
in the Credit Agreement.
If notice of this Proposed Conversion has been given previously by
telephone, then this notice should be considered a written confirmation.
WICKES LUMBER COMPANY
By:
---------------------------------
Name:
Title:
Ex. H-2
<PAGE> 137
EXHIBIT I
FORM OF BAILEE NOTICE
__________ __, 199_
[name of bailee]
[address]
RE; Notification of Security Interest in Bailed Goods
Dear ____________:
This notice is made with reference to bailed goods in your possession
subject to a bill of lading between __________________ and _________________
dated _______________ and covering the following goods:
_________________________________________________________ (the "Agreement"). A
copy of the Agreement is attached hereto.
Please be advised that a security interest in the goods covered by the
Agreement was granted by the undersigned to BT Commercial Corporation, as agent,
14 Wall Street, New York, New York 10005, as secured party, who now enjoys a
security interest in these goods and all the rights, remedies, and obligations
of a secured party.
Notification is hereby given pursuant to Section 9-304(3) of the Uniform
Commercial Code of the above-named party's security interest in these goods,
and, in accordance with Section 9-305 of the Uniform Commercial Code, you are to
hold these goods for the benefit of the named secured party, who shall
henceforth be deemed to be in possession and control of these goods which may
not be released {except on the direction and consent of the above-named secured
party [with respect to deliveries of goods in a jurisdiction in which the
above-named secured party does not have a perfected security interest in such
goods by virtue of the filing of a financing statement in such jurisdiction]}
{upon delivery of the goods to the undersigned as provided in the Agreement
[with respect to deliveries of goods in a jurisdiction in which the above-named
secured party has a perfected security interest in such goods by virtue of the
filing of a financing statement in such jurisdiction]}.
Ex. I-1
<PAGE> 138
All charges and expenses incident to the transport, storage and care of
these goods remain in full force and effect and continue to be the obligation of
the undersigned. They will continue to be paid in a timely manner as provided in
the Agreement.
Sincerely,
WICKES LUMBER COMPANY
By:
----------------------------------
Title:
Address: 706 N. Deerpath Drive
Vernon Hills, Illinois 60661
Ex. I-2
<PAGE> 139
SCHEDULE C
Qualified Builders
Ex. I-3
<PAGE> 140
SCHEDULE 8.9
Permitted Real Estate and Related Asset Sales
Ex. I-4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RIVERSIDE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 575
<SECURITIES> 0
<RECEIVABLES> 68,003
<ALLOWANCES> 4,637
<INVENTORY> 109,506
<CURRENT-ASSETS> 199,803
<PP&E> 49,564
<DEPRECIATION> 31,654
<TOTAL-ASSETS> 320,283
<CURRENT-LIABILITIES> 77,314
<BONDS> 221,093
0
0
<COMMON> 529
<OTHER-SE> 16,089
<TOTAL-LIABILITY-AND-EQUITY> 320,283
<SALES> 159,319
<TOTAL-REVENUES> 160,484
<CGS> 122,372
<TOTAL-COSTS> 122,372
<OTHER-EXPENSES> 37,375
<LOSS-PROVISION> 1,046
<INTEREST-EXPENSE> 6,017
<INCOME-PRETAX> (5,773)
<INCOME-TAX> 2,740
<INCOME-CONTINUING> (4,139)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,139)
<EPS-PRIMARY> (.78)
<EPS-DILUTED> (.78)
</TABLE>
