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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 24, 1997
KERR GROUP, INC.
--------------------------
(Exact name of registrant as specified in charter)
DELAWARE 1-7272 95-0898810
- -------------- -------------- -----------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
500 NEW HOLLAND AVENUE, LANCASTER, PA 17602
- -------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 299-6511
NOT APPLICABLE
(Former name or former address, if changed from last report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
a. On August 26, 1997, Fremont Acquisition Company, LLC ("Fremont") and
Kerr Acquisition Corporation ("KAC") completed their previously announced cash
tender offer (the "Tender Offer") for all of the shares of Common Stock, par
value $.50 per share (the "Common Stock") and $1.70 Class B Cumulative
Convertible Preferred Stock, Series D, par value $.50 per share (the "Preferred
Stock") of Kerr Group, Inc. (the "Company") pursuant to the Agreement and Plan
of Merger, dated July 1, 1997, among the Company, Fremont and KAC (the "Merger
Agreement"). Fremont now beneficially owns approximately 93% of the Common
Stock outstanding, approximately 63% of the Preferred Stock outstanding and
approximately 81% of the Common Stock outstanding on an as-converted, fully
diluted basis. Fremont acquired the Common Stock and Preferred Stock from
shareholders who tendered their shares pursuant to the Tender Offer. Subject to
the terms of the Merger Agreement, shares of Common Stock and Preferred Stock
not tendered will be converted into the right to receive $5.40 net per share of
Common Stock and $12.50 net per share of Preferred Stock pursuant to a second
step merger between KAC and the Company (the "Merger").
In connection with the Merger and the consummation of the Tender Offer,
the Company entered into that certain Loan and Security Agreement, dated as
of August 26, 1997 (the "Loan and Security Agreement"), by and among the
Company, the lenders from time to time party thereto (the "Lenders"), L/C
Issuer (as defined therein) and NationsBank of Texas, N.A. ("NationsBank") as
agent for the Lenders, pursuant to which the Lenders extended credit
facilities to the Company in an aggregate amount of $62 million dollars,
which credit facilities were used, among other things, (i) to refinance the
outstanding principal balance of funded indebtedness (including premium, and
accrued and unpaid interest) of the Company at the time of the consummation
of the Tender Offer, (ii) to pay a portion of the fees and expenses incurred
in connection with the Tender Offer and (iii) to provide for working capital
and general corporate purposes of the Company after the consummation of the
Tender Offer. NationsBank received a first priority, perfected security
interest in all of the tangible and intangible assets of the Company.
Pursuant to the Loan and Security Agreement, NationsBank, in its capacity
as initial Lender, provided the Company with credit facilities in the aggregate
amount of up to $62 million consisting of a $20 million revolving credit
facility (which includes a sublimit for the issuance of standby and commercial
letters of credit) (the "Revolving Credit Facility"), a $32 million term loan
facility (the "Term Loan Facility") and a $10 million equipment acquisition
facility (the "CAPEX Facility" and together with the Revolving Credit Facility
and the Term Loan Facility, the "Senior Credit Facilities").
The Revolving Credit Facility bears interest at a rate equal to LIBOR
plus 225 basis points or the Base Rate (defined as the higher of (i) the
NationsBank prime rate and (ii) the Federal Funds rate), at all times subject
to applicable maximum legal interest rates. The Term Loan Facility and the
CAPEX Facility bear interest at a rate equal to LIBOR plus 275 basis points
or the Base
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Rate plus 50 basis points, in each case at all times subject to applicable
maximum legal interest rates. The Company may select interest periods of 1, 2,
3 or 6 months for LIBOR loans, subject to availability. A default rate of
interest applies on all loans in the event of default at a rate per annum of 2%
above the applicable interest rate.
The Revolving Credit Facility terminates and all amounts outstanding
thereunder will be due and payable in full five years from the closing of the
Tender Offer (the "Closing"). The Term Loan Facility is subject to repayment
according to scheduled amortization, with the final payment of all amounts
outstanding, plus accrued interest due five years from the Closing or upon
termination of the Revolving Credit Facility, whichever is earlier. The
CAPEX Facility also is subject to amortization, with the final payment of all
amounts outstanding, plus accrued interest, due five years from the Closing
or upon termination of the Revolving Credit Facility, whichever is earlier.
The Loan and Security Agreement provides for prepayment of the Senior
Credit Facilities provided that the Company pays liquidated damages in an amount
equal to the appropriate percentage of the maximum approved amount of the Senior
Credit Facilities: (i) 1.0% if such termination or reduction occurs during the
first year following the closing, (ii) 0.50% if such termination or reduction
occurs during the second year following the Closing and (iii) 0.25% if such
termination or reduction occurs at any time thereafter. However, no such
payment is required upon termination in connection with refinancing of the
Senior Credit Facilities with NationsBank or any of its affiliates. Fremont and
KAC each have guaranteed the payment obligations of the Company under the Loan
and Security Agreement.
b. None.
ITEM 5. OTHER EVENTS
a. On August 24, 1997, the Company and the Pension Benefit Guaranty
Corporation (the "PBGC") entered into a definitive agreement pursuant to which
the PBGC agreed to dismiss its lawsuit now pending before the United States
District court for the Eastern District of Pennsylvania seeking to terminate the
Company's pension plan, withdraw its Notice of Determination and forbear from
instituting new proceedings with respect to the acquisition. Pursuant to the
terms of the definitive agreement, the Company agreed to
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(i) future enhanced pension plan contributions, (ii) grant to the PBGC a second
lien in the amount of $40.7 million secured by substantially all of the assets
of the Company, (iii) various restrictions on future secured indebtedness and
(iv) provisions regarding notice of certain events. The definitive agreement
became effective upon the consummation of the Tender Offer.
b. On August 26, 1997, the Company refinanced all of its existing
indebtedness, including its 9.45% Senior Series A and 8.99% Series B Notes and
its credit facility with Madeleine L.L.C., through a secured credit facility
with NationsBank. See Item 1.
c. On August 26, 1997, pursuant to terms of the Merger Agreement, upon the
completion of the Tender Offer, (i) all of the Company's directors retired or
resigned except for Harvey L. Sperry and (ii) Mr. Sperry appointed Mark N.
Williamson and Gregory P. Spivy to the Company's Board of Directors. Currently,
the Company's directors are Mr. Sperry, Mr. Spivy and Mr. Williamson.
d. Effective as of August 31, 1997, the Company's Board of Directors (i)
appointed Richard D. Hofmann as President and Chief Executive Officer and
Lawrence C. Caldwell as Chief Financial Officer, Treasurer and Secretary of
the Company, and (ii) removed each of the following individuals from their
respective offices: D. Gordon Strickland as President and Chief Executive
Officer, Robert S. Reeves as Senior Vice President, Sales, Richard H. Dittmar
as Vice President, Employee Relations, Larry R. Knipple as Vice President and
Secretary and Geoffrey A. Whynot as Vice President, Finance and Chief
Financial Officer of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired:
None.
(b) Pro Forma financial information:
None.
(c) Exhibits:
10.42 Agreement, dated August 24, 1997, by and between the PBGC
and the Company.
10.43 Security Agreement, dated as of August 24, 1997, by and
between the PBGC and the Company.
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10.44 Subordination and Standby Agreement, dated August 24, 1997,
by and among NationsBank, the Company and the PBGC.
10.45 Loan and Security Agreement, dated as of August 26, 1997,
by and among the Company, the Lenders, L/C Issuer and
NationsBank.
10.46 Guaranty Agreement, dated as of August 26, 1997, by and
between Kerr Acquisition Corporation and NationsBank.
10.47 Guaranty Agreement, dated as of August 26, 1997, by and
between Fremont and NationsBank.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KERR GROUP, INC.
By: /s/ Lawrence C. Caldwell
------------------------------
Name: Lawrence C. Caldwell
Title: Chief Financial Officer,
Treasurer and Secretary
Dated: September 10, 1997
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EXHIBIT INDEX
Exhibit
- -------
10.42 Agreement, dated August 24, 1997, between the PBGC and the Company.
10.43 Security Agreement, dated as of August 24, 1997, by and between the
PBGC and the Company.
10.44 Subordination and Standby Agreement, dated August 24, 1997, by and
among NationsBank, the Company and the PBGC.
10.45 Loan and Security Agreement, dated as of August 21, 1997, by and among
the Company, the Lenders, L/C Issuer and NationsBank.
10.46 Guaranty Agreement, dated as of August 26, 1997, by and between Kerr
Acquisition Corporation and NationsBank.
10.47 Guaranty Agreement, dated as of August 26, 1997, by and between
Fremont and NationsBank.
7
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AGREEMENT
BETWEEN
PENSION BENEFIT GUARANTY CORPORATION
AND
KERR GROUP, INC.
DATED AS OF
AUGUST 24, 1997
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TABLE OF CONTENTS
ARTICLE I......................................................................2
DEFINITIONS .............................................................. 2
1.1 GENERAL........................................................2
ARTICLE II.....................................................................4
ENHANCED CONTRIBUTIONS .................................................. 4
2.1 GENERAL........................................................4
2.2 CONTRIBUTIONS FOR PLAN YEAR 2003 AND THEREAFTER................5
2.3 MEETING THE STATUTORY FUNDING REQUIREMENTS.....................5
ARTICLE III....................................................................6
PERMITTED FUTURE FINANCINGS AND FUTURE FINANCING PAYMENTS ................ 6
3.1 SECURED DEBT...................................................6
3.2 UNSECURED DEBT.................................................6
3.3 EFFECT ON ENHANCED CONTRIBUTIONS AND STATUTORY FUNDING
REQUIREMENTS...................................................6
ARTICLE IV.....................................................................6
PBGC LIEN ................................................................ 6
4.1 AGREED TERMINATION LIABILITY...................................6
4.2 PBGC SECURITY AGREEMENT AND INTERCREDITOR AGREEMENT............7
4.3 FINANCING STATEMENTS...........................................7
ARTICLE V......................................................................7
TAX DEDUCTIBILITY ........................................................ 7
5.1 GENERAL........................................................7
5.2 DETERMINING DEDUCTIBILITY......................................7
5.3 CARRYOVER......................................................8
5.4 NOTICE TO PBGC.................................................8
ARTICLE VI.....................................................................8
PLAN LIEN .................................................................8
6.1 GENERAL........................................................8
6.2 FINANCING STATEMENTS...........................................8
6.3 PLAN LIEN IS SUBORDINATE TO SECURED DEBT...................... 8
ARTICLE VII....................................................................9
PBGC FORBEARANCE ......................................................... 9
7.1 DISMISSAL OF TERMINATION ACTION................................9
7.2 PBGC'S FORBEARANCE.............................................9
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ARTICLE VIII...................................................................9
TERMINATION................................................................9
8.1 TERMINATION OF AGREEMENT.......................................9
8.2 EFFECT OF TERMINATION.........................................10
8.3 EARLIER RELEASE OF PBGC LIEN..................................10
8.4 EFFECT ON PLAN LIEN...........................................10
8.5 NOTICE TO PBGC................................................11
8.6 EFFECT OF PLAN LIEN...........................................11
ARTICLE IX....................................................................11
NOTICES TO PBGC...........................................................11
9.1 GENERAL.......................................................11
9.2 NOTICE OF MERGER OR CONSOLIDATION.............................12
ARTICLE X.....................................................................13
THE CLOSING AND EVENTS OF DEFAULT.........................................13
10.1 GENERAL.......................................................13
10.2 EVENTS OF DEFAULT BY KERR.....................................13
ARTICLE XI....................................................................13
GENERAL PROVISIONS........................................................13
11.1 LIMITATION OF RIGHTS..........................................13
11.2 SEVERABILITY..................................................14
11.3 NOTICES.......................................................14
11.4 WEEKENDS AND HOLIDAYS.........................................14
11.5 COUNTERPARTS..................................................15
11.6 ENTIRE AGREEMENT..............................................15
11.7 NO ADMISSION OF LIABILITY.....................................15
11.8 REPRESENTATIONS AND WARRANTIES................................15
11.9 NO RELIANCE...................................................15
11.10 AMENDMENTS AND WAIVERS........................................16
11.11 HEADINGS......................................................16
11.12 GOVERNING LAW.................................................16
11.13 BINDING EFFECT................................................16
11.14 CONSTRUCTION..................................................16
11.15 ASSIGNMENT....................................................16
11.16 NO CHANGE TO GOVERNING PLAN DOCUMENTS OR PLAN
ADMINISTRATION................................................16
11.17 RESERVATION OF RIGHTS.........................................16
11.18 SUBORDINATION AND STANDBY AGREEMENT...........................17
<PAGE>
AGREEMENT
THIS AGREEMENT is entered into on August 24, 1997, between the
PENSION BENEFIT GUARANTY CORPORATION ("PBGC"), for its own benefit
and for the benefit of the Kerr Group, Inc. Retirement Income
Plan ("Plan"), and KERR GROUP, INC. ("Kerr").
RECITALS
WHEREAS, Kerr is the contributing sponsor of the Plan; and
WHEREAS, Fremont Acquisition Company, LLC ("Fremont"),
proposes to consummate the Proposed Acquisition (as hereinafter
defined) no later than August 25, 1997; and
WHEREAS, simultaneously with or immediately following the
consummation of the Proposed Acquisition (as hereinafter defined),
Kerr will enter into the Loan and Security Agreement and incur the
Senior Debt (as both such terms are hereinafter defined) and will
use approximately $45 million of the borrowed funds to repay
certain outstanding unsecured indebtedness of Kerr (the
"Refinancing"); and
WHEREAS, PBGC filed a civil action (the "Termination Action")
in the United States District Court for the Eastern District of
Pennsylvania, asserting that PBGC's possible long run loss with
respect to the Plan could reasonably be expected to increase
unreasonably as a result of the Proposed Acquisition and
Refinancing, and seeking to terminate the Plan pursuant to 29
U.S.C. Section 1342 effective before the Proposed Acquisition is
consummated; and
WHEREAS, in consideration of Kerr's agreement to undertake
the obligations set forth below in this Agreement, PBGC has agreed
to dismiss the Termination Action and to forbear from taking
further action to terminate the Plan as a result of the Proposed
Acquisition and Refinancing;
NOW THEREFORE, for good and valuable consideration, and
intending to be bound hereby, PBGC and Kerr agree as follows:
1
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ARTICLE I
DEFINITIONS
1.1 GENERAL. As used in this Agreement, the following terms
have the following meanings:
"Additional Contributions" means the contributions required
under section 2.2(b) of this Agreement.
"Agent means the "Agent" as defined in the Loan and Security
Agreement.
"Agreement" means this Agreement and all exhibits, addenda
and other attachments hereto, and any renewal, extension,
amendment, modification, restatement or supplement hereof.
"CAPEX Loan Facility" means the loan facility to be used for
the purchase of property, plant and equipment provided for under
Article 5 of the Loan and Security Agreement (as hereinafter
defined).
"Closing" means the date and time of the closing of the
Refinancing.
"Code" means the Internal Revenue Code of 1986, as amended,
26 U.S.C. Section 1, et seq., and any successor statute of similar
import, together with the regulations thereunder, in each case as
in effect from time to time. References to sections of the Code
shall be construed to refer also to any successor or substantially
related sections of similar import.
"Controlled Group" has the meaning set forth in section
4001(a)(14) of ERISA.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, 29 U.S.C. Section 1001, et seq., and any successor
statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to refer also
to any successor or substantially related sections of similar
import.
"Debt" and "Indebtedness" mean obligations to third parties
for borrowed money.
"Enhanced Contributions" means the contributions required
under section 2.1 of this Agreement.
"Funding Standard Account" means the funding standard account
maintained for the Plan pursuant to section 412 of the Code and
section 302 of ERISA.
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"Future Financing" means, after the Closing, additional
Indebtedness, beyond the Senior Debt (as hereinafter defined),
that is secured by a lien senior to or pari passu with the PBGC
Lien (as hereinafter defined).
"Future Financing Payments" means the contributions to the
Plan required under section 3.1 of this Agreement.
"Intercreditor Agreement" means the Subordination and Standby
Agreement substantially in the form of Exhibit B to this Agreement
among PBGC, Lender, and Kerr, as the same may be renewed,
extended, modified, amended or restated from time to time.
"Lender" means each Lender as defined in the Loan and
Security Agreement.
"Loan and Security Agreement" means the Loan and Security
Agreement, Dated as of the date of the Closing, among Kerr, Lender
(in its capacity as Agent and Lender thereunder) and other
lenders, if any, from time to time a party thereto, and all
exhibits, schedules, addenda and other attachments thereto, and
any renewal, extension, amendment, modification, restatement or
supplement thereof.
"Minimum Contributions" means the contributions required
under section 2.2(a) of this Agreement.
"PBGC Funding Ratio" as of any date means the market value of
Plan's assets on that date divided by the value of Plan benefit
liabilities on that date determined under sections 4001(a)(16) and
(a)(18) of ERISA.
"PBGC Lien" means the security interests, liens, mortgages,
rights and interests in property of Kerr granted by Kerr to PBGC
as provided in article IV of this Agreement.
"PBGC Notice Amount" means the amount, not to exceed
$25,000.00, expended by PBGC for advertisements to publicize
PBGC's Notice of Determination respecting the Plan dated August 1,
1997, which amount Kerr has agreed to pay to PBGC as soon as
practicable after this Agreement is executed but in no event later
than the Closing.
"Permitted Future Financings" means any Future Financing
where Future Financing Payments are made as set forth in section
3.1 of this Agreement.
"Plan" has the meaning set forth in the recitals portion of
this Agreement.
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"Plan Lien" means the security interests, liens, mortgages,
rights and interests in property of Kerr granted by Kerr to PBGC
for the benefit of the Plan as provided in article VI of this
Agreement.
"Plan Year" means a calendar year of twelve months beginning
on January 1 and ending on December 31. Kerr shall not change the
Plan Year of the Plan without PBGC's prior written consent.
"Proposed Acquisition" means the offer to purchase for cash
all outstanding shares of common stock and all outstanding shares
of $1.70 of Class B Cumulative Convertible Preferred Stock, Series
D, of Kerr by Kerr Acquisition Corporation, pursuant to an
agreement and plan of merger dated as of July 1, 1997 among
Fremont, Kerr Acquisition Corporation and Kerr.
"Refinancing" has the meaning set forth in the recitals
portion of this Agreement.
"Required Credit Balance" means, as of the end of any Plan
Year ending after December 31, 2002, the Funding Standard Account
credit balance as of December 31, 2002, plus the Funding Standard
Account credit balance attributable to the Additional
Contributions, plus the excess of Minimum Contributions over
Statutory Funding Requirements, plus Future Financing Payments on
or after January 1, 2003, all adjusted for interest to the end of
the Plan Year.
"Senior Debt" means (i) the Indebtedness incurred by Kerr
under the Loan and Security Agreement, on a fully secured basis,
of up to $52 million in the form of term loans in the aggregate
total amount of no more than $32 million and a revolving credit
facility in the aggregate total amount of no more than
$20 million, including any refinancings thereof, and of no more
than $10 million (and no more than $17.5 million after June 30,
1999) under the CAPEX Loan Facility, (ii) all accrued interest,
fees, costs, expenses and other obligations payable by Kerr under
the Loan and Security Agreement, (iii) any Permitted Future
Financings (excluding any such Permitted Future Financings which
by their express terms are secured by a lien which is not senior
to, but is pari passu with, the PBGC Lien) and (iv) in each case
all renewals, extensions, modifications, rearrangements or
refinancings thereof.
"Senior Lien" means all of the continuing security interests,
liens, mortgages, rights and interests in and to all property now
or hereafter owned by Kerr granted by Kerr to the Agent under the
Loan and Security Agreement, pursuant to the Senior Security
Documents, or to a similar agent under such future loan and
security agreements that reflect Permitted Future Financings under
section 3.1.
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"Senior Security Documents" means the Loan and Security
Agreement and all other Security Documents (as that term is
defined in the Loan and Security Agreement), as the same may be
renewed, extended, modified, amended, supplemented or restated
from time to time.
"Statutory Funding Requirements" means the minimum funding
requirements for the Plan under section 302 of ERISA and section
412 of the Code.
ARTICLE II
ENHANCED CONTRIBUTIONS
2.1 GENERAL. Notwithstanding any credit balance in the
Plan's Funding Standard Account, Kerr shall contribute the
following amounts in cash to the Plan ("Enhanced Contributions")
no later than the due dates specified below:
<TABLE>
<CAPTION>
DUE DATE AMOUNT DUE DATE AMOUNT
- ------------------ --------------- --------------- -------------
<S> <C> <C> <C>
Closing $3.5 million April 15, 2000 $1.50 million
October 15, 1997 $1.75 million July 15, 2000 $1.50 million
January 15, 1998 $1.75 million October 15, 2000 $1.50 million
April 15, 1998 $1.75 million January 15, 2001 $1.50 million
July 15, 1998 $1.75 million April 15, 2001 $1.50 million
October 15, 1998 $1.75 million July 15, 2001 $1.50 million
January 15, 1999 $1.75 million October 15, 2001 $1.50 million
April 15, 1999 $1.75 million January 15, 2002 $1.50 million
July 15, 1999 $1.75 million April 15, 2002 $1.50 million
October 15, 1999 $1.75 million July 15, 2002 $1.50 million
January 15, 2000 $1.75 million October 15, 2002 $1.50 million
January 15, 2003 $1.50 million
</TABLE>
2.2 CONTRIBUTIONS FOR PLAN YEAR 2003 AND THEREAFTER. For
Plan Years beginning January 1, 2003, and thereafter, Kerr shall
make Minimum Contributions and Additional Contributions in cash to
the Plan as provided below.
(a) MINIMUM CONTRIBUTIONS. For Plan Years beginning
January 1, 2003, and thereafter, Kerr will pay Minimum
Contributions determined as follows. The Minimum Contribution for
a Plan Year is the minimum amount of cash required under the
Statutory Funding Requirements to be contributed for the Plan Year
in equal quarterly installments on April 15, July 15, and October
15 of the Plan Year and on January 15 of the following year,
except that (i) the Required Credit Balance shall not be used in
calculating the Minimum Contributions, and (ii) the Required
Credit Balance shall not be
5
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included in the assets used in calculating the unfunded current
liability under section 302(d)(8)(A) of ERISA and section
412(l)(8)(A) of the Code.
(b) ADDITIONAL CONTRIBUTIONS. For each of the Plan
Years beginning January 1, 2003, and thereafter, Kerr will pay an
Additional Contribution of $1 million per year into the Plan, in
addition to the Minimum Contributions, in equal quarterly
installments on April 15, July 15, and October 15 of the Plan Year
and on January 15 of the following year.
2.3 MEETING THE STATUTORY FUNDING REQUIREMENTS. Amounts
paid as Enhanced Contributions, Minimum Contributions, and
Additional Contributions will be on account of and applied to the
amounts required to be contributed for a Plan Year under the
Statutory Funding Requirements. If the amount required to be
contributed for a Plan Year under the Statutory Funding
Requirements, before any offset for the Plan's credit balance,
exceeds the amount of Enhanced Contributions required for that
Plan Year, Kerr shall pay in cash to the Plan the greater amounts.
Nothing in this section 2.3 is intended to preclude the use of the
prior Year's credit balance in making determinations concerning
the deficit reduction contribution for Plan Years beginning before
January 1, 2003. The Enhanced Contributions attributable to a
Plan Year for purposes of section 412 of the Code are the payments
specified in section 2.1 of this Agreement that are due April 15,
July 15, and October 15 of that year and January 15 of the
following year. For this purpose, the $3.5 million Enhanced
Contribution payable at Closing shall be assigned to Kerr's 1997
Plan Year.
ARTICLE III
PERMITTED FUTURE FINANCINGS
AND FUTURE FINANCING PAYMENTS
3.1 SECURED DEBT. If, after the Closing, Kerr incurs Future
Financing, Kerr shall immediately contribute one dollar ($1.00) of
every three dollars ($3.00) of the funds received from such
borrowing to the Plan (the "Future Financing Payments") until the
Plan's PBGC Funding Ratio is at least 0.90. Notwithstanding the
preceding sentence, Kerr may not incur Future Financing if a Plan
Lien exists at the time of the proposed Future Financing. Except
as otherwise expressly permitted in this Agreement and the Senior
Security Documents, Kerr shall not grant to any person any
security interest, lien, mortgage, right or interest in its
property now or hereafter owned, except that security interests,
liens, rights or interests that Kerr provides in connection with
purchase money Indebtedness permitted under credit facilities with
the Lender shall not exceed the aggregate amount of $1 million.
6
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3.2 UNSECURED DEBT. If, after the Closing, Kerr desires to
incur additional unsecured Indebtedness (which, as unsecured
Indebtedness, is subordinate to the PBGC Lien), Kerr may do so
without limitation. Such unsecured Indebtedness will not be
subject to the Future Financing Payment obligations described in
section 3.1, provided that the PBGC Lien is still in place. If
PBGC has released the PBGC Lien pursuant to section 8.3 of this
Agreement, then, for purposes of this Agreement only, any
unsecured Indebtedness incurred after the PBGC Lien is released
shall be treated as if it were Future Financing for purposes of
subjecting such additional Indebtedness to the requirements of
section 3.1. Notwithstanding the preceding sentence, Kerr may,
at its option, elect to provide PBGC with all documents and
information necessary to perfect the PBGC Lien, in which case the
unsecured borrowings will not be subject to Future Financing
Payments in accordance with the first two sentences of this
section 3.2.
3.3 EFFECT ON ENHANCED CONTRIBUTIONS AND STATUTORY FUNDING
REQUIREMENTS. Amounts contributed to the Plan to satisfy any
obligations to make Future Financing Payments are in addition to
Enhanced Contributions, Minimum Contributions, Additional
Contributions and any amounts required to be contributed pursuant
to the Statutory Funding Requirements, and may not be applied to
satisfy Kerr's obligations to make Enhanced Contributions, Minimum
Contributions, Additional Contributions, or Statutory Funding
Requirements.
3.4 REPAYMENT OF CERTAIN AMOUNTS INCLUDED IN SENIOR DEBT.
(a) Kerr will not borrow under the CAPEX Loan Facility an
aggregate total amount that is more than the lesser of (i)
$10 million (or $17.5 million after June 30, 1999) or (ii) 80% of
the Cost Value of Eligible Purchased Equipments (as defined in the
Loan and Security Agreement). The principal amount of each such
borrowing shall be repaid in 84 equal, consecutive monthly
amounts, with each such amount equal to one eighty-fourth (1/84th)
of the original principal amount of each such advance; PROVIDED,
however, that Kerr shall have the right to make prepayments on
such borrowings as provided in the Loan and Security Agreement
with such prepayments being applied to the principal installments
in inverse order of maturity. Once borrowings are repaid, they
may not be borrowed again.
(b) Kerr will not borrow in the form of term loans pursuant
to the Loan and Security Agreement an aggregate total amount that
is more than $32 million. The principal amounts of term loan
borrowings shall be repaid in consecutive monthly amounts of
$333,333.33 from September 1, 1997 through and including August 1,
1998, $416,666.66 from September 1, 1998 through and including
August 1, 1999, $500,000.00 from September 1, 1999 through and
including August 1, 2001, $916,666.66 from September 1, 2001
through and including August 1, 2002, and the remaining balance on
7
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the termination date of the loans; PROVIDED, however, that Kerr
shall have the right to make prepayments on such borrowings as
provided in the Loan and Security Agreement with such prepayments
being applied to the principal installments in inverse order of
maturity. Once borrowings are repaid, they may not be borrowed
again.
ARTICLE IV
PBGC LIEN
4.1 AGREED TERMINATION LIABILITY. Upon termination of the
Plan after the Closing (other than in a standard termination
pursuant to section 4041(b) of ERISA), Kerr will pay PBGC a sum of
money ("Agreed Termination Liability") equal to the total amount
of the Plan's unfunded benefit liabilities, as calculated in
accordance with section 4001(a)(18) of ERISA, associated with the
Plan as of the Plan termination date as set in accordance with
section 4048 of ERISA. Kerr's obligation to pay Agreed
Termination Liability in an amount up to $40,700,000.00 shall be
secured with security interests, liens, mortgages, rights and
interests in property of Kerr (the "PBGC Lien") as described in
sections 4.2 and 4.3 below. The PBGC Lien, and the rights and
interests of PBGC thereunder, shall be subordinate to the Senior
Lien and subject to the terms of the Intercreditor Agreement and
such other intercreditor agreements that PBGC enters into pursuant
to section 4.2.
4.2 PBGC SECURITY AGREEMENT AND INTERCREDITOR AGREEMENT.
Upon execution of this Agreement, Kerr shall execute and deliver
to PBGC security agreements, substantially in the form of Exhibit
A-1 to this Agreement, and mortgages, substantially in the form of
Exhibit A-2 to this Agreement, sufficient to create the PBGC Lien.
Upon execution of this Agreement, PBGC shall execute and deliver
to Fremont and the Agent under the Loan and Security Agreement the
Intercreditor Agreement. If and when Kerr obtains Permitted
Future Financings, PBGC shall, at Kerr's cost, execute and deliver
to Kerr additional intercreditor agreement(s) respecting such
Permitted Future Financings substantially in the form of the
Intercreditor Agreement or in such other form as PBGC and Kerr may
agree to at that time.
4.3 FINANCING STATEMENTS. As soon as practicable after
execution of this Agreement, but in no event later than September
30, 1997, PBGC shall prepare such documents (including without
limitation, Uniform Commercial Code financing statements) as are
necessary to establish and perfect the PBGC Lien. Kerr shall
provide such information as PBGC reasonably requests in order to
prepare such filings. Filings prepared by PBGC shall be executed
by Kerr and delivered to PBGC within five (5) business days of
receipt, after which time PBGC may file, register and record such
documents, as appropriate, with state and local recordation
offices to perfect the PBGC Lien.
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ARTICLE V
TAX DEDUCTIBILITY
5.1 GENERAL. Notwithstanding any other provision of this
Agreement, Kerr shall not be required to make that portion of any
Enhanced Contribution, Minimum Contribution, Additional
Contribution, or Future Financing Payment that would not be
deductible under section 404 of the Code.
5.2 DETERMINING DEDUCTIBILITY. For purposes of this
Agreement, deductibility under section 404 of the Code shall be
determined subject to the following requirements:
(a) Enhanced Contributions, Minimum Contributions and
Additional Contributions made on April 15, July 15 and
October 15 are made for the current Plan Year, and payments
made on January 15 are made for the previous Plan Year.
Future Financing Payments shall be allocated to the Plan Year
when paid; and
(b) "Current liability" shall be computed using the lowest
interest rate in the "permissible range" prescribed under
section 412(b)(5)(B)(ii) of the Code.
5.3 CARRYOVER. If any portion of an Enhanced Contribution,
Minimum Contribution, Additional Contribution, or Future Financing
Payment is not deductible under sections 5.1 and 5.2 of this
Agreement, then that portion shall be carried over and paid in the
next taxable year of Kerr in which it is deductible under such
sections. Any such carryover payment will be in addition to any
other Enhanced Contributions, Minimum Contributions, Additional
Contributions, and Future Financing Payments required for such
next year.
5.4 NOTICE TO PBGC. If Kerr determines that any portion of
an Enhanced Contribution, Minimum Contribution, Additional
Contribution or Future Financing Payment is not required to be
paid as a result of the provisions in this Article V, Kerr shall
as soon as practicable provide PBGC with the computations
supporting that determination, together with such additional
information, if any, that PBGC reasonably requests in order to
review those computations.
ARTICLE VI
PLAN LIEN
6.1 GENERAL. If any Enhanced Contribution, Minimum
Contribution, Additional Contribution, or Future Financing Payment
is not paid when due and such delinquency is
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not cured within ten (10) days following the due date, then there
shall be a lien and security interest in favor of the PBGC, for
the benefit of the Plan ("Plan Lien"), on all of Kerr's property
and rights to property, for the aggregate unpaid balance of
Enhanced Contributions, Minimum Contributions, Additional
Contributions, and Future Financing Payments (including interest).
The Plan Lien shall arise on the due date for the required
Enhanced Contribution, Minimum Contribution, Additional
Contribution, or Future Financing Payment and shall continue in
effect until all such delinquencies are cured (or, in the case of
an event covered by section 8.4, until the amount of the Plan Lien
provided for under that section is paid in full).
6.2 FINANCING STATEMENTS. As soon as practicable after
execution of this Agreement, PBGC shall prepare, and Kerr shall
execute and deliver, such documents (including, without
limitation, Uniform Commercial Code financing statements) as are
necessary to establish and perfect the Plan Lien described in this
Article VI. Kerr shall provide such information as PBGC
reasonably requests in order to prepare such documents. Such
documents shall be held in escrow by PBGC or, if Kerr so elects at
Kerr's expense, by an escrow agent mutually and reasonably
acceptable to Kerr and PBGC, until such time as the Plan Lien
shall arise, at which time the PBGC may file, register and record
such documents, as appropriate, with state and local recordation
offices to perfect such Plan Lien. In the event that this
Agreement shall terminate prior to the time a Plan Lien arises,
PBGC shall surrender such documents to Kerr as soon as practicable
after the date of termination.
6.3 PLAN LIEN IS SUBORDINATE TO SECURED DEBT. Any Plan Lien
arising under this Article VI, and the rights and interests of the
PBGC thereunder, shall be subordinate to the Senior Lien and
subject to the terms of the Intercreditor Agreement.
ARTICLE VII
PBGC FORBEARANCE
7.1 DISMISSAL OF TERMINATION ACTION. As soon as practicable
after execution of this Agreement and Kerr's payment to the PBGC
in cash of the PBGC Notice Amount, PBGC shall (a) cause the
Termination Action to be dismissed without prejudice, (b) withdraw
its Notice of Determination regarding termination of the Plan, and
(c) if Kerr elects and at Kerr's expense, assist in Kerr's efforts
to publicize PBGC's withdrawal of the Notice of Determination.
7.2 PBGC'S FORBEARANCE. From and after the Closing, PBGC
shall forbear from instituting proceedings to terminate the Plan
under section 4042(a)(4) of ERISA as a
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result of the Proposed Acquisition, the Loan and Security
Agreement, the Senior Debt, the Refinancing or any Permitted
Future Financings.
ARTICLE VIII
TERMINATION
8.1 TERMINATION OF AGREEMENT. Except as provided in section
8.6, this Agreement will terminate upon the earliest to occur of
(a), (b), (c) and (d) below.
(a) Termination of the Plan in a standard termination under
section 4041(b) of ERISA.
(b) The date after August 31, 2002, on which Kerr obtains
both of the credit ratings (which may be private ratings
in the event a public rating is not available) specified
below, or better, on either actual unsecured debt or
hypothetical unsecured debt in the amount of at least
$50 million:
RATING AGENCY RATING
Standard & Poor's BBB-
Moody's Baa3
(c) The date after August 31, 2002, on which Kerr
demonstrates to PBGC that the Plan has no unfunded
benefit liabilities as determined under section
4001(a)(18) of ERISA as of the last day of the Plan Year
for any two full consecutive calendar years after the
date of this Agreement.
(d) The date after August 31, 2002, on which Kerr is merged
into, or becomes a member of a Controlled Group with, a
person that satisfies the minimum credit rating test
specified in section 8.1(b) on a pro forma basis after
the merger or combination is completed.
8.2 EFFECT OF TERMINATION. All obligations of Kerr and PBGC
under this Agreement shall terminate immediately upon termination
of this Agreement. Upon such termination, PBGC shall release and
return to Kerr all financing statements and other documents
furnished to PBGC pursuant to sections 4.3 and 6.2.
8.3 EARLIER RELEASE OF PBGC LIEN. Except as provided in
section 8.6, PBGC shall release the PBGC Lien, before August 31,
2002, under the circumstances and conditions specified in (a),
(b), or (c) below.
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(a) If, before August 31, 2000, Kerr satisfies the minimum
credit rating test specified in section 8.1(b) and
maintains those minimum ratings, or better, continuously
for two years, PBGC shall release the PBGC Lien at the
end of such two-year period.
(b) If, before August 31, 2001, Kerr is merged into, or
becomes a member of a Controlled Group with, a person
whose minimum credit ratings (which may be private
ratings in the event a public rating is not available)
on either actual unsecured debt or hypothetical
unsecured debt in the amount of at least $50 million are
BBB by S&P and Baa2 by Moody's on a pro forma basis
after giving effect to the merger or combination, and
such person maintains those minimum ratings, or better,
continuously for one year, PBGC shall release the PBGC
Lien at the end of such one-year period.
(c) If Kerr is merged into, or becomes a member of a
Controlled Group with, a person whose minimum credit
ratings (which may be private ratings in the event a
public rating is not available) on either actual
unsecured debt or hypothetical unsecured debt in the
amount of at least $50 million are A- by Standard &
Poor's and A3 by Moody's on a pro forma basis after
giving effect to the merger or combination, PBGC shall
release the PBGC Lien on the date of such merger or
combination.
8.4 EFFECT ON PLAN LIEN. In the event the PBGC Lien is
released pursuant to section 8.3 of this Agreement, and a Plan
Lien arises before August 31, 2002, pursuant to section 6.1 of
this Agreement, then
(a) the amount of the Plan Lien shall equal
(i) the aggregate unpaid balance of Enhanced
Contributions, Minimum Contributions, Additional
Contributions, and Future Financing Payments, plus
(ii) an amount equal to one hundred fifteen percent
(115%) of the Plan's benefit liabilities (as
defined in sections 4001(a)(16) and (18)(A) of
ERISA), calculated as of the end of the prior Plan
Year, based on actuarial data as of the beginning
of the prior Plan Year, minus
(iii)an amount equal to the market value of the Plan's
assets, determined as of the end of the prior Plan
Year; and
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<PAGE>
(b) the amount described in section 8.4(a) above shall
immediately become due and payable to the Plan.
8.5 NOTICE TO PBGC. (a) Kerr shall provide PBGC with
written notice of any determination by Kerr that it has achieved
one of the tests in section 8.1 for termination of the Agreement
or in section 8.3 for earlier release of the PBGC Lien. Within
thirty (30) days of receipt of such notice, PBGC will respond in
writing to Kerr that it concurs with the determination, such
concurrence not to be unreasonably withheld.
(b) In the event a Plan Lien arises in the amount described
in section 8.4(a) above, Kerr shall provide PBGC by January 31 of
each Plan Year with calculations showing the amount of the Plan's
benefit liabilities and with the value of the Plan's assets, all
as required for section 8.4(a)(ii) and (iii) of this Agreement.
8.6 EFFECT OF PLAN LIEN. If a Plan Lien arises before this
Agreement terminates pursuant to section 8.1, then,
notwithstanding anything to the contrary in sections 8.1, 8.2,
8.3, 8.4, and 8.5 of this Agreement, this Agreement shall not
terminate, any PBGC Lien shall not be released, and the
obligations of Kerr and PBGC shall not terminate hereunder unless
and until any such then-existing Plan Lien is released.
ARTICLE IX
NOTICES TO PBGC
9.1 GENERAL. From and after the Closing and until
termination of this Agreement, and in addition to any reporting
obligations that Kerr may have under ERISA, Kerr shall deliver or
cause to be delivered to PBGC the following:
(a) thirty (30) days' prior written notice of any
refinancing of Kerr's outstanding Indebtedness;
(b) ten (10) days' prior written notice of any borrowings
under the Loan and Security Agreement (except the
revolving credit facility), any refinancings thereof and
any other Indebtedness of more than $1 million incurred
after the Closing;
(c) as soon as practicable upon their issuance, Kerr's
quarterly financial statements and audited annual
financial statements;
(d) written notice of all payments made with respect to the
outstanding amounts of the term loan portions of the
debts to the Lender (and any other person
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<PAGE>
that is a Lender under the Loan and Security Agreement)
within thirty (30) days of such payment;
(e) thirty (30) days' prior written notice of any actual
change in any of the Plan's actuarial assumptions or
methods for the purposes of the Statutory Funding
Requirements, which change shall be subject to PBGC's
consent, such consent not to be unreasonably withheld;
(f) a written statement of the amount and date of any
contributions made to the Plan, within ten (10) days of
payment of that contribution;
(g) a written statement of the amount and date of any
failure to make a contribution when due, within two (2)
days of such due date;
(h) (intentionally deleted);
(i) for each Plan year, a copy of the Plan's annual report
on Internal Revenue Service Form 5500, at the same time
that report is filed with the Internal Revenue Service;
(j) for each Plan year, a copy of the Plan's actuarial
valuation report, within ten (10) days after that report
is completed in final form by the Plan's actuary;
(k) to the Director of PBGC's Corporate Finance and
Negotiations Department, a copy of any reportable event
notices at the same time such notice is filed in
accordance with 29 C.F.R. part 4043;
(l) a copy of any Plan amendment within ten (10) days after
adoption of that amendment; and
(m) a copy of any notices required to be given by, or
required to be provided to, the Lender, or by any other
party to Kerr's Loan and Security Agreement, at the same
time such notice is given or required to be given.
9.2 NOTICE OF MERGER OR CONSOLIDATION. From and after the
Closing, and until termination of this Agreement, Kerr shall
notify PBGC thirty (30) days in advance of any merger or
consolidation involving Kerr, or any sale or disposition of Kerr's
assets that is outside the ordinary course of business if such
sale or disposition (in any one transaction or series of related
transactions) involves at least 5% of Kerr's annual revenues,
operating profits, or assets.
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<PAGE>
ARTICLE X
THE CLOSING AND EVENTS OF DEFAULT
10.1 GENERAL. Kerr's obligations under this Agreement shall
become effective upon the Closing. If the Closing does not occur
by September 10, 1997, this Agreement shall terminate
automatically and the provisions of section 8.2 shall apply and
PBGC shall refund the PBGC Notice Amount to Kerr.
10.2 EVENTS OF DEFAULT BY KERR. The occurrence of any of the
following events shall constitute a default by Kerr, PROVIDED,
however, that PBGC's exercise of rights and remedies upon the
occurrence of such a default shall be subject to the terms of the
Intercreditor Agreement and to any other intercreditor agreements
entered into by PBGC pursuant to section 4.2:
(a) Kerr breaches or is in default of any of its covenants
or obligations under this Agreement, including without
limitation, Kerr's obligation to make Enhanced
Contributions, Minimum Contributions, Additional
Contributions, and Future Financing Payments;
(b) Kerr breaches or is in default of any of its covenants
or obligations under its Loan and Security Agreement;
(c) Kerr files or has filed against it a petition under
Title 11 of the United States Code or under any similar
Federal law or law of a State or political subdivision
of a State; and
(d) Kerr breaches or is in default of any of the
representations and warranties listed in section 11.8 of
this Agreement.
ARTICLE XI
GENERAL PROVISIONS
11.1 LIMITATION OF RIGHTS. This Agreement is intended to be
and is for the sole and exclusive benefit of PBGC (acting for its
own benefit and for the benefit of the Plan) and Kerr and the
persons (if any) within Kerr's Controlled Group. Nothing
expressed or mentioned in or to be implied from the Agreement
gives any person other than PBGC, Kerr and the persons (if any)
within Kerr's Controlled Group any legal or equitable right,
remedy or claim against Fremont, PBGC, Kerr or the persons (if
any) in Kerr's Controlled Group under or in respect of this
Agreement.
15
<PAGE>
11.2 SEVERABILITY. If any provision of this Agreement shall
be invalid, inoperative or unenforceable as applied in any
particular case, this shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other
case or circumstance. If any provision of this Agreement shall be
invalid, inoperative or unenforceable in all cases, this shall not
have the effect of rendering any other provision of the Agreement
invalid, inoperative, or unenforceable. The invalidity of any
portion of this Agreement shall not affect the remaining portions
of the Agreement.
11.3 NOTICES. All notices, demands, instructions and other
communications required or permitted under the Agreement to any
party to the Agreement shall be in writing and shall be personally
delivered or sent by registered, certified or express mail,
postage prepaid, return receipt requested; telefacsimile (which
shall be immediately followed by the original of such
communication); or pre-paid overnight delivery service with
confirmed receipt; and shall be deemed to be given for purposes of
this Agreement on the date the writing is received by the intended
recipient, or in the case of telefacsimile, on the date
transmitted to the intended recipient. Unless otherwise specified
in a communication sent or delivered in accordance with the
foregoing provisions of this section, notices, demands,
instructions and other communications in writing shall be sent to
the parties as indicated below:
To Kerr: D. Gordon Strickland
President and Chief Executive Officer
Kerr Group, Inc.
500 New Holland Avenue
Lancaster, PA 17602-2104
Telephone: (717) 299-6511
Telefacsimile:(717) 394-6398; and
Groom and Nordberg, Chtd.
Thomas S. Gigot, Esq.
1701 Pennsylvania Avenue, N.W.
Suite 1200
Washington, D.C. 20006
Telephone: (202) 861-6624
Telefacsimile:(202) 659-4503
To PBGC: Director, Corporate Finance and
Negotiations Department
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005-4026
16
<PAGE>
Telephone: (202) 326-4070
Telefacsimile: (202) 842-2643; and
General Counsel
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005-4026
Telephone: (202) 326-4020
Telefacsimile: (202) 326-4112
11.4 WEEKENDS AND HOLIDAYS. If the last date (whether
measured by calendar days or business days) for performing any act
or exercising any right provided for in the Agreement falls on a
Saturday, Sunday, or federal holiday, unless otherwise expressly
provided in this Agreement, the act may be performed or the right
exercised on the next day that is not a Saturday, Sunday or
federal holiday with the same force and effect as if done on the
date provided in the Agreement.
11.5 COUNTERPARTS. This Agreement may be executed in two or
more counterparts and by different parties on separate
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.6 ENTIRE AGREEMENT. The confidentiality agreement dated
February 13, 1997, between Kerr and PBGC, and the confidentiality
agreement dated June 27, 1997, between Fremont and PBGC shall
remain in full force and effect in accordance with their
respective terms. Those agreements together with this Agreement
and its Exhibits contain the complete and exclusive statement of
the agreement and understanding by and among the parties hereto
and supersede all prior agreements, understandings, commitments,
representations, communications, and proposals, oral or written,
between the parties relating to the subject matter of this
Agreement. This Agreement may not be amended, modified, or
supplemented except by an instrument in writing executed by the
parties to this Agreement.
11.7 NO ADMISSION OF LIABILITY. This Agreement is not and
shall not be construed as or deemed to be an admission or
concession by or on the part of any party of any liability or the
applicability or inapplicability of any provision of ERISA in
connection with any matter described in the Agreement, and each
party expressly denies any liability whatsoever.
11.8 REPRESENTATIONS AND WARRANTIES. PBGC and Kerr each
represents and warrants to the other that it has full power and
authority to enter into this Agreement and
17
<PAGE>
that this Agreement constitutes a legal, valid and binding
obligation enforceable against the opposite party or parties in
accordance with the Agreement's terms. Kerr also represents and
warrants that the documents provided to PBGC on August 22, 1997,
were true and correct copies of a late draft of the Loan and
Security Agreement.
11.9 NO RELIANCE. Except for the representations and
warranties stated in section 11.8 of this Agreement, each party to
the Agreement has made its own independent inquiry concerning the
matters, facts and circumstances material to the settlement
embodied in the Agreement, including without limitation, the
legal, tax and accounting aspects of the transactions contemplated
in the Agreement and any related transactions. No party to the
Agreement has relied and no party will rely upon any other party
to the Agreement, or any other party's legal counsel or financial
or actuarial advisors, for any information or advice of any kind
in connection with any of the transactions contemplated in the
Agreement or with any related transactions; PROVIDED, HOWEVER,
that PBGC has relied on Kerr's and Fremont's representations that
the information and documentation they have provided to PBGC has
been, to the best of their knowledge and belief, accurate and
complete.
11.10 AMENDMENTS AND WAIVERS. No amendment of any
provision of this Agreement shall be valid unless the amendment is
in writing and signed by the parties hereto and by the Lender.
The failure of any party to the Agreement to enforce a provision
of the Agreement shall not constitute a waiver of the party's
right to enforce that provision of the Agreement.
11.11 HEADINGS. The section headings contained in this
Agreement are for convenience only and shall not affect the
meaning or interpretation of this Agreement.
11.12 GOVERNING LAW. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
District of Columbia and by ERISA, the Code and other laws of the
United States to the extent they preempt District of Columbia law.
11.13 BINDING EFFECT. This Agreement shall be binding
upon Kerr and PBGC and their respective successors, if any.
11.14 CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties to
express their mutual intent, and no rule of strict construction
shall be applied against any party hereto. Nor shall any rule of
construction that favors a non-draftsman or a government agency be
applied.
11.15 ASSIGNMENT. This Agreement may not be assigned in
whole or in part by either party without the express written
consent of the other party.
18
<PAGE>
11.16 NO CHANGE TO GOVERNING PLAN DOCUMENTS OR PLAN
ADMINISTRATION. This Agreement is not a document or instrument
governing the Plan, nor does anything in this Agreement amend,
supplement or derogate from the documents and instruments
governing such Plan. Further, nothing in this Agreement alters,
amends or otherwise modifies the operation or administration of
the Plan.
11.17 RESERVATION OF RIGHTS. Nothing in this Agreement
or the Intercreditor Agreement shall preclude PBGC from exercising
its regulatory, enforcement, litigation or other authority as set
forth in ERISA and the Code with respect to any person, other than
as expressly provided otherwise in article VII of this Agreement.
Nothing in this Agreement constitutes or reflects a waiver or
modification by Kerr of any claim, right or defense that it has
under law.
11.18 FURTHER COOPERATION. Kerr hereby agrees to execute
and deliver to PBGC such further documents and agreements as PBGC
shall reasonably request in order to implement further the intent
of the parties reflected herein. PBGC hereby agrees, at Kerr's
expense, to execute and deliver to Kerr such further documents and
agreements as PBGC shall reasonably request in order to implement
further the intent of the parties reflected herein.
11.19 SUBORDINATION AND STANDBY AGREEMENT. This
Agreement and all rights and interests of PBGC and the Plan
hereunder are subject to the Intercreditor Agreement, and to such
other intercreditor agreements executed by PBGC pursuant to
section 4.2.
19
<PAGE>
AGREED AND ACCEPTED:
PENSION BENEFIT GUARANTY KERR GROUP, INC.
CORPORATION
By: /s/ Andrea E. Schneider By: /s/ D. Gordon Strickland
------------------------ --------------------------
Its: Acting Deputy Director Its: President and Chief
and Chief Negotiator Executive Officer
Executed on August 24, 1997 Executed on August 24, 1997
20
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 24, 1997 (as the same may from time
to time be amended, supplemented or otherwise modified, this "Security
Agreement"), between the Pension Benefit Guaranty Corporation ("Secured Party"),
and Kerr Group, Inc. ("Debtor").
W I T N E S S E T H:
WHEREAS, the Secured Party has filed an action before the United
States District Court for the Eastern District of Pennsylvania seeking to
terminate the Kerr Group, Inc. Retirement Income Plan (the "Plan") pursuant to
29 U.S.C. Section 1342; and
WHEREAS, in consideration of (i) the Debtor's willingness to undertake
the obligations set forth in the Agreement, dated as of August 24, 1997 (the
"Settlement Agreement"), between the Debtor and the Secured Party, and (ii) the
Debtor's willingness to enter into this Security Agreement, the Secured Party is
willing to dismiss the Termination Action and is willing to forbear from taking
further action to terminate the Plan;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"ACCOUNT DEBTOR" shall mean the person who is obligated on a
Receivable.
"ACCOUNTS" shall mean "accounts" as such term is defined in Section
9-106 of the UCC.
"ACQUISITION" shall mean the acquisition of not less than 51% of the
fully diluted shares of capital stock of the Debtor by Kerr Acquisition
Corporation, a Delaware corporation, and the subsequent merger of Kerr Acquisi-
<PAGE>
tion Corporation with and into the Debtor, with the Debtor remaining as the
surviving corporation.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"CHATTEL PAPER" shall mean "chattel paper" as such term is defined in
Section 9-105(b) of the UCC.
"COLLATERAL" shall have the meaning assigned to it in Article II
hereof.
"COLLATERAL RECORDS" shall mean books, records, computer software,
computer printouts, customer lists, blueprints, technical specifications,
manuals, and similar items which relate to any Collateral other than such items
obtained under license or franchise security agreements which prohibit
assignment or disclosure of such items.
"CONTRACTS" shall mean all contracts, undertakings or other agreements
(other than Chattel Paper, Documents and Instruments) in or under which the
Debtor may now or hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any agreement relating to the
terms of payment or the terms of performance thereof.
"DEBTOR" shall have the meaning set forth in the introductory clause
to this Agreement.
"DEPOSIT ACCOUNTS" shall mean and any deposit account, including
without limitation, "deposit accounts" as such term is defined in Section
9-105(e) of the UCC and any other deposit or securities account (general or
special), together with any funds, instruments or other items credited to any
such account from time to time, and all interest thereon.
"DOCUMENTS" shall mean "documents" as such term is defined in Section
9-105(f) of the UCC.
"EQUIPMENT" shall mean "equipment" as such term is defined in Section
9-109(2) of the UCC, including, without limitation, machinery, manufacturing
equipment, data processing equipment, computers, office equipment, furniture,
appliances and tools.
2
<PAGE>
"EVENT OF DEFAULT" shall mean the occurrence or continuance of any of
the following events, acts, occurrences or conditions, whether such event, act,
occurrence or condition is voluntary or involuntary or results from the
operation of law or pursuant to or as a result of compliance by any Person with
any judgment, decree, order, rule or regulation of any court or administrative
or governmental body:
(a) DEFAULT UNDER SECURED OBLIGATIONS. The Debtor shall default
in the payment or performance when due (after satisfaction of any applicable
grace period and notice requirements) of any of the Secured Obligations.
(b) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made by the Debtor herein or in any other document or certificate or
statement delivered pursuant hereto shall prove to be false or misleading in any
material respect on the date as of which made or deemed made.
(c) BREACH OF COVENANTS. The Debtor shall fail to perform or
observe any agreement, covenant or obligation arising under this Security
Agreement, and such failure shall continue after the end of the applicable grace
period, if any, provided herein.
(d) BANKRUPTCY, ETC. (i) The Debtor shall commence a voluntary
case concerning itself under the Bankruptcy Code; or (ii) an involuntary case is
commenced against the Debtor under the Bankruptcy Code and the petition is not
controverted within 10 days, or is not dismissed within 30 days, after
commencement of the case; or (iii) a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of the Debtor or the Debtor commences any other proceedings under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Debtor or there is commenced against the
Debtor any such proceedings which remains undismissed for a period of 30 days;
or (iv) any order for relief or other order approving any such case or
proceeding is entered; or (v) the Debtor is adjudicated insolvent or bankrupt;
or (vi) the Debtor suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed for
a period of 30 days; or (vii) the Debtor makes a general assignment for the
benefit of creditors; or (viii) the Debtor shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts generally as they
become due; or (ix) the Debtor shall
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call a meeting of its creditors with a view of arranging a composition or
adjustment of its debts; or (x) the Debtor shall by any act or failure to act
consent to, approve of or acquiesce in any of the foregoing; or (xi) any
corporate action is taken by the Debtor for the purpose of effecting any of the
foregoing.
(e) SECURITY AGREEMENT. This Security Agreement shall for any
reason cease to be in full force and effect, or shall cease to give the Secured
Party the Liens, rights, powers and privileges purported to be created hereby
including, without limitation, a perfected security interest in, and Lien on,
all of the Collateral in accordance with the terms hereof.
(f) JUDGMENTS. One or more judgments or decrees in an aggregate
amount of $500,000 or more shall be entered by a court or courts of competent
jurisdiction against the Debtor (other than any judgment as to which, and only
to the extent, a reputable insurance company has acknowledged coverage of such
claim in writing) and (i) any such judgments or decrees shall not be stayed,
discharged, paid, bonded or vacated within 30 days or (ii) enforcement
proceedings shall be commenced by any creditor on any such judgments or decrees.
"FIXTURES" shall mean "fixtures" as such term is defined in Section
9-313 of the UCC.
"FUTURE FINANCING" shall have the meaning given in the Settlement
Agreement.
"GENERAL INTANGIBLES" shall mean "general intangibles" as such term is
defined in Section 9-106 of the UCC, including, without limitation, rights to
the payment of money (other than Receivables), trademarks, copyrights, patents,
and contracts, licenses and franchises (except in the case of licenses and
franchises in respect of which the Debtor is the licensee or franchisee if the
agreement in respect of such license or franchise prohibits by its terms any
assignment or grant of a security interest, limited and general partnership
interests and joint venture interests, federal income tax refunds, trade names,
distributions on certificated securities (as defined in Section 8-102(1)(a) of
the UCC and uncertificated securities (as defined in Section 8-102(1)(b) of the
UCC, computer programs and other computer software, inventions, designs, trade
secrets, goodwill, proprietary rights, customer lists, supplier contracts, sale
orders, correspondence, advertising materials, payments due in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of any
property, reversionary interests in pension and profit-
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sharing plans and reversionary, beneficial and residual interests in trusts,
credits with and other claims against any Person, other, together with any
collateral for any of the foregoing and the rights under any security agreement
granting a security interest in such collateral.
"HEDGING AGREEMENTS" shall mean interest rate or currency protection
or hedging arrangements, including without limitation, caps, collars, floors,
forwards and any other similar or dissimilar interest rate or currency exchange
agreements or other interest rate or currency hedging arrangements.
"INSTRUMENTS" shall mean "instruments" as such term is defined in
Section 9-105(1)(i) of the UCC.
"INTERCREDITOR AGREEMENT" means that certain Subordination and Standby
Agreement by and among the Debtor, Secured Party, and NationsBank of Texas,
N.A., in its capacity as agent as provided therein as the same may be renewed,
amended, extended, modified, or restated from time to time, and any similar
agreement entered into hereafter in connection with any Future Financing.
"INVENTORY" shall mean "inventory" as such term is defined in Section
9-109(4) of the UCC, including without limitation, all goods (whether such
goods are in the possession of the Debtor or of a bailee or other Person for
sale, lease, storage, transit, processing, use or otherwise and whether
consisting of whole goods, spare parts, components, supplies, materials or
consigned or returned or repossessed goods), including without limitation, all
such goods which are held for sale or lease or are to be furnished (or which
have been furnished) under any contract of service or which are raw materials or
work in progress or materials used or consumed in the Debtor's business.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement of any kind or nature whatsoever,
including, without limitation, the filing of any financing statement or similar
instrument under the UCC or comparable law of any jurisdiction, domestic or
foreign.
"MONEY" shall mean "money" as such term is defined in Section
1-201(24) of the UCC.
"MOTOR VEHICLES" shall mean motor vehicles, tractors, trailers and
other like property, if title thereto is governed by a certificate of title
ownership.
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"PERMITTED LIENS" shall mean:
(a) Liens securing taxes, assessments and other charges or
levies of a governmental authority or the claims of materialmen, mechanics,
carriers, warehousemen or landlords for labor, materials, supplies or rentals
incurred in the ordinary course of business, but in the case of warehousemen or
landlords, only if such Liens are junior to the security interest in any of the
Collateral;
(b) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under worker's compensation, unemployment insurance, social security or similar
legislation or under payment, bid, surety, appeal or performance bonds;
(c) Liens constituting encumbrances in the nature of zoning
restrictions, easements, leases, subleases, rights or restrictions of record on
the use of real estate and other minor defects or irregularities in title and
other similar charges or encumbrances, none of such Liens which materially
detract from the value of such property or impair the use thereof in the
business of the Debtor;
(d) purchase money liens securing purchase money indebtedness
incurred for the purchase of Equipment after the date hereof;
(e) Liens shown on Schedule III hereto;
(f) Liens of the Secured Party arising under this Security
Agreement; and
(g) Liens granted to NationsBank of Texas, N.A., as agent
pursuant to the terms of that certain Loan and Security Agreement by and among
the Debtor, the other Lenders (as defined therein) from time to time party
thereto, the L/C Issuer (as defined therein), and NationsBank of Texas, N.A., as
agent, and any Liens granted in connection with any Future Financings.
(h) Liens arising in connection with judgments for the payments
of money of an amount not to exceed $250,000 in any one case or $500,000 in the
aggregate; provided that, as to any of such Liens, (i) the judgment or other
court order giving rise to such Lien is being contested in good faith by
appropriate proceedings diligently pursued and available to the Debtor prior to
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the commencement of any foreclosure or similar proceeding, (ii) execution
thereon is at all time effectively stayed (iii) an adequate reserve for the
Indebtedness which such Lien secures has been established on Debtor's books in
accordance with GAAP, and (iv) Debtor shall have given prior notice of such Lien
to the Secured Party.
"PERSON" shall mean and include any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"PROCEEDS" shall mean "proceeds" as such term is defined in Section
9-306(1) of the UCC.
"RECEIVABLES" shall mean all rights to payment for goods sold or
leased or services rendered, whether or not earned by performance and all rights
in respect of the Account Debtor, including without limitation, all such rights
in which the Debtor has any right, title or interest by reason of the purchase
thereof by the Debtor, and including without limitation all such rights
constituting or evidenced by any Account, Chattel Paper, Instrument, General
Intangible, note, contract, invoice, purchase order, draft, acceptance,
intercompany account, security agreement, or other evidence of indebtedness or
security, together with (a) any collateral assigned, hypothecated or held to
secure any of the foregoing and the rights under any security agreement granting
a security interest in such collateral, (b) all goods, the sale of which gave
rise to any of the foregoing, including, without limitation, all rights in any
returned or repossessed goods and unpaid seller's rights, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, and (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith.
"RECEIVABLES RECORDS" shall mean (a) all original copies of all
documents, instruments or other writings evidencing the Receivables, (b) all
books, correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to Receivables, including without limitation
all tapes, cards, computer tapes, computer discs, computer runs, record keeping
systems and other papers and documents relating to the Receivables, whether in
the possession or under the control of the Debtor or any computer bureau or
agent from time to time acting for the Debtor or otherwise, (c) all evidences of
the filing of financing statements and the registration of other instruments in
connection therewith and amendments, supplements or other modifications thereto,
notices to other creditors or secured parties, and certificates,
acknowledgements,
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or other writings, including without limitation lien search reports, from filing
or other registration officers, (d) all credit information, reports and
memoranda relating thereto, and (e) all other written or non-written forms of
information related in any way to the foregoing or any Receivable.
"SECURED OBLIGATIONS" shall mean all obligations, liabilities and
indebtedness of every nature of the Debtor to the Secured Party now existing or
hereafter incurred, arising under or in connection with the Settlement Agreement
or this Security Agreement.
"SECURED PARTY" shall have the meaning set forth in the introductory
clause to this Security Agreement.
"SETTLEMENT AGREEMENT" shall have the meaning set forth in the
recitals to this Agreement.
"TERMINATION ACTION" shall have the meaning set forth in the recitals
to this Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York.
ARTICLE II
GRANT OF SECURITY INTERESTS
Subject to the terms of any Intercreditor Agreement and to any other
Liens granted in connection with any Future Financing (as defined in the
Settlement Agreement), as security for the prompt and complete payment and
performance in full of all the Secured Obligations, the Debtor hereby grants to
the Secured Party a security interest in and continuing lien on all of the
Debtor's right, title and interest in, to and under the following, in each case,
whether now owned or existing or hereafter acquired or arising, and wherever
located (all of which being hereinafter collectively called the "COLLATERAL"):
(i) all Accounts;
(ii) all Chattel Paper;
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(iii) all contracts;
(iv) all Collateral Records;
(v) all Deposit Accounts;
(vi) all Documents;
(vii) all Equipment;
(viii) all Fixtures;
(ix) all General Intangibles
(x) all Hedging Agreements
(xi) all Instruments;
(xii) all Inventory;
(xiii) all Money;
(xiv) all Motor Vehicles;
(xv) all Receivables;
(xvi) all Receivables Records;
(xvii) all other tangible and intangible personal
property; and
(xviii) all accessions and additions to any or all of the
foregoing, all substitution and replacements for any or all of the
foregoing and all Proceeds or products of any or all of the foregoing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Party, which
representations and warranties shall survive execution and delivery of this
Security Agreement, as follows:
3.1 VALIDITY, PERFECTION AND PRIORITY. Subject to the terms of any
Intercreditor Agreement:
(a) The security interests in the Collateral granted to the
Secured Party hereunder constitute valid and continuing security interests in
the Collateral; and
(b) upon filing financing statements naming the Debtor as
"debtor" and the Secured Party as "secured party" in the filing offices set
forth on Schedule I hereto, the security interests in the Collateral granted to
the Secured Party hereunder will constitute perfected security interests therein
superior and prior to all Liens other than Permitted Liens, rights or claims of
all other Persons.
3.2 NO LIENS; OTHER FINANCING STATEMENTS. Subject to the terms of any
Intercreditor Agreement:
(a) except for the Lien granted to the Secured Party hereunder,
the Debtor owns and, as to all Collateral whether now existing or hereafter
acquired, will continue to own, each item of the Collateral free and clear of
any and all Liens, rights or claims of all other Persons other than Permitted
Liens, and the Debtor shall defend the Collateral against all claims and demands
of all Persons at any time claiming the same or any interest therein adverse to
the Secured Party other than the holders of Permitted Liens.
(b) No financing statement or other evidence of Lien covering or
purporting to cover any of the Collateral is on file in any public office other
than (1) financing statements filed or to be filed in connection with the
security interests granted to the Secured Party hereunder, (ii) financing
statements for which proper termination statements have been delivered to the
Secured Party for filing, and (iii) financing statements filed in connection
with Permitted Liens.
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3.3 CHIEF EXECUTIVE OFFICE. The chief executive office of the Debtor
is located at 500 New Holland Avenue, Lancaster, Pennsylvania 17602.
3.4 LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and Equipment
now or from time to time included in the Collateral will be held at the
locations set forth on Schedule II hereto.
3.5 BASIC REPRESENTATIONS AND WARRANTIES. (a) The Debtor is duly
organized and validly existing in good standing under the laws of the
jurisdiction of its formation; and
(a) The Debtor has the power and authority to execute, deliver
and carry out the terms and provisions of this Security Agreement and has taken
all necessary action to authorize the execution, delivery and performance by it
of this Security Agreement. The Debtor has duly executed and delivered this
Security Agreement, and this Security Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Party that from and
after the date of this Security Agreement:
4.1 FURTHER ASSURANCES. The Debtor will from time to time at the
expense of the Debtor, promptly execute, deliver, file and record all further
instruments, indorsements and other documents, and take such further action as
the Secured Party may deem reasonably desirable in obtaining the full benefits
of this Security Agreement and of the rights, remedies and powers herein
granted, including, without limitation, the following:
(i) the filing of any financing statements, in form
acceptable to the Secured Party under the UCC in effect in
any jurisdiction with respect to the liens and security interests granted
hereby. The Debtor also hereby authorizes the Secured Party to file any such
financing statement without the signature of the Debtor to the extent permitted
by applicable law. A photocopy or other reproduction of this Security Agreement
shall
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be sufficient as a financing statement and may be filed in lieu of the original
to the extent permitted by applicable law. The Debtor will pay or reimburse the
Secured Party for all filing fees and related expenses;
(ii) furnish to the Secured Party from time to time
statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
the Secured Party may reasonably request, all in reasonable detail and
in form satisfactory to the Secured Party.
4.2 PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS. The
Debtor will preserve and maintain its existence, rights, franchises, licenses
and privileges in the jurisdiction of its incorporation, and qualify and remain
qualified as a foreign business enterprise and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
4.3 MAINTAIN RECORDS. The Debtor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral.
4.4 RIGHT OF INSPECTION. The Secured Party shall at all times have
full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Secured Party and its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and the Debtor agrees to render the Secured Party at the
Debtor's cost and expense, such clerical and other assistance as may be
reasonable requested with regard thereto. The Secured Party and its
representatives shall at all times also have the right to enter into and upon
any premises where any of the Inventory or Equipment is located for the purpose
of inspecting the same, observing its use or otherwise protecting its interests
therein.
4.5 INSURANCE. (a) The Debtor will maintain insurance with
responsible insurance companies against such risks and in such amounts as is
customarily maintained by similar businesses or as may be required by any
applicable laws, and from time to time deliver to Secured Party upon its request
a detailed list of the insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the insurance, the dates of the
expiration thereof and the properties and risks covered thereby.
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(b) In addition to the foregoing, the following provisions shall
apply with respect to the Collateral:
(i) Debtor shall at all times maintain insurance on the
Inventory and Equipment against loss or damage by fire, theft, burglary,
pilferage and loss in transit, in amounts not to exceed those obtainable at
commercially reasonable rates and under policies issued by qualified
insurers. All premiums on such insurance shall be paid by Debtor. Debtor
will not use or permit the Inventory or Equipment to be used in violation
of any applicable law or in any manner which might render inapplicable any
insurance coverage.
(ii) All proceeds of insurance shall (except as otherwise
required under the terms and conditions of any Senior Debt (as defined in
the Settlement Agreement) or Future Financing) be reinvested in the
business of Debtor.
4.6 PAYMENT OF OBLIGATIONS. The Debtor will pay promptly when due
all taxes, assessments and governmental charges or levies imposed upon the
Collateral, as well as all claims of any kind (including, without limitation,
claims for labor, materials, supplies and services) against or with respect to
the Collateral, except that no such charge need be paid if (i) the validity
thereof is being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve, in the sole opinion of the Secured Party, any
material danger for the sale, forfeiture or loss of any of the Collateral or any
interest therein, and (iii) such charge is adequately reserved against on the
Debtor's books in accordance with generally accepted accounting principles.
4.7 NEGATIVE PLEDGE. The Debtor will not create, incur or permit
to exist, will defend the Collateral against, and will take such other action as
is necessary to remove, any Lien or claim on or to the Collateral, other than
the Liens created hereby and other than Permitted Liens.
4.8 PERFORMANCE BY THE SECURED PARTY OF THE DEBTOR'S OBLIGATIONS;
REIMBURSEMENT. If the Debtor fails to perform or comply with any of its
security agreements contained herein, the Secured Party may, without notice to
or consent by the Debtor, perform or comply or cause performance or compliance
therewith and the expenses of the Secured Party incurred in connection with such
performance or compliance shall be payable by the Debtor to the Secured Party on
demand and such reimbursement obligation shall be secured hereby.
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ARTICLE V
POWER OF ATTORNEY
Upon the occurrence of any Event of Default, the Debtor hereby
irrevocably constitutes and appoints the Secured Party and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Debtor and in the name of the Debtor or in its own name, from time
to time in the Secured Party's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action by any
technologically available means, which may include, without limitation, any form
of electronic data transmission, and to execute in any appropriate manner, which
may include, without limitation, using any symbol that the Secured Party may
adopt to signify the Debtor's intent to authenticate, any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement.
The Debtor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
6.1 RIGHTS AND REMEDIES GENERALLY. If an Event of Default shall
occur and be continuing, then and in every such case, the Secured Party shall
have all the rights of a secured party under the UCC, shall have all rights now
or hereafter existing under all other applicable laws, and, subject to any
mandatory requirements of applicable law then in effect, shall have all the
rights set forth in this Security Agreement and all the rights set forth with
respect to the Collateral or this Security Agreement in any other security
agreement between the parties.
6.2 ASSEMBLY OF COLLATERAL. If an Event of Default shall occur and
be continuing, upon five days notice to the Debtor, the Debtor shall, at its own
expense, assemble the Collateral (or from time to time any portion thereof) and
make it available to the Secured Party at any place or places designated by the
Secured Party which is reasonably convenient to both parties.
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6.3 DISPOSITION OF COLLATERAL. The Secured Party will give the
Debtor reasonable notice of the time and place of any public sale of the
Collateral or any part thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. The Debtor agrees that the
requirements of reasonable notice to it shall be met if such notice is mailed,
postage prepaid to its address specified in Section 9.5 of this Security
Agreement (or such other address that the Debtor may provide to the Secured
Party in writing) at least ten (10) days before the time of any public sale or
after which any private sale may be made.
6.4 RECOURSE. The Secured Party's sole recourse to satisfy the
Secured Obligations shall be to the Collateral and the Debtor shall not be
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to satisfy the Secured Obligations.
6.5 EXPENSES; ATTORNEYS FEES. The Debtor shall reimburse the
Secured Party for all its expenses in connection with the exercise of its rights
hereunder, including, without limitation, all reasonable attorneys' fees and
legal expenses incurred by the Secured Party. Expenses of retaking, holding,
preparing for sale, selling or the like shall include the reasonable attorneys'
fees and legal expenses of the Secured Party. All such expenses shall be
secured hereby.
6.6 LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL.
(a) The Secured Party's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the UCC or otherwise, shall be to deal with it in the same manner as the
Secured Party deals with similar property for its own account.
(b) The Secured Party shall have no obligation to take any steps
to preserve rights against prior parties to any Collateral.
(c) Neither the Secured Party nor any of its directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Debtor or otherwise.
6.7 INTERCREDITOR AGREEMENT. The rights and remedies of the
Secured Party granted pursuant to this Article VI shall be subject in all
instances to the terms and provisions of any Intercreditor Agreement.
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ARTICLE VII
MISCELLANEOUS
7.1 GOVERNING LAW. THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
7.2 NOTICES. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of telex notice, when sent, answer-back
received, or in the case of telecopy notice, when sent, or in the case of a
nationally recognized overnight courier service, one business day after delivery
to such courier service, addressed, in the case of each party hereto, at its
address specified opposite its signature below, or to such other address as may
be designated by any party in a written notice to the other party hereto.
If to the Debtor:
Kerr Group, Inc.
500 New Holland Avenue
Lancaster, Pennsylvania 17602-2104
Attention: Geoffrey A. Whynot
Telephone: 717-299-6511
Facsimile: 717-394-6398
If to the Secured Party:
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington D.C. 20005-4026
Attention: Director, Corporate Finance and Negotiations
Department
Telephone: 202-326-4070
Facsimile: 202-842-2643
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7.3 SUCCESSORS AND ASSIGNS. This Security Agreement shall be
binding upon and shall inure to the benefit of the Debtor, the Secured Party,
all future holders of the Secured Obligations and their respective successors
and assigns, except that the Debtor may not assign or transfer any of its rights
or obligations under this Security Agreement without the prior written consent
of the Secured Party.
7.4 WAIVERS AND AMENDMENTS. None of the terms or provisions of this
Security Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the party against whom enforcement is
sought. In the case of any waiver, the Debtor and the Secured Party shall be
restored to their former position and rights hereunder and under the outstanding
Secured Obligations, and any Event of Default waived shall be deemed to be cured
and not continuing, but no such waiver shall extend to any subsequent or other
Event of Default, or impair any right consequent thereon.
7.5 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of the Secured Party in exercising any right, power or privilege hereunder
and no course of dealing between the Debtor and the Secured Party shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Secured
Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Secured Party would
otherwise have on any future occasion. The rights and remedies herein expressly
provided are cumulative and may be exercised singly or concurrently and as often
and in such order as the Secured Party deems expedient and are not exclusive of
any rights or remedies which the Secured Party would otherwise have whether by
security agreement or now or hereafter existing under applicable law. No notice
to or demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Party to any other or future action in any
circumstances without notice or demand.
7.6 TERMINATION; RELEASE. When the Secured Obligations have been
indefeasibly paid and performed in full, this Security Agreement shall
terminate, and the Secured Party, at the request and sole expense of the Debtor,
will execute and deliver to the Debtor the proper instruments (including UCC
termination statements) acknowledging the termination of this Security
Agreement, and will duly assign, transfer and deliver to the Debtor, without
recourse, repre-
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sentation or warranty of any kind whatsoever, such of the Collateral as may be
in possession of the Secured Party and has not theretofore been disposed of,
applied or released.
7.7 HEADINGS DESCRIPTIVE. The headings of the several Sections and
subsections of this Security Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Security Agreement.
7.8 SEVERABILITY. In case any provision in or obligation under this
Security Agreement or the Secured Obligations shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and 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.
7.9 INTERCREDITOR AGREEMENT. This Agreement and all rights and
interests of the Secured Party and the Plan hereunder are subject to the terms
and provisions of any Intercreditor Agreement.
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IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be duly executed and delivered as of the date first above
written.
KERR GROUP, INC.
By: /s/ Geoffrey A.. Whynot
-----------------------------
Name: Geoffrey A. Whynot
Title: Vice President and Chief
Financial Officer
PENSION BENEFIT GUARANTY
CORPORATION
By: /s/ Andrea E. Schneider
-----------------------------
Name: Andrea E. Schneider
Title: Acting Deputy Director and
Chief Negotiator
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SUBORDINATION AND STANDBY AGREEMENT
This Agreement is executed by and among NATIONSBANK OF TEXAS, N.A., a
national banking association, in its capacity as Agent (defined below), PENSION
BENEFIT GUARANTY CORPORATION, a body corporate within the United States
Department of Labor, for the benefit of itself and on behalf of Kerr Group, Inc.
Retirement Income Plan and KERR GROUP, INC., a Delaware corporation ("Debtor"),
as follows:
DEFINITIONS
"AGENT" means NationsBank of Texas, N.A., a national banking association
with its principal place of business located at 901 Main Street, Dallas,
Texas 75202, in its capacity as Agent under the Loan and Security
Agreement.
"AGENT COLLATERAL" means all "Collateral" defined in the Loan and Security
Agreement (which definition is incorporated herein by reference), including
without limitation all of the following, now owned and hereafter acquired
by Debtor: all Receivables, Inventory, Equipment, Contract Rights, General
Intangibles, Investment Property and Real Estate, as such terms are defined
in the Loan and Security Agreement (which definitions are incorporated
herein by reference), and all other property in which Agent is granted a
security interest, lien, mortgage or other collateral interest under the
Loan and Security Agreement or the other Agent Security Documents, now
owned and hereafter acquired, and all proceeds of any of the foregoing.
"AGENT LIEN" means all of Agent's continuing security interests, liens,
mortgages, rights and interests (for itself and the Credit Parties as
defined by the Loan and Security Agreement) in and to all property now or
hereafter owned by Debtor and included within the Agent Collateral, as
provided by the Agent Security Documents.
"AGENT SECURITY DOCUMENTS" means the Loan and Security Agreement and all
other "Security Documents" as defined therein, as the same may be renewed,
extended, modified, amended, supplemented or restated from time to time.
"COLLECTION ACTION" means (a) the filing of any action, suit or proceeding
to collect all or any part of any amounts now or hereafter owing by Debtor
under the PBGC Agreement, (b) any action (whether by judicial action or
otherwise) to enforce the PBGC Agreement Lien or the Plan Lien, including
without limitation any action to foreclose, repossess, marshal, control or
otherwise exercise any remedies with respect to any property included
within the Agent Collateral, (c) any contact or communication, directly or
indirectly (including but not limited to notification or confirmation) with
any account debtor or obligor on any accounts, chattel paper, instruments,
general intangibles or other property included within the Agent Collateral
or (d) any other action in respect of the interests of PBGC or the Plan
under the PBGC Agreement which could reasonably be expected to interfere
with the daily operation of Debtor's business. "Collection Action" does
not include the filing of any proof of claim or statement of interest in
any bankruptcy proceeding of Debtor with respect to amounts owed by Debtor
under the
<PAGE>
PBGC Agreement, PROVIDED that any such proof of claim or statement of
interest is expressly stated to be subject to this Agreement.
"DEBTOR" means Kerr Group, Inc., a Delaware corporation with its principal
place of business located at 500 New Holland Avenue, Lancaster,
Pennsylvania 17602.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, 29 U.S.C. Section 1368, ET SEQ.
"LSA OBLIGATIONS" means all "Secured Obligations" defined in the Loan and
Security Agreement (which definition hereby is incorporated herein by
reference), including without limitation all obligations and indebtedness
for loans, accrued interest, and all fees, costs and expenses under the
Loan and Security Agreement and the other Agent Security Documents, and any
and all "Permitted Future Financings" owing to the Lenders under the Loan
and Security Agreement, as may be amended to provide for same (excluding
any such Permitted Future Financings (if any) which by their express terms
are secured by a lien which is not senior to, but is pari passu with, the
PBGC Lien), as may be renewed, extended or modified, from time to time.
"LOAN AND SECURITY AGREEMENT" means the certain Loan and Security Agreement
among Agent, Debtor and the Lenders (as defined therein) from time to time
party thereto, as may be renewed, extended, modified, amended or restated
from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation, a body corporate
within the United States Department of Labor, with its mailing address at
1200 K. Street, N.W., Washington, D.C. 20005-4026, acting under this
Agreement and the PBGC Agreement both in its individual corporate capacity
and also on behalf of, and for the benefit of, the Plan.
"PBGC AGREEMENT" collectively means the certain Agreement dated August 24,
1997 between Debtor and PBGC, all security agreements, mortgages or other
collateral agreements executed pursuant thereto, and all renewals,
extensions, modifications, amendments or restatements of any of the
foregoing.
"PBGC AGREEMENT LIEN" means all security interests, liens, mortgages,
rights and interests in property of Debtor granted by Debtor to PBGC under
the PBGC Agreement.
"PBGC STATUTORY LIEN" means any lien (if any) hereafter acquired by PBGC in
property of Debtor pursuant to Section 4068 of the Employee Retirement
Income Security Act of 1974, as amended, Section 412(n) of the Internal
Revenue Code of 1986, as amended, or other applicable law.
"PLAN" means the Kerr Group, Inc. Retirement Income Plan, as may be
amended, modified or restated from time to time, and any successor thereto.
2
<PAGE>
"PLAN LIEN" means all security interests, liens, mortgages, rights and
interests in property of Debtor granted by Debtor to PBGC for the benefit
of the Plan under the PBGC Agreement.
RECITALS
Debtor and Agent are parties to the Loan and Security Agreement which
provides a secured credit facility for Debtor, subject to the terms
thereof, reference to which is hereby made. Pursuant to the Agent Security
Documents, the LSA Obligations are secured by continuing security interests
and liens in the Agent Collateral granted by Debtor to or for the benefit
of Agent, for the benefit of the Credit Parties (as defined by the Loan and
Security Agreement).
It is proposed that Debtor grant to PBGC a security interest in property
included within the Agent Collateral to secure certain contingent
obligations of Debtor to PBGC, pursuant to the PBGC Agreement.
Agent requires that all security interests and liens of Agent in the Agent
Collateral be first and prior in priority, and that any and all security
interests, liens, rights and other interests of PBGC or the Plan under the
PBGC Agreement, now or hereafter existing, be subordinated in favor of
Agent for the benefit of the Credit Parties (as defined in the Loan and
Security Agreement), as provided hereinbelow.
NOW THEREFORE, for valuable consideration, the receipt of which hereby is
acknowledged, and in consideration of the mutual benefits and agreements
provided herein, Agent, PBGC and Debtor hereby agree as follows:
AGREEMENT
1. The Agent Lien is and at all times shall be first, senior and prior to
the PBGC Agreement Lien and the Plan Lien, respectively. The PBGC Agreement
Lien and the Plan Lien, respectively, each is and at all times shall be
expressly subordinated and made junior to the Agent Lien.
2. PBGC disclaims any interest in the Agent Collateral except as provided
by the PBGC Agreement as of the effective date of this Agreement. Debtor
represents to Agent that the Plan has no interest in the Agent Collateral.
Debtor and PBGC each agrees that Debtor shall not grant to PBGC or the Plan any
other security interest, lien or other interest in any property included within
the Agent Collateral without the prior written consent of Agent. PBGC and
Debtor are not party to any agreement between them other than the PBGC
Agreement.
3. Until termination of this Agreement PBGC agrees that it will not take
any Collection Action without the prior written consent of Agent.
3
<PAGE>
4. Until termination of this Agreement, PBGC agrees that in the event it
at any time receives or otherwise comes into possession of any property included
within the Agent Collateral, or any proceeds thereof (other than scheduled
payments made by Debtor to PBGC or the Plan under the PBGC Agreement in the
ordinary course of Debtor's business and received by PBGC or the Plan prior to
written notice by Agent of the occurrence of any Event of Default as defined by
the Loan and Security Agreement), it will forthwith deliver same to Agent in the
form received for the account of Debtor, and until so delivered the same shall
be held in trust for the benefit of Agent, for the account of Debtor. At
Agent's request, PBGC will provide any necessary endorsement or assignment
(without recourse) as necessary to transfer or negotiate any check or other item
constituting Agent Collateral. In the absence of any such endorsement or
assignment, Agent is irrevocably appointed as attorney-in-fact with full power
of substitution, coupled with an interest, with full authority for the limited
purpose to make any such endorsement or assignment on behalf of PBGC as may be
necessary to collect or enforce same.
5. Debtor and PBGC each agrees that:
(a) The PBGC Agreement (including each security agreement, mortgage
or other security document included therein) shall include a provision
stating substantially the following:
"This Agreement and all rights and interests of [PBGC] and [the Plan]
thereunder are subject to the certain Subordination and Standby
Agreement dated _______, 1997 among [PBGC], [Agent] and [Debtor], as
the same may be renewed, extended, modified, amended or restated from
time to time."
(b) All financing statements filed by PBGC naming Debtor and covering
any property included within the Agent Collateral shall state the
following:
"Secured Party's rights under the above referenced financing statement
are subordinated in favor of NationsBank of Texas, N.A., in its
capacity as Agent under the certain Loan and Security Agreement
(herein called "Agent") among Debtor, Agent and the Lenders (as
defined therein) from time to time party thereto, pursuant the certain
Subordination and Standby Agreement among Secured Party, Debtor,
[PBGC] and Agent, reference to which hereby is made."
6. PBGC and Debtor each agrees that the PBGC Agreement (including each
security agreement, mortgage or other security document included therein) will
not be amended without the prior written consent of Agent.
7. Agent may take any action, or defer or refrain from taking action, to
enforce its rights and remedies with respect to the LSA Obligations and the
Agent Lien, and may make such other determinations or take such other actions in
connection therewith (including without limitation the timing or manner of
disposition of any Agent Collateral, determination of funding or other actions
after or during the continuance of an Event of Default (as defined by the Loan
and Security Agreement), or make such waivers, or agree with Debtor for such
amendments or modifications to the terms of the Loan and Security Agreement or
any other Loan Document (as
4
<PAGE>
defined therein) as Agent may determine in its discretion), without requirement
of prior notice to or consent from PBGC and without in any manner impairing
Agent's rights and obligations under this Agreement. Agent may release any
person or entity now or hereafter liable upon any of the LSA Obligations, or
permit substitutions, withdrawals or release of any of the Agent Collateral or
any other security or collateral at any time securing same, or renew, extend or
accept partial payments on any of the LSA Obligations. Agent shall not at any
time be required to institute suit or exercise or exhaust remedies against any
person or entity obligated to pay any of the LSA Obligations, or against the
Agent Collateral or any other security for the LSA Obligations, prior to
exercising its rights or receiving the benefits of this Agreement.
8. Nothing herein shall impair the rights of PBGC in respect of any PBGC
Statutory Lien (if any) at any time arising, PROVIDED, that the Agent Lien shall
have priority over any such PBGC Statutory Lien to the extent provided pursuant
to Section 4068 of ERISA and notwithstanding anything to the contrary (if any)
provided by other applicable law. PBGC agrees to notify Agent in writing upon
providing any notice to Debtor of intention to institute proceedings to
terminate the Plan.
9. The subordinations and priorities specified in this Agreement are
applicable irrespective of the validity or the time or order of attachment or
perfection of the security interests evidenced by the Agent Lien, the PBGC
Agreement Lien and the Plan Lien, respectively, or the time or order of filing
of financing statements with respect thereto. This Agreement is solely for the
purpose of defining the relative rights of Agent and PBGC and shall not be
deemed to create any rights or priorities in favor of any other person,
including without limitation, Debtor or any debtor-in-possession or trustee in
bankruptcy in any bankruptcy proceedings of Debtor. Nothing herein shall be
construed to govern the relative priority between the PBGC Agreement Lien and
the Plan Lien, respectively, as between them, which priority shall be determined
by separate agreement between PBGC and the Plan or applicable law.
10. This Agreement is an irrevocable and continuing agreement of
subordination, and Agent and the Credit Parties (as defined by the Loan and
Security Agreement) may continue to rely upon same in lending money, extending
credit, and making other financial accommodations to or for the account of
Debtor, without notice to PBGC, pursuant to the Loan and Security Agreement and
the other Loan Documents (defined therein).
11. Any notice or demand by one party to another under this Agreement
shall be in writing and shall be deemed made and received upon delivery (VIA
personal delivery, courier, telecopy or other electronic transmission) to the
address specified below, or on the third day following deposit in the United
States mail, postage prepaid, addressed as specified below:
PBGC:
Director, Corporate Finance and Negotiations Department
Pension Benefit Guaranty Corporation
1200 K. Street, N.W.
Washington, D.C. 2005-4026
Telecopy: (202) 842-2643
5
<PAGE>
Debtor:
D. Gordon Strickland
President and Chief Executive Officer
Kerr Group, Inc.
500 New Holland Avenue
Lancaster, PA 17602-2104
Telecopy: (717) 394-6398
Agent:
NationsBank of Texas, N.A.
901 Main Street
Dallas, Texas 75202
Attention: Business Credit: Regional Manager/URGENT
Telecopy: 214-508-0480
12. This Agreement shall terminate at such time that the LSA Obligations
have been paid in full and the Loan and Security Agreement has terminated;
PROVIDED HOWEVER, that in the event, following any such payment or termination,
any amount previously applied in reduction of the LSA Obligations is revived
pursuant to Section 18.7 of the Loan and Security Agreement, then all rights and
obligations under this Agreement shall likewise be revived, and all amounts, if
any, received by PBGC in respect of any property included within the Agent
Collateral after such termination likewise shall be governed by the provisions
of this Agreement as if the same had not been terminated.
13. No waiver shall be deemed to have been made by Agent of any of its
rights hereunder unless such waiver is in writing and signed by Agent, and any
such written waiver shall be limited to the specific instance specified therein.
The rights of Agent hereunder are cumulative of all other rights of Agent under
any other agreement with Debtor or PBGC, respectively, or as otherwise provided
by law.
14. PBGC and Agent each represents to the other that (i) it has full
corporate power and authority to enter into, execute, deliver and perform this
Agreement, all of which have been duly authorized by all proper and necessary
corporate action and are not prohibited by its charter, bylaws or applicable law
and (ii) the officer signing this Agreement on its behalf is a duly authorized
officer with full authority to execute this Agreement.
15. If any provision of this Agreement is for any reason held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement.
16. This Agreement is binding upon and inures to the benefit of the
parties hereto and their respective assignees, transferees, and successors.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS. EACH OF PBGC, AGENT AND DEBTOR HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY
6
<PAGE>
IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN
ACTION MAY BE COMMENCED BY OR AGAINST PBGC, AGENT OR DEBTOR ARISING OUT OF THIS
AGREEMENT. EACH SUCH PARTY ACKNOWLEDGES THAT SUCH WAIVER IS MADE WITH FULL
KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED
HEREBY AND WITH THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING. PBGC, AGENT
AND DEBTOR HEREBY AGREE THAT THE FEDERAL COURT OF THE NORTHERN DISTRICT OF TEXAS
OR, AT THE OPTION OF AGENT, ANY COURT IN WHICH AGENT SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN OR AMONG PBGC, AGENT OR DEBTOR PERTAINING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT. THE NONEXCLUSIVE CHOICE OF FORUM SET FORTH IN
THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.
17. This Agreement may be executed in counterparts, each of which shall be
an original, but all of which, taken together, shall constitute one and the same
instrument. A telecopy of any such executed counterpart shall be deemed valid
as an original.
18. All references herein to PBGC shall be deemed to mean, and all
representations, warranties, covenants and agreements herein by PBGC are deemed
made by and shall be binding upon, PBGC both in its individual corporate
capacity and also in its capacity on behalf of the Plan, and all such
representations, warranties, covenants and agreements by PBGC in such capacity
on behalf of the Plan shall be binding upon the Plan.
19. Debtor agrees that this Agreement shall be deemed to be a "Loan
Document" as defined by the Loan and Security Agreement.
7
<PAGE>
SIGNED EFFECTIVE as of August 26, 1997.
NATIONSBANK OF TEXAS, N.A.
in its capacity as Agent under the Loan and Security
Agreement defined herein
By: /s/ Anne E. Carbone
--------------------------------------------------
Name: Anne E. Carbone
-------------------------------------------------
Title: Senior Vice President
------------------------------------------------
Authorized Officer
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
--------------------------------------------------
Name: Geoffrey A. Whynot
-------------------------------------------------
Title: Vice President and Chief Financial Officer
------------------------------------------------
Authorized Officer
PENSION BENEFIT GUARANTY CORPORATION
By: /s/ Ellen A. Hennessy
--------------------------------------------------
Name: Ellen A. Hennessy
-------------------------------------------------
Title: Deputy Executive Director and Chief Negotiator
------------------------------------------------
Authorized Officer
8
<PAGE>
WASHINGTON, D.C. Section
Section
Section
BEFORE ME, the undersigned authority, on this day personally appeared Ellen
A. Hennessy, known to me be the person and officer whose name is subscribed to
the foregoing instrument, and acknowledged me that the same was the act of
Pension Benefit Guaranty Corporation, and that she executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 25th day of August, 1997.
/s/ Donna Lynne Griffiths
--------------------------------------------
NOTARY PUBLIC, STATE OF
WASHINGTON, D.C.
My Commission Expires: 10/31/98
Donna Lynne Griffiths
--------------------------------------------
(Printed Name of Notary)
THE STATE OF PENNSYLVANIA Section
Section
COUNTY OF LANCASTER Section
BEFORE ME, the undersigned authority, on this day personally appeared
Geoffrey A. Whynot, known to me be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged me that the same was
the act of Kerr Group, Inc., and that he executed the same for the purposes and
considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of August, 1997.
/s/ Sherry S. Shertzer
--------------------------------------------
NOTARY PUBLIC, STATE OF
PENNSYLVANIA
My Commission Expires: 2/26/2000
Sherry S. Shertzer
--------------------------------------------
(Printed Name of Notary)
9
<PAGE>
NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
- -------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
among
KERR GROUP, INC.,
as Borrower,
NATIONSBANK OF TEXAS, N.A.,
as Agent and a Lender
(AND OTHER LENDERS, IF ANY, FROM TIME TO TIME PARTY HERETO)
Dated as of August 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 1.3 EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . . . 38
ARTICLE 2 - REVOLVING CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . . . 38
Section 2.1 REVOLVING CREDIT LOANS . . . . . . . . . . . . . . . . . . 38
Section 2.2 MANNER OF BORROWING REVOLVING CREDIT LOANS . . . . . . . . 39
Section 2.3 REPAYMENT OF REVOLVING CREDIT LOANS. . . . . . . . . . . . 40
Section 2.4 REVOLVING CREDIT NOTE. . . . . . . . . . . . . . . . . . . 40
Section 2.5 EXTENSION OF REVOLVING CREDIT FACILITY . . . . . . . . . . 40
ARTICLE 3 - LETTER OF CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.1 AGREEMENT TO ISSUE . . . . . . . . . . . . . . . . . . . . 41
Section 3.2 AMOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.3 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.4 ISSUANCE OF LETTERS OF CREDIT. . . . . . . . . . . . . . . 42
Section 3.5 DUTIES OF L/C ISSUER . . . . . . . . . . . . . . . . . . . 42
Section 3.6 PAYMENT OF REIMBURSEMENT OBLIGATIONS . . . . . . . . . . . 43
Section 3.7 PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.8 INDEMNIFICATION, EXONERATION . . . . . . . . . . . . . . . 45
Section 3.9 SUPPORTING LETTER OF CREDIT; CASH COLLATERAL . . . . . . . 47
ARTICLE 4 - TERM LOAN FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.1 TERM LOAN. . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.2 MANNER OF BORROWING AND DISBURSING TERM LOAN . . . . . . . 47
Section 4.3 REPAYMENT OF TERM LOAN . . . . . . . . . . . . . . . . . . 47
Section 4.4 TERM NOTES . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 5 - CAPEX LOAN FACILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.1 CAPEX LOAN . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.2 MANNER OF BORROWING AND DISBURSING CAPEX LOAN. . . . . . . 48
Section 5.3 REPAYMENT OF CAPEX LOAN. . . . . . . . . . . . . . . . . . 48
Section 5.4 CAPEX NOTES. . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 6- GENERAL LOAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.1 PROCEDURE FOR BORROWING. . . . . . . . . . . . . . . . . . 49
Section 6.2 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.3 INTEREST RATE OPTION . . . . . . . . . . . . . . . . . . . 50
Section 6.4 CERTAIN FEES . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.5 MANNER OF PAYMENT. . . . . . . . . . . . . . . . . . . . . 52
Section 6.6 PAYMENTS ON BUSINESS DAYS. . . . . . . . . . . . . . . . . 53
</TABLE>
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Section 6.7 LOAN ACCOUNTS; STATEMENTS OF ACCOUNT . . . . . . . . . . . 53
Section 6.8 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . 53
Section 6.9 MAKING OF LOANS. . . . . . . . . . . . . . . . . . . . . . 54
Section 6.10 SETTLEMENT AMONG LENDERS . . . . . . . . . . . . . . . . . 55
Section 6.11 MANDATORY PREPAYMENTS. . . . . . . . . . . . . . . . . . . 58
Section 6.12 PREPAYMENT FEE . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 7- CHANGE OF CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.1 INCREASED COST AND REDUCED RETURN. . . . . . . . . . . . . 60
Section 7.2 LIMITATION ON TYPES OF LOANS.. . . . . . . . . . . . . . . 62
Section 7.3 ILLEGALITY.. . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.4 TREATMENT OF AFFECTED LOANS. . . . . . . . . . . . . . . . 62
Section 7.5 COMPENSATION.. . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.6 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 8- CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 8.1 CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT. . . . 65
Section 8.2 ALL LOANS; LETTERS OF CREDIT . . . . . . . . . . . . . . . 70
ARTICLE 9- REPRESENTATIONS AND WARRANTIES OF BORROWER. . . . . . . . . . . . . . . 71
Section 9.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 71
Section 9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . 83
ARTICLE 10- SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.1 SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . . 83
Section 10.2 CONTINUED PRIORITY OF SECURITY INTEREST. . . . . . . . . . 84
ARTICLE 11- COLLATERAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 11.1 COLLECTION OF RECEIVABLES. . . . . . . . . . . . . . . . . 85
Section 11.2 VERIFICATION AND NOTIFICATION. . . . . . . . . . . . . . . 86
Section 11.3 DISPUTES, RETURNS AND ADJUSTMENTS. . . . . . . . . . . . . 87
Section 11.4 INVOICES . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 11.5 DELIVERY OF INSTRUMENTS. . . . . . . . . . . . . . . . . . 87
Section 11.6 SALES OF INVENTORY . . . . . . . . . . . . . . . . . . . . 88
Section 11.7 OWNERSHIP AND DEFENSE OF TITLE . . . . . . . . . . . . . . 88
Section 11.8 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 11.9 LOCATION OF OFFICES AND COLLATERAL.. . . . . . . . . . . . 90
Section 11.10 RECORDS RELATING TO COLLATERAL.. . . . . . . . . . . . . . 90
Section 11.11 INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 11.12 INFORMATION AND REPORTS. . . . . . . . . . . . . . . . . . 91
Section 11.13 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . 92
Section 11.14 ADDITIONAL REAL ESTATE AND LEASES. . . . . . . . . . . . . 92
Section 11.15 ASSIGNMENT OF CLAIMS ACT . . . . . . . . . . . . . . . . . 93
ARTICLE 12- AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 12.1 PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS. . 94
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Section 12.2 COMPLIANCE WITH APPLICABLE LAW . . . . . . . . . . . . . . 94
Section 12.3 MAINTENANCE OF PROPERTY. . . . . . . . . . . . . . . . . . 94
Section 12.4 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . 95
Section 12.5 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 12.6 PAYMENT OF TAXES AND CLAIMS. . . . . . . . . . . . . . . . 95
Section 12.7 ACCOUNTING METHODS AND FINANCIAL RECORDS . . . . . . . . . 95
Section 12.8 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . 95
Section 12.9 HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL
REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . 96
ARTICLE 13 - INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 13.1 FINANCIAL STATEMENTS.. . . . . . . . . . . . . . . . . . . 97
Section 13.2 ACCOUNTANTS' CERTIFICATE . . . . . . . . . . . . . . . . . 98
Section 13.3 OFFICER'S CERTIFICATE. . . . . . . . . . . . . . . . . . . 98
Section 13.4 COPIES OF OTHER REPORTS. . . . . . . . . . . . . . . . . . 98
Section 13.5 NOTICE OF LITIGATION AND OTHER MATTERS . . . . . . . . . . 99
Section 13.6 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . .100
Section 13.7 ACCURACY OF INFORMATION. . . . . . . . . . . . . . . . . .100
Section 13.8 REVISIONS OR UPDATES TO SCHEDULES. . . . . . . . . . . . .100
Section 13.9 ANNUAL PROJECTIONS . . . . . . . . . . . . . . . . . . . .101
Section 13.10 REAL ESTATE AND EQUIPMENT APPRAISALS . . . . . . . . . . .101
Section 13.11 PBGC AGREEMENTS. . . . . . . . . . . . . . . . . . . . . .101
Section 13.12 ADDITIONAL CAPITAL CONTRIBUTION. . . . . . . . . . . . . .101
ARTICLE 14 - NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . .101
Section 14.1 FINANCIAL PERFORMANCE. . . . . . . . . . . . . . . . . . .101
Section 14.2 INDEBTEDNESS FOR MONEY BORROWED. . . . . . . . . . . . . .103
Section 14.3 GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . .103
Section 14.4 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . .103
Section 14.5 RESTRICTED DIVIDEND PAYMENTS AND PURCHASES, ETC. . . . . .103
Section 14.6 MERGER, CONSOLIDATION AND SALE OF ASSETS . . . . . . . . .103
Section 14.7 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . .104
Section 14.8 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . .104
Section 14.9 CAPITALIZED LEASE OBLIGATIONS. . . . . . . . . . . . . . .104
Section 14.10 OPERATING LEASES . . . . . . . . . . . . . . . . . . . . .104
Section 14.11 REAL ESTATE LEASES . . . . . . . . . . . . . . . . . . . .104
Section 14.12 PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .104
Section 14.13 SALES AND LEASEBACKS.. . . . . . . . . . . . . . . . . . .104
Section 14.14 SUBORDINATED INDEBTEDNESS. . . . . . . . . . . . . . . . .104
Section 14.15 BUSINESS ACTIVITIES OF FREMONT AND KAC . . . . . . . . . .105
Section 14.16 ACQUISITION FEES AND EXPENSES. . . . . . . . . . . . . . .105
ARTICLE 15- DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105
Section 15.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . .105
Section 15.2 REMEDIES.. . . . . . . . . . . . . . . . . . . . . . . . .109
Section 15.3 APPLICATION OF PROCEEDS. . . . . . . . . . . . . . . . . .111
</TABLE>
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<TABLE>
<S> <C>
Section 15.4 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . .112
Section 15.5 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES.. . . . . . .113
Section 15.6 REGISTRATION RIGHTS; PRIVATE SALES; ETC. . . . . . . . . .114
ARTICLE 16 - ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
Section 16.1 ASSIGNMENTS AND PARTICIPATIONS.. . . . . . . . . . . . . .116
Section 16.2 REPRESENTATION OF LENDERS. . . . . . . . . . . . . . . . .117
ARTICLE 17 - AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118
Section 17.1 APPOINTMENT, POWERS, AND IMMUNITIES. . . . . . . . . . . .118
Section 17.2 RELIANCE BY AGENT. . . . . . . . . . . . . . . . . . . . .118
Section 17.3 DEFAULTS.. . . . . . . . . . . . . . . . . . . . . . . . .119
Section 17.4 RIGHTS AS LENDER.. . . . . . . . . . . . . . . . . . . . .119
Section 17.5 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . .119
Section 17.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. . . . . . . . . .120
Section 17.7 RESIGNATION OF AGENT.. . . . . . . . . . . . . . . . . . .120
ARTICLE 18 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . .120
Section 18.1 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . .120
Section 18.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . .122
Section 18.3 STAMP AND OTHER TAXES. . . . . . . . . . . . . . . . . . .123
Section 18.4 RIGHT OF SET-OFF; ADJUSTMENTS. . . . . . . . . . . . . .123
Section 18.5 LITIGATION; WAIVER OF TRIAL BY JURY. . . . . . . . . . . .124
Section 18.6 REVERSAL OF PAYMENTS . . . . . . . . . . . . . . . . . . .125
Section 18.7 INJUNCTIVE RELIEF. . . . . . . . . . . . . . . . . . . . .125
Section 18.8 ACCOUNTING MATTERS . . . . . . . . . . . . . . . . . . . .125
Section 18.9 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . .125
Section 18.10 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . .127
Section 18.11 PERFORMANCE OF BORROWER'S DUTIES . . . . . . . . . . . . .127
Section 18.12 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . .127
Section 18.13 ALL POWERS COUPLED WITH INTEREST.. . . . . . . . . . . . .128
Section 18.14 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . .128
Section 18.15 TITLES AND CAPTIONS. . . . . . . . . . . . . . . . . . . .129
Section 18.16 SEVERABILITY OF PROVISIONS . . . . . . . . . . . . . . . .129
Section 18.17 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . .129
Section 18.18 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . .129
Section 18.19 REPRODUCTION OF DOCUMENTS. . . . . . . . . . . . . . . . .129
Section 18.20 TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . . .129
Section 18.21 PRO-RATA PARTICIPATION . . . . . . . . . . . . . . . . . .130
Section 18.22 INTEREST LIMITATION. . . . . . . . . . . . . . . . . . . .130
Section 18.23 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . .131
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
EXHIBIT "A" Form of Revolving Credit Note
EXHIBIT "B" Form of Term Note
EXHIBIT "C" Form of CAPEX Note
EXHIBIT "D" Form of Borrowing Base Certificate
EXHIBIT "E" Form of Assignment and Acceptance
EXHIBIT "F" Form of Settlement Report
EXHIBIT "G" Form of Notice of Borrowing, Prepayment, Conversion or Continuation
EXHIBIT "H" Form of Compliance Certificate
</TABLE>
SCHEDULES
Schedule 1.1A Acquisition Documents
Schedule 1.1B Permitted Investments
Schedule 1.1C Permitted Liens
Schedule 9.1(a) Qualification
Schedule 9.1(b) Capitalization
Schedule 9.1(c) Subsidiaries; Ownership of Stock
Schedule 9.1(e) Compliance with Laws
Schedule 9.1(g) Governmental Approvals
Schedule 9.1(h) Title to Properties
Schedule 9.1(i) Liens
Schedule 9.1(j) Indebtedness for Money Borrowed; Guaranties
Schedule 9.1(k) Litigation
Schedule 9.1(l) Tax Matters
Schedule 9.1(p) Benefit Plans
Schedule 9.1(t) Chief Executive Office and Location of Records
Schedule 9.1(u) Location of Inventory
Schedule 9.1(v) Location of Equipment
Schedule 9.1(w) Real Estate (Owned and Leased)
Schedule 9.1(x) Corporate and Fictitious Names
Schedule 9.1(aa) Employee Relations
Schedule 9.1(bb) Proprietary Rights
Schedule 9.1(cc) Trade Names
Schedule 9.1(ff) Investment Property
Schedule 12.8 Use of Proceeds
Schedule 12.9 Environmental Liabilities
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<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("AGREEMENT"), dated as of August 26,
1997, is executed and entered into by and among KERR GROUP, INC, a Delaware
corporation ("BORROWER"), each of the lending institutions which is a party
hereto, or any permitted successor or assignee thereof permitted pursuant to
SECTION 16.1 (individually, a "LENDER" and collectively, the "LENDERS"), L/C
Issuer (as such term is defined herein) and NATIONSBANK OF TEXAS, N.A., a
national banking association, as agent for itself and the other Lenders (in
such capacity, together with its successors and assigns in such capacity,
"AGENT").
RECITALS:
A. Borrower has requested that the Lenders extend a revolving loan
facility, a term loan facility, a capital expenditures loan facility and a
letter of credit facility to Borrower for the purpose of refinancing existing
obligations of Borrower and providing working capital, and for other
corporate purposes of Borrower.
B. The Lenders have agreed to provide such loan and letter of credit
facilities upon and subject to the terms and conditions set forth in this
Agreement and the other Loan Documents (as defined below).
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACQUISITION" means the acquisition of not less than fifty-one percent
(51.0%) of the fully diluted shares of Capital Stock of Borrower by KAC
pursuant to the terms of the Tender Offer Statement.
"ACQUISITION AGREEMENT" means the certain Agreement and Plan of Merger,
dated as of July 1, 1997, among Borrower, KAC and Fremont, as such agreement
may be amended up to and through the Agreement Date with the consent of Agent
and the Lenders.
"ACQUISITION DOCUMENTS" means, collectively, the Acquisition Agreement,
the Tender Offer Statement and each other agreement, certificate, document
and instrument executed or delivered in connection with, or otherwise related
to, the Acquisition Agreement, the Acquisition or the Merger,
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including, without limitation, the agreements, certificates, documents and
instruments listed on SCHEDULE 1.1A ("Acquisition Documents") attached hereto.
"ADJUSTED EURODOLLAR RATE" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined by Agent to be equal to the quotient
obtained by dividing (a) the Eurodollar Rate for such Eurodollar Loan for
such Interest Period by (b) one (1) minus the Reserve Requirement for such
Eurodollar Loan for such Interest Period.
"AFFECTED LOANS" has the meaning set forth in SECTION 7.4 of this
Agreement
"AFFECTED TYPE" has the meaning set forth in SECTION 7.4 of this
Agreement.
"AFFILIATE" means, with respect to any Person, (a) any partner, officer,
shareholder (if holding more than ten percent (10.0%) of the outstanding
Capital Stock of such Person), director, employee or managing agent of such
Person, or (b) any other Person (other than a Subsidiary) that, (i) directly
or indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, such Person, (ii) directly or indirectly
beneficially owns or holds ten percent (10.0%) or more of any class of Voting
Stock of such Person or any Subsidiary of such Person, or (iii) ten percent
(10.0%) or more of the Voting Stock of which is directly or indirectly
beneficially owned or held by such Person or a Subsidiary of such Person.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of Voting Stock, by contract or otherwise.
"AFFILIATE GUARANTY" means each Guaranty, dated as of the Agreement Date,
executed by Fremont and KAC in favor of Agent, for the benefit of the Credit
Parties, as such Guaranty may be amended, modified, restated or supplemented
from time to time, and any other Guaranty executed by a Guarantor in favor of
Agent, for the benefit of the Credit Parties, and "AFFILIATE GUARANTIES"
means all of such agreements, collectively.
"AGENCY ACCOUNT" means an account of Borrower maintained by it with a
Clearing Bank pursuant to an Agency Account Agreement.
"AGENCY ACCOUNT AGREEMENT" means any agreement (if required pursuant to
SECTION 11.1(a)) among Borrower, Agent and a Clearing Bank, in form and
substance satisfactory to Agent, which designates an Agency Account for the
deposit of checks and items constituting proceeds of Receivables or any other
Collateral, and establishes the terms for transferring balances therein to
Agent.
"AGENT" means NationsBank, in its capacity as agent for the Lenders and
L/C Issuer as provided by this Agreement, and any successor agent appointed
pursuant to SECTION 17.7 hereof.
"AGREEMENT" means and includes this Agreement and all exhibits,
schedules, addenda and other attachments hereto, and any renewal, extension,
amendment, modification, restatement or supplement hereof.
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<PAGE>
"AGREEMENT DATE" means the date as of which this Agreement is dated.
"APPLICABLE LAW" means, with respect to any Person, all provisions of
constitutions, statutes, rules, regulations and orders of any Governmental
Authority applicable to such Person or its property, including, without
limitation, all orders and decrees of all courts and arbitrators in
proceedings or actions to which such Person is a party and all Environmental
Laws.
"APPLICABLE LENDING OFFICE" means, for each Lender and for each Type of
Loan, the "Lending Office" of such Lender (or of an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
office of such Lender (or an Affiliate of such Lender) as such Lender may
from time to time specify to Agent and Borrower by written notice in
accordance with the terms hereof as the office by which its Loans of such
Type are to be made and maintained.
"APPLICABLE MARGIN" means the percentage corresponding to each Type of
Loan as set forth below applicable to the Revolving Credit Loan, the Term
Loan and the CAPEX Loan, respectively:
- --------------------------------------------------------------------------
Type of Loan Revolving Loans Term Loan and CAPEX Loan
- --------------------------------------------------------------------------
Base Rate Loans 0.00% 0.50%
- --------------------------------------------------------------------------
Eurodollar Loans 2.25% 2.75%
- --------------------------------------------------------------------------
PROVIDED that, notwithstanding the foregoing, if Borrower's Fixed Charge
Coverage Ratio, calculated in accordance with SECTION 14.1(b), is not less
than (a) 1.75 to 1.00 for the fiscal year ended December 31, 1998, or (b)
2.00 to 1.00 for the fiscal year ended December 31, 1999, respectively, then,
in either (or both) of such events the Applicable Margin otherwise then
applicable with respect to Base Rate Loans and Eurodollar Loans shall be
permanently reduced by one-quarter of one percent (0.25%), any such reduction
to be effective automatically as of the first day of the second calendar
month following the calendar month of Agent's receipt of financial statements
required by SECTION 13.1(a).
"APPLICABLE RATE" means, at any time: (a) with respect to Base Rate
Loans, the Base Rate plus the Applicable Margin; or (b) with respect to
Eurodollar Loans, the Adjusted Eurodollar Rate plus the Applicable Margin, as
the case may be, in effect at any time pursuant to a Notice of Borrowing or
otherwise pursuant to the terms of this Agreement.
"ASSET DISPOSITION" means, with respect to any Person, the disposition of
any asset of such Person (including, without limitation, the sale of any
Capital Stock of any Subsidiary of such Person) other than sales of Inventory
in the ordinary course of business.
3
<PAGE>
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance Agreement
in the form attached hereto as EXHIBIT "E" assigning all or a portion of a
Lender's interests, rights and obligations under this Agreement to an
Eligible Assignee pursuant to SECTION 16.1.
"AVAILABILITY" means, as of the date of any determination thereof, (a)
the Borrowing Base at such time, MINUS (b) the aggregate outstanding
principal balance of the Revolving Credit Loan as of such date.
"BASE RATE" means, for any day, the rate per annum equal to the higher of
(a) the Federal Funds Rate for such day or (b) the Prime Rate for such day.
Any change in the Base Rate due to a change in the Federal Funds Rate or the
Prime Rate shall be effective on the effective date of such change in the
Federal Funds Rate or the Prime Rate; PROVIDED, that adjustments, if any, of
the Applicable Rate resulting from any change in the Base Rate shall become
effective as provided in SECTION 6.2(d).
"BASE RATE LOAN" means any Loan that bears interest at rates based upon
the Base Rate.
"BENEFIT PLAN" means an "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which
Borrower or any Related Company is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA, including
such plans as may be established after the Agreement Date.
"BENEFITTED LENDER" has the meaning set forth in SECTION 18.4 of this
Agreement.
"BORROWER" means Kerr Group, Inc., a Delaware corporation, with its chief
executive office located at 500 New Holland Avenue, Lancaster, Pennsylvania
17602, whose tax identification number is 95-0898810, and its successors and
permitted assigns.
"BORROWING BASE" means, at any time, an amount equal to the lesser of:
(a) the maximum principal amount of the Revolving Credit Facility,
MINUS the sum of
(i) the Letter of Credit Reserve, PLUS
(ii) the aggregate amount of the Environmental Compliance
Reserves, PLUS
(iii) such other reserves as Agent in its reasonable
discretion may establish from time to time, or
(b) an amount equal to the sum of
(i) eighty-five percent (85%) (or such lesser percentage as
Agent may in its reasonable discretion determine from time
to time) of the face value of Eligible Receivables due and
owing at such time, PLUS
(ii) sixty percent (60%) (or such lesser percentage as Agent may
in its reasonable discretion determine from time to time) of
the lesser of cost determined on a FIFO (or first-in-first-
out) accounting basis and
4
<PAGE>
fair market value of Eligible Inventory, net of Borrower's
reserve for obsolescence, at such time; PROVIDED, that the
maximum amount included in the Borrowing Base in respect of
work-in-process shall not at any time exceed $2,000,000,
MINUS
(iii) the sum of
(A) the Letter of Credit Reserve, PLUS
(B) the aggregate amount of the Environmental Compliance
Reserves, PLUS
(C) such other reserves as Agent in its reasonable
discretion may establish from time to time.
"BORROWING BASE CERTIFICATE" means a certificate, signed by an authorized
representative of Borrower, in substantially the form attached hereto as
EXHIBIT "D".
"BROKER" means any "broker," as such term is defined in Chapter 8 (or
Article 8) of the UCC, and in any event shall include, but not be limited to,
any Person defined as a broker or dealer under the federal securities laws,
but without excluding a bank acting in that capacity.
"BUSINESS DAY" means (a) any calendar day other than Saturday, Sunday or
other day on which banks in Dallas, Texas are authorized to close, and (b)
with respect to all Loans, payments, Conversions, Continuations, Interest
Periods and notices in connection with any Eurodollar Loan, any day which is
a Business Day described in CLAUSE (a) above and which is also a day on which
dealings in Dollar deposits are carried out in the London interbank
Eurodollar market.
"BUSINESS UNIT" means all or substantially all of the assets constituting
the business or an operating unit thereof, of any Person.
"CAPEX LOAN" means each Loan made to Borrower pursuant to SECTION 5.1, as
well as all such Loans collectively, as the context requires.
"CAPEX LOAN AMORTIZATION PAYMENT" means an amount, determined as of each
Installment Payment Date, equal to the sum of all CAPEX Loan Installments
applicable to such date.
"CAPEX LOAN AVAILABILITY" means with respect to any CAPEX Loan, an
amount, determined as of the time of funding thereof, equal to the sum of
eighty percent (80.0%) of the Cost Value of Eligible Purchased Equipment
which is to be financed or refinanced by such CAPEX Loan.
"CAPEX LOAN FACILITY" means the facility provided by ARTICLE 5 of this
Agreement for Loans up to the maximum principal sum of Ten Million and no/100
Dollars ($10,000,000.00).
"CAPEX LOAN INSTALLMENT" means an amount, determined with respect to each
CAPEX Loan for each Installment Payment Date occurring after the date of
funding thereof and prior to the Termination Date, equal to one eighty-fourth
(1/84th) of the original principal amount of such CAPEX Loan.
5
<PAGE>
"CAPEX NOTE" means a CAPEX Note made by Borrower payable to the order of
a Lender evidencing the obligation of Borrower to pay the aggregate unpaid
principal amount of the CAPEX Loan made to it by such Lender (and any
promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor whether
payable to such Lender or to a different Lender in connection with a Person
becoming a Lender after the Effective Date or otherwise) substantially in the
form of EXHIBIT "C" hereto, with all blanks properly completed, either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or refinanced.
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets
(other than assets which constitute a Business Unit) which are not, in
accordance with GAAP, treated as expense items for such Person in the year
made or incurred or as a prepaid expense applicable to a future year or years.
"CAPITAL STOCK" means corporate stock and any and all shares, partnership
interests, membership interests, equity interests, rights, securities or
other equivalent evidences of ownership (however designated) issued by any
entity (whether a corporation, partnership, limited liability company,
limited partnership or other type of entity).
"CAPITALIZED LEASE" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"CASH COLLATERAL" means Collateral consisting of cash or Cash Equivalents
on which Agent, for the benefit the Credit Parties, has a first priority Lien.
"CASH DIVIDENDS" means cash payments of dividends (to the extent not
prohibited by this Agreement).
"CASH EQUIVALENTS" means, with respect to any Person:
(a) marketable direct obligations issued or unconditionally
guaranteed by the U.S. or issued by any agency thereof and backed by the
full faith and credit of the U.S., in each case maturing within one (1)
year from the date of acquisition thereof;
(b) commercial paper maturing no more than one (1) year from the date
issued and, at the time of acquisition thereof, having a rating of at least
A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.;
(c) certificates of deposit or bankers' acceptances issued in Dollar
denominations and maturing within one (1) year from the date of issuance
thereof issued by any commercial bank organized under the laws of the U.S.
or any state thereof or the District of Columbia
6
<PAGE>
having combined capital and surplus of not less than $100,000,000 and,
unless issued by Agent or a Lender, not subject to set-off or offset
rights in favor of such bank arising from any banking relationship with
such bank;
(d) repurchase agreements with a term of not more than thirty (30)
days for underlying securities of the types described in CLAUSE (a) above
entered into with any commercial bank meeting the qualifications specified
in CLAUSE (c) above; and
(e) investments in money market funds and mutual funds which invest
substantially all of their assets in securities of the types described in
clauses (a) through (f) above.
"CASH TAXES" means cash payments made in respect of income tax
liabilities due and owing.
"CLEARING BANK" means PNC Bank, National Association and any other
banking institution with which an Agency Account has been established
pursuant to an Agency Account Agreement.
"CLEARING CORPORATION" means any "clearing corporation," as such term is
defined in Chapter 8 (or Article 8) of the UCC, and in any event shall
include, but not be limited to, any (i) Person that is registered as a
"clearing agency" under the federal securities laws, (ii) federal reserve
bank, or (iii) other Person that provides clearance or settlement services
with respect to Financial Assets that would require it to register as a
clearing agency under the federal securities laws but for an exclusion or
exemption from the registration requirement, if its activities as a clearing
corporation, including promulgation of rules, are subject to regulation by a
federal or state Governmental Authority.
"COLLATERAL" means and includes all of Borrower's right, title and
interest in and to each of the following, wherever located and whether now or
hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables;
(b) all Inventory;
(c) all Equipment;
(d) all Contract Rights;
(e) all General Intangibles;
(f) all Investment Property;
(g) all Real Estate;
(h) all goods and other property, whether or not delivered,
7
<PAGE>
(i) the sale or lease of which gives or purports to give rise to
any Receivable, including, but not limited to, all merchandise
returned or rejected by or repossessed from customers, or
(ii) securing any Receivable,
including, without limitation, all rights as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and
reclamation) with respect to such goods and other property;
(i) all mortgages, deeds to secure debt and deeds of trust on real or
personal property, guaranties, leases, security agreements and other
agreements and property which secure or relate to any Receivable or other
Collateral, or are acquired for the purpose of securing and enforcing any
item thereof;
(j) all documents of title, policies and certificates of insurance,
securities, chattel paper and other documents and instruments evidencing or
pertaining to any and all items of Collateral;
(k) all files, correspondence, computer programs, tapes, discs and
related data processing software which contain information identifying or
pertaining to any of the Receivables or any Account Debtor, or showing the
amounts thereof or payments thereon or otherwise necessary or helpful in
the realization thereon or the collection thereof;
(l) all deposit accounts, including, without limitation, all cash
deposited with Agent or any Lender or any Affiliate of Agent or any Lender
or which Agent, for the benefit of the Credit Parties, or any Lender or
such Affiliate is entitled to retain or otherwise possess as Collateral
pursuant to the provisions of this Agreement or any of the Security
Documents or any agreement relating to any Letter of Credit; and
(m) any and all products and proceeds of the foregoing (including,
but not limited to, any claim to any item referred to in this definition,
and any claim against any third party for loss of, damage to or destruction
of any or all of, the Collateral or for proceeds payable under, or unearned
premiums with respect to, policies of insurance) in whatever form,
including, but not limited to, cash, negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements
and other documents.
"COMMITMENT" means, as to each Lender, the amount set forth opposite such
Lender's name on the signature pages hereof or in the Register, representing
such Lender's obligation, upon and subject to the terms and conditions of
this Agreement (including the applicable provisions of SECTION 16.1), to make
the Revolving Credit Loan, the CAPEX Loan and the Term Loan and to purchase
participations in Letters of Credit.
"COMMITMENT PERCENTAGE" means, as to any Lender, the percentage obtained
by dividing such Lender's Commitment by the Total Commitment.
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"COMPLIANCE CERTIFICATE" means a certificate of Borrower's president or a
Financial Officer, in substantially the form of EXHIBIT "H", containing the
information required by SECTION 13.3 of this Agreement.
"CONSOLIDATED", when used in connection with any accounting term with
reference to a Person, means such accounting term determined with reference to
such Person and its Subsidiaries, as consolidated according to GAAP (and, in the
case of Net Income and Net Worth, after appropriate deductions for any minority
interests in any Subsidiaries).
"CONSOLIDATED SUBSIDIARIES" means, as to Borrower, the Subsidiaries of
Borrower whose accounts are at the time in question, in accordance with GAAP and
pursuant to the written consent of the Required Lenders, which consent may be
withheld in their absolute discretion conditioned upon, INTER ALIA, the
execution and delivery of guaranties, security agreements, mortgages and other
documents required by the Required Lenders in their absolute discretion,
consolidated with those of Borrower.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"CONTINUE", "CONTINUATION" and "CONTINUED" mean the continuation pursuant
to SECTION 6.3(b) hereof of a Eurodollar Loan as a Eurodollar Loan from one
Interest Period to the next Interest Period.
"CONTRACT RIGHTS" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper, whether now
existing or hereafter arising, to the extent that such rights may be lawfully
assigned.
"CONVERT", "CONVERSION" and "CONVERTED" mean a conversion pursuant to
SECTION 6.3(c), or ARTICLE 7 of one Type of Loan into another Type of Loan.
"COPYRIGHTS" means and includes, in each case whether now existing or
hereafter arising, all of Borrower's right, title and interest in and to the
following:
(a) all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations and copyright
applications;
(b) all renewals of any of the foregoing;
(c) all income, royalties, damages and payments now or hereafter due
and/or payable under any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the
foregoing;
(d) the right to sue for past, present and future infringements of
any of the foregoing; and
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(e) all rights corresponding to any of the foregoing throughout the
world.
"COPYRIGHT SECURITY AGREEMENT" means any Copyright Security Agreement
executed by Borrower to Agent, for the benefit of the Credit Parties, as such
agreement may be amended, modified, restated or supplemented from time to time.
"COST VALUE" means, with respect to any Eligible Purchased Equipment, the
actual net purchase price (exclusive of taxes, freight, transportation,
installation charges, service charges, maintenance charges or other charges not
directly part of the base purchase price) thereof, as evidenced by a purchase
contract, purchase order, invoice or other written evidence, satisfactory to
Agent, issued by the seller thereof.
"CREDIT PARTY" means each of Agent, L/C Issuer and the Lenders, and "CREDIT
PARTIES" means all of such Persons, collectively.
"CURRENT LIABILITIES" means, with respect to any Person, the aggregate
amount of all Liabilities of such Person which should properly be classified as
current liabilities in accordance with GAAP.
"CURRENT MATURITIES" means, when used in connection with Long Term
Liabilities, as of any date of determination, the principal amount of such
Liabilities coming due on such date or during the twelve (12) month period
following such date in accordance with the terms of any instrument or agreement
evidencing such Liabilities or relating thereto.
"DEFAULT" means any of the events specified in SECTION 15.1 which with the
passage of time or giving of notice or both would constitute an Event of
Default.
"DEFAULT MARGIN" means two percent (2.0%).
"DISBURSEMENT ACCOUNT" means one or more accounts maintained by and in the
name of Borrower with a Disbursing Bank for the purposes of disbursing Revolving
Credit Loan proceeds.
"DISBURSING BANK" means any commercial bank with which a Disbursement
Account is maintained after the Effective Date.
"DOLLAR" and "$" each means freely transferable U.S. dollars.
"EBITDA" means Net Income, PLUS interest expense, PLUS fees paid by
Borrower pursuant to SECTION 6.4(a) and SECTION 6.4(c), PLUS income taxes, PLUS
depreciation and amortization expense.
"ERISA" means the Employee Retirement Income Security Act of 1974 (as
amended), as in effect from time to time, any regulation promulgated thereunder
and any successor statute.
"EFFECTIVE DATE" means the later of:
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(a) the Agreement Date; or
(b) the first date on which all of the conditions set forth in
ARTICLE 8 shall have been fulfilled or waived in accordance with the
provisions of SECTION 18.9.
"EFFECTIVE INTEREST RATE" means each rate of interest per annum on the
Revolving Credit Loans and the Term Loan in effect from time to time pursuant to
the provisions of SECTIONS 6.2(a) and (b).
"ELIGIBLE ASSIGNEE" means (i) a Lender, (ii) any Affiliate of a Lender, and
(iii) any other Person that is primarily engaged in the business of commercial
lending or is a Subsidiary or Affiliate of a Person primarily engaged in the
business of commercial lending, approved by Agent and, unless a Default or an
Event of Default has occurred and is continuing at the time any assignment is
effected in accordance with SECTION 16.1, Borrower, such approval not to be
unreasonably withheld or delayed by Borrower and such approval to be deemed
given by Borrower if no objection is received by the assigning Lender and Agent
from Borrower within two (2) Business Days after notice of such proposed
assignment has been provided by the assigning Lender to Borrower; PROVIDED,
HOWEVER, that neither Borrower nor an Affiliate of Borrower shall qualify as an
Eligible Assignee.
"ELIGIBLE INVENTORY" means Inventory which Agent, in its reasonable
discretion determines to meet all of the following requirements:
(a) such Inventory is owned by Borrower, is stored at a location
listed on SCHEDULE 9.1(u), is subject to the Security Interest which is
perfected as to such Inventory and is subject to no other Lien whatsoever
other than a Permitted Lien;
(b) such Inventory consists of finished goods, work-in-process or raw
materials;
(c) such Inventory is in good condition and meets all standards
imposed by any Governmental Authority having regulatory authority over such
goods, their use or sale;
(d) such Inventory is currently either usable or salable, at prices
approximating at least the cost of such Inventory, in the normal course of
Borrower's business and is not slow moving or stale;
(e) such Inventory is not obsolete or returned, repossessed or used
goods taken in trade;
(f) such Inventory is located within the U.S. at one of the locations
set forth in the most recent Schedule of Inventory;
(g) such Inventory is in the possession and control of Borrower and
not any third party or if such Inventory is held by a third party bailee
and a negotiable instrument has not been issued with respect thereto (i) a
financing statement which names the third party bailee
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as the debtor/bailee, names Borrower as the secured party/bailor, names
Agent as assignee of the secured party/bailor and contains a
description of such Inventory acceptable to Agent and otherwise in
compliance with the requirements of Section 9-304(3) of the UCC has
been filed in the appropriate filing office, and (ii) such other steps
as Agent may reasonably require in order to establish and preserve the
priority of the Security Interest against secured creditors of the
third party bailee or Borrower shall have been taken (PROVIDED HOWEVER
that, notwithstanding the foregoing, any such Inventory held by a third
party bailee shall not be excluded from being considered as Eligible
Inventory solely by reason of this CLAUSE (g) to the extent, if any,
that the aggregate value of such Inventory, together with the value of
all other such Inventory held by a third party bailee, does not exceed
$100,000);
(h) if such Inventory is located in a warehouse or other facility
leased by Borrower, the lessor has delivered to Agent, on behalf of the
Lenders, a waiver and consent in form and substance satisfactory to Agent;
and
(i) such Inventory is not determined by Agent, on behalf of the
Lenders, in its reasonable discretion to be ineligible for any other
reason.
"ELIGIBLE PURCHASED EQUIPMENT" means, with respect to any CAPEX Loan,
Equipment which is acquired or to be acquired by Borrower after the Agreement
Date and within one (1) year prior to the funding of such CAPEX Loan and which
is acceptable to Agent in its discretion for purposes of determination of the
CAPEX Loan Availability for such CAPEX Loan, as determined by Agent in its
reasonable discretion.
"ELIGIBLE RECEIVABLE" means a Receivable that consists of the unpaid
portion of the obligation stated on the invoice issued to an Account Debtor with
respect to Inventory sold and shipped to or services performed for such Account
Debtor in the ordinary course of Borrower's business, net of any credits or
rebates owed by Borrower to the Account Debtor and net of any commissions
payable by Borrower to third parties and that Agent, in its reasonable
discretion determines to meet all of the following requirements:
(a) such Receivable is owned by Borrower and represents a complete
bona fide transaction which requires no further act under any circumstances
on the part of Borrower to make such Receivable payable by the Account
Debtor;
(b) such Receivable is not more than sixty (60) days past due from
the stated due date of the original invoice;
(c) not more than one hundred twenty (120) days have elapsed from the
date of the original invoice;
(d) the goods the sale of which gave rise to such Receivable were
shipped or delivered to the Account Debtor on an absolute sale basis and
not on a bill and hold sale basis, a consignment sale basis, a guaranteed
sale basis, a sale or return basis or on the basis
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of any other similar understanding, and no material part of such goods
has been returned or rejected;
(e) such Receivable is not evidenced by chattel paper or an
instrument of any kind unless such chattel paper or instrument has (i) been
collaterally assigned to Agent, for the benefit of itself as agent and the
Lenders, pursuant to an assignment in form and substance satisfactory to
Agent and (ii) is in the possession of Agent;
(f) the Account Debtor with respect to such Receivable is not
insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind or of any other proceeding or action, threatened or pending, which
might, in Agent's sole judgment, have a Materially Adverse Effect on such
Account Debtor, and is not, in the reasonable discretion of Agent, deemed
ineligible for credit or other reasons;
(g) such Receivable is not owing by an Account Debtor having fifty
percent (50%) or more in face value of its then existing accounts owing to
Borrower which do not meet the requirements of CLAUSE (b) or CLAUSE (c)
above;
(h) such Receivable is not owing by an Account Debtor whose then
existing accounts owing to Borrower exceed in face amount fifteen percent
(15%) of Borrower's total Eligible Receivables; PROVIDED, HOWEVER, that
only such portion of Receivables owing by an Account Debtor which exceeds
fifteen percent (15%) of Borrower's total Eligible Receivables shall fail
to qualify as an Eligible Receivable hereunder;
(i) if such Receivable arises from the performance of services, such
services have been fully rendered and do not relate to any warranty claim
or obligation;
(j) such Receivable is not owing by an Account Debtor that is located
outside of the U.S. (for this purpose, the Commonwealth of Puerto Rico and
other possessions of the U.S. shall be considered located within the U.S.)
or Canada;
(k) such Receivable is a valid, legally enforceable obligation of the
Account Debtor with respect thereto and is not subject to any present or
contingent (and no facts exist which are the basis for any future) offset,
deduction or counterclaim, dispute or other defense on the part of such
Account Debtor;
(l) such Receivable is subject to the Security Interest, which is
perfected as to such Receivable, and is subject to no other Lien whatsoever
other than a Permitted Lien;
(m) such Receivable is evidenced by an invoice or other documentation
in form acceptable to Agent;
(n) such Receivable is not subject to the Assignment of Claims Act of
1940, as amended from time to time, or any Applicable Law now or hereafter
existing similar in effect thereto, or to any other prohibition (under
Applicable Law, by contract or otherwise) against
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its assignment or requiring notice of or consent to such assignment,
unless all such required notices have been given, all such required
consents have been received and all other procedures have been complied
with such that such Receivable shall have been duly and validly
assigned to Agent, for the benefit of the Credit Parties;
(o) the goods giving rise to such Receivable were not, at the time of
the sale thereof, subject to any Lien, except the Security Interest and
Permitted Liens;
(p) Borrower is not in breach of any express or implied
representation or warranty with respect to the goods the sale of which gave
rise to such Receivable nor in breach of any representation or warranty,
covenant or other agreement contained in the Loan Documents with respect to
such Receivable;
(q) such Receivable does not arise out of any transaction with any
Subsidiary, Affiliate, creditor, tenant, lessor or supplier of Borrower;
(r) Borrower is not the beneficiary of any letter of credit, nor has
any bond or other undertaking by a guarantor or surety been obtained,
supporting such Receivable and the Account Debtor's obligations in respect
thereof;
(s) such Receivable does not arise out of finance or similar charges
by Borrower or other fees for the time value of money;
(t) the Account Debtor with respect to such Receivable is not located
in New Jersey or any other state denying creditors access to its courts in
the absence of qualification to transact business in such state or the
filing of a Notice of Business Activities Report or other similar filing,
unless Borrower has either qualified as a foreign corporation authorized to
transact business in such state or has filed a Notice of Business
Activities Report or similar filing with the applicable Governmental
Authority for the then current year; and
(u) neither the Account Debtor with respect to such Receivable, nor
such Receivable, is determined by Agent in its reasonable discretion to be
ineligible for any other reason.
"ENTITLEMENT HOLDER" means any Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement against the
Securities Intermediary.
"ENVIRONMENTAL COMPLIANCE FUNDINGS" means cash payments made in respect of,
or for the purpose of, any Remedial Action.
"ENVIRONMENTAL COMPLIANCE RESERVES" means reserves for the cost of Remedial
Action by Borrower determined by Agent from time to time in its reasonable
discretion based upon the reports delivered pursuant to SECTION 12.9(b) and such
other advice, analysis and engineering studies as it deems appropriate.
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"ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws now
or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals or industrial,
toxic or hazardous substances or wastes into the environment (including,
without limitation, ambient air, surface water, ground water or land), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, removal, transport or handling of pollutants,
Contaminants, chemicals or industrial, toxic or hazardous substances or
wastes, and any and all regulations, notices or demand letters issued,
entered, promulgated or approved thereunder, including, but not limited to,
the Resource Conservation and Recovery Act, 42 U.S.C. SECTION 6901 ET SEQ.,
as amended, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. SECTION 6901 ET SEQ., as amended, the Toxic
Substances Control Act, 15 U.S.C. SECTION 2601 ET SEQ., as amended, the Clean
Air Act, 46 U.S.C. SECTION 7401 ET SEQ., as amended, and state and federal
lien and environmental cleanup programs.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental Authority
for (a) any liability under Environmental Laws or (b) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of Contaminant into the environment.
"EQUIPMENT" means and includes, with respect to any Person, all equipment,
including, without limitation, all machinery, apparatus, equipment, molds, dies,
tooling, motor vehicles, tractors, trailers, rolling stock, fittings, fixtures
and other tangible personal property (other than Inventory) of every kind and
description used in such Person's business operations or owned by such Person or
in which such Person has an interest, and all parts, accessories and special
tools and all increases and accessions thereto and substitutions and
replacements therefor.
"EURODOLLAR BUSINESS DAY" means a Business Day on which dealings in Dollars
are carried out in the London interbank Eurodollar market.
"EURODOLLAR LOAN" means any Loan that bears interest at rates based upon
the Adjusted Eurodollar Rate.
"EURODOLLAR RATE" means, for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two (2) Eurodollar Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period. If for any
reason such rate is not available, the term "Eurodollar Rate" shall mean, for
any Eurodollar Loan for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period; PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%).
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"EVENT OF DEFAULT" means any of the events specified in SECTION 15.1,
PROVIDED that any requirement for notice or lapse of time or any other condition
has been satisfied.
"EXCESS CASH FLOW" means EBITDA, LESS Unfunded Capital Expenditures, LESS
Cash Taxes, LESS Cash Dividends, LESS Environmental Compliance Fundings, LESS
Pension Liability Fundings, LESS Retiree Health and Medical Fundings, LESS
Restructuring Cost Fundings, LESS principal, interest, fees, costs and expenses
paid under the Loan Documents, without duplication, in each case determined for
Borrower for each fiscal year based on the financial statements delivered
pursuant to SECTION 13.1(a).
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; PROVIDED that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to Agent (in its
individual capacity) on such day on such transactions as determined by Agent.
"FINANCIAL ASSET" means any financial asset, and in any event shall
include, but not be limited to, any (i) Security, (ii) obligation of a Person or
a share, participation or other interest in a Person or in property or an
enterprise of a Person, which is, or is of a type, dealt in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment and (iii) any property that is held by a
Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Chapter 8 (or Article 8) of
the UCC.
"FINANCIAL OFFICER" means the chief financial officer, treasurer, assistant
treasurer or controller of Borrower.
"FINANCING STATEMENTS" means any and all UCC financing statements, in form
and substance satisfactory to Agent, executed and delivered by Borrower to
Agent, naming Agent, for the benefit of the Credit Parties, as secured party and
Borrower as debtor, in connection with this Agreement.
"FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of (i)
EBITDA, PLUS Pension Liability Accruals to (ii) the sum of interest expense,
PLUS the aggregate amount of the CAPEX Loan Amortization Payments and the Term
Loan Amortization Payments actually made by Borrower during such period, PLUS
Cash Taxes, PLUS Pension Liability Fundings.
"FREMONT" means Fremont Acquisition Company, LLC, a Delaware limited
liability company, with its chief executive office located at 50 Fremont Street,
Suite 3700, San Francisco, California 94105, whose tax identification number is
94-3277720, and its successors and permitted assigns.
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"GAAP" means generally accepted accounting principles (existing as of the
Agreement Date as promulgated by opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements of the
Financial Accounting Standards Board) consistently applied and maintained
throughout the period indicated and, when used with reference to Borrower or any
Subsidiary of Borrower, consistent with the prior financial practice of Borrower
or such Subsidiary, as reflected on the financial statements referred to in
SECTION 9.1(n); PROVIDED, HOWEVER, that, in the event that changes shall be
mandated by the Financial Accounting Standards Board or any similar accounting
authority of comparable standing, or shall be recommended by Borrower's
independent public accountants, such changes shall be included in GAAP as
applicable to Borrower and any Subsidiary of Borrower only from and after such
date as Borrower, the Required Lenders and Agent shall have amended this
Agreement to the extent necessary to reflect any such changes in the financial
covenants set forth in ARTICLE 14.
"GENERAL INTANGIBLES" means all of Borrower's now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of Borrower of every kind and nature (other
than Receivables), including, without limitation, all Proprietary Rights,
corporate or other business records, data, inventions, designs, blueprints,
plans, specifications, goodwill, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, reversions or any rights
thereto and any other amounts payable to Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance policies covering the lives of key employees on which
Borrower is the beneficiary and any letter of credit, guarantee, claim, security
interest or other security held by or granted to Borrower to secure payment by
an Account Debtor of any Receivable.
"GOVERNMENT ACTS" has the meaning set forth in SECTION 3.8(a) of this
Agreement.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, any
Governmental Authority, whether federal, state, local or foreign national or
provincial.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, county, municipal, parish, provincial or other political subdivision
thereof and any department, commission, board, court, agency or other
instrumentality or entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"GUARANTOR" means each of Fremont and KAC, respectively, and all existing
and hereafter acquired direct and indirect domestic Subsidiaries of Borrower,
Fremont or KAC, and "GUARANTORS" means all of such Persons, collectively.
"GUARANTY", "GUARANTEED" or to "GUARANTEE" as applied to any obligation of
another Person shall mean and include:
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(a) any guaranty (other than by endorsement of negotiable instruments
for collection in the ordinary course of business), directly or indirectly,
in any manner, of any part or all of such obligation of such other Person;
and
(b) any agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation of such other Person
whether by
(i) the purchase of securities or obligations,
(ii) the purchase, sale or lease (as lessee or lessor) of
property or the purchase or sale of services primarily for the purpose
of enabling the obligor with respect to such obligation to make any
payment or performance (or payment of damages in the event of
nonperformance) of or on account of any part or all of such
obligation, or to assure the owner of such obligation against loss,
(iii) the supplying of funds to or in any other manner
investing in the obligor with respect to such obligation,
(iv) repayment of amounts drawn down by beneficiaries of letters
of credit, or
(v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's obligation under a
Guaranty of any obligation or indemnifying or holding harmless, in any
way, such Person against any part or all of such obligation.
"INDEBTEDNESS" of any Person means, without duplication, all Liabilities of
such Person, and to the extent not otherwise included in Liabilities, the
following:
(a) all obligations for Money Borrowed or for the deferred purchase
price of property or services;
(b) all obligations (including, during the noncancellable term of any
lease in the nature of a title retention agreement, all future payment
obligations under such lease discounted to their present value in
accordance with GAAP) secured by any Lien to which any property or asset
owned or held by such Person is subject, whether or not the obligation
secured thereby shall have been assumed by such Person;
(c) all obligations of other Persons which such Person has
Guaranteed, including, but not limited to, all obligations of such Person
consisting of recourse liability with respect to accounts receivable sold
or otherwise disposed of by such Person;
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(d) all obligations of such Person in respect of Interest Rate
Protection Agreements; and
(e) in the case of Borrower (without duplication) all obligations
under the Revolving Credit Loan, the CAPEX Loan and the Term Loan.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 18.12 of this
Agreement.
"INSTALLMENT PAYMENT DATE" means the first day of each calendar month,
commencing on September 1, 1997, and continuing thereafter until each of the
Term Loan and the CAPEX Loan has been irrevocably paid in full.
"INTEREST PAYMENT DATE" means, with respect to all Loans, the first day of
each calendar month, commencing on September 1, 1997, and, with respect to any
Eurodollar Loan, on the last day of each corresponding Interest Period, and
continuing thereafter until the Secured Obligations have been irrevocably paid
in full.
"INTEREST PERIOD" means the period beginning on the day any Eurodollar Loan
is made and ending one (1), two (2), three (3) or six (6) months thereafter (as
Borrower may select); PROVIDED, HOWEVER:
(a) if any Interest Period would otherwise end on a day which is not
a Eurodollar Business Day, such Interest Period shall be extended to the
next succeeding Eurodollar Business Day, unless, with respect to a
Eurodollar Loan, the result of such extension would be to extend such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) any Interest Period with respect to a Eurodollar Loan that begins
on the last Eurodollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Eurodollar Business
Day of a calendar month; and
(c) Borrower may not select any Interest Period which ends after the
date of a scheduled principal payment on the Loans unless, after giving
effect to such selection, the aggregate unpaid principal amount of the
Eurodollar Loans for which Interest Periods end after such scheduled
principal payment shall be equal to or less than the principal amount to
which the Loans are required to be reduced after such scheduled principal
payment is made.
"INTEREST RATE PROTECTION AGREEMENT" shall mean an interest rate swap, cap
or collar agreement or similar arrangement between a Person and a financial
institution providing for the transfer or mitigation of interest risks either
generally or under specific contingencies.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
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"INVENTORY" means all inventory and shall include, without limitation:
(a) all goods held or intended for sale or lease, or for display or
demonstration;
(b) all work-in-process;
(c) all raw materials and other materials and supplies of every
nature and description used or which might be used in connection with the
manufacture, packing, shipping, advertising, selling, leasing or furnishing
of such goods or otherwise used or consumed in Borrower's business; and
(d) all documents evidencing and general intangibles relating to any
of the foregoing.
"INVESTMENT" means, with respect to any Person:
(a) the acquisition or ownership by such Person of any share of
Capital Stock, evidence of Indebtedness or other security issued by any
other Person;
(b) any loan, advance or extension of credit to, or contribution to
the capital of, any other Person, excluding advances to employees in the
ordinary course of business for business expenses;
(c) any Guaranty of the obligations of any other Person;
(d) any other investment (other than the Acquisition of a Business
Unit) in any other Person; and
(e) any commitment or option (where the consideration for such option
exceeds $100) to make any of the investments listed in CLAUSES (a) through
(d) above.
"INVESTMENT PROPERTY" means any investment property, now owned or hereafter
acquired, and, in any event, shall include, without limitation, each of the
following: (a) any Security, whether certificated or uncertificated, (b) any
Security Entitlement, (c) any Securities Account, and (d) all proceeds of any of
the foregoing.
"IRS" means the Internal Revenue Service.
"ISSUER" means any "issuer," as such term is defined in Chapter 8 (or
Article 8) of the UCC, and in any event shall include, but not be limited to,
any Person that, with respect to an obligation on or a defense to a Security,
(i) places or authorizes the placing of its name on a Security Certificate,
other than as authenticating trustee, registrar, transfer agent or the like, to
evidence a share, participation or other interest in its property or in an
enterprise, or to evidence its duty to perform an obligation represented by the
certificate, (ii) creates a share, participation or other interest in its
property or in an enterprise, or undertakes an obligation, that is an
Uncertificated Security; (iii)
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directly or indirectly creates a fractional interest in its rights or
property, if the fractional interest is represented by a Security
Certificate or (iv) becomes responsible for, or in the place of,
another Issuer.
"KAC" means Kerr Acquisition Corporation, a Delaware corporation, with its
chief executive office is located at 50 Fremont Street, Suite 3700, San
Francisco, California 94105, whose tax identification number is 94-3276409, and
its successors and permitted assigns.
"L/C ISSUER" means NationsBank and any Affiliate of NationsBank that issues
any Letter of Credit pursuant to this Agreement.
"LENDER" means, at any time, each Lender signatory to this Agreement and
any other Person becoming a party hereto pursuant to the provisions of
ARTICLE 16, and in each case its successors and assigns, and "LENDERS" means, at
any time, all such Persons, and their successors and assigns.
"LETTER OF CREDIT" means any letter of credit issued by L/C Issuer for the
account of Borrower pursuant to ARTICLE 3.
"LETTER OF CREDIT AMOUNT" means, with respect to any Letter of Credit, the
aggregate maximum amount at any time available for drawing under such Letter of
Credit.
"LETTER OF CREDIT FACILITY" means the facility provided under ARTICLE 3 of
this Agreement for issuance of one or more Letters of Credit for the account of
Borrower in an aggregate face amount not to exceed Two Million and No/100
Dollars ($2,000,000.00) at any time.
"LETTER OF CREDIT OBLIGATIONS" means, at any time, the sum of (a) the
Reimbursement Obligations of Borrower at such time, PLUS (b) the aggregate of
all Letter of Credit Amounts outstanding at such time, PLUS (c) the aggregate of
all Letter of Credit Amounts of Letters of Credit the issuance of which has been
authorized by L/C Issuer pursuant to SECTION 3.4(b) but that have not yet been
issued, in each case as determined by Agent.
"LETTER OF CREDIT RESERVE" means, at any time, the Letter of Credit
Obligations at such time, other than Letter of Credit Obligations that are fully
secured by Cash Collateral.
"LIABILITIES" means, with respect to any Person, all items (excluding
Capital Stock, additional paid-in capital, retained earnings and general
contingency items and deferred tax reserves) which in accordance with GAAP would
be included in determining total liabilities as shown on a balance sheet of such
Person as at the date for which Liabilities are to be determined.
"LICENSES" means and includes, with respect to a Person, in each case
whether now existing or hereinafter arising, all of such Person's right, title
and interest in and to (a) any and all licensing agreements or similar
arrangements in and to the Patents, Copyrights or Trademarks; (b) all income,
royalties, damages, claims and payments now or hereafter due and/or payable
under and with respect thereto, including, without limitation, damages and
payments for past and future breaches thereof; and (c) all rights to sue for
past, present and future breaches thereof.
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"LIEN" as applied to the property of any Person means:
(a) any security interest, mortgage, deed to secure debt, deed of
trust, lien, pledge, charge, lease constituting a Capitalized Lease
Obligation, conditional sale or other title retention agreement, or other
security interest, security title or encumbrance of any kind in respect of
any property of such Person, or upon the income or profits therefrom;
(b) any arrangement, express or implied, under which any property of
such Person is transferred, sequestered or otherwise identified for the
purpose of subjecting the same to the payment of Indebtedness or
performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person;
(c) any Indebtedness which is unpaid more than thirty (30) days after
the same shall have become due and payable and which if unpaid might by law
(including, but not limited to, bankruptcy and insolvency laws), or
otherwise, be given any priority whatsoever over the claims of general
unsecured creditors of such Person; and
(d) the filing of, or any agreement to give, any financing statement
under the UCC, or its equivalent, in any jurisdiction, excluding
informational or precautionary financing statements relating to property
leased by Borrower.
"LOAN" means any Revolving Credit Loan, CAPEX Loan or Term Loan, as well as
all such loans collectively, as the context requires, and in any case includes,
without limitation, any and all renewals, extensions, modifications or
replacements thereof.
"LOAN ACCOUNT" and "LOAN ACCOUNTS" shall have the meanings ascribed thereto
in SECTION 6.7.
"LOAN DOCUMENTS" means collectively this Agreement, the Notes, the
Reimbursement Agreements, the Security Documents and each other instrument,
agreement, certificate or document executed by Borrower, any Guarantor or any
Affiliate or Subsidiary of Borrower or any Guarantor in connection with this
Agreement whether prior to, on or after the Effective Date and each other
instrument, agreement, certificate or document referred to herein or
contemplated hereby.
"LOAN PARTY" means each of Borrower and the Guarantors, individually, and
"LOAN PARTIES" means all of such Persons, collectively.
"LOAN YEAR" means each annual period commencing on the Agreement Date, or
any anniversary thereof, and ending on the day preceding the next successive
anniversary of such commencement date.
"LOCKBOX" means a U.S. post office box specified in, or pursuant to, an
Agency Account Agreement or a Lockbox Agreement.
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"LOCKBOX AGREEMENT" means any agreement established between Agent, Borrower
and a Clearing Bank concerning the establishment of a Lockbox for the receipt
and collection of checks and other items constituting proceeds of Receivables.
"LONG TERM LIABILITIES" means, with respect to any Person, the aggregate
amount of all Liabilities of such Person other than Current Liabilities.
"MAKE-WHOLE AMOUNT" shall have the meaning set forth in SECTION 6.9(b) of
this Agreement.
"MARGIN STOCK" means margin stock as defined in Section 221.1(h) of
Regulation U.
"MATERIALLY ADVERSE EFFECT" means, with respect to any Person, a materially
adverse effect upon such Person's business, assets, liabilities, condition
(financial or otherwise), results of operations or business prospects, and in
addition (i) with respect to Borrower, means a materially adverse effect upon
Borrower's ability to perform its obligations hereunder or under any other Loan
Document to which it is a party or upon the enforceability of such obligations
against Borrower, (ii) with respect to any Guarantor, means a materially adverse
effect upon such Guarantor's ability to perform its obligations under a
Guaranty, or under any other Loan Document to which such Guarantor is a party or
upon the enforceability of such obligations against such Guarantor, and (iii)
with respect to any other Person which is a party to any Loan Document, means a
materially adverse effect upon such Person's ability to perform its obligations
under any Loan Document to which such Person is a party or upon the
enforceability of such obligations against such Person.
"MAXIMUM RATE" shall have the meaning set forth in SECTION 6.2(e) of this
Agreement.
"MERGER" means the merger of KAC with and into Borrower, as survivor, as
contemplated pursuant to the terms of the Acquisition Agreement.
"MONEY BORROWED" means, as applied to Indebtedness:
(a) Indebtedness for money borrowed;
(b) Indebtedness, whether or not in any such case the same was for
money borrowed,
(i) represented by notes payable, and drafts accepted, that
represent extensions of credit,
(ii) constituting obligations evidenced by bonds, debentures,
notes or similar instruments, or
(iii) upon which interest charges are customarily paid or
that was issued or assumed as full or partial payment for property
(other than trade credit that is incurred in the ordinary course of
business);
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(c) Indebtedness that constitutes a Capitalized Lease Obligation, and
(d) Indebtedness that is such by virtue of CLAUSE (c) of the
definition thereof, but only to the extent that the obligations Guaranteed
are obligations that would constitute Indebtedness for money borrowed.
"MORTGAGES" means and includes any and all of the mortgages, deeds of
trust, deeds to secure debt, assignments and other instruments executed and
delivered by Borrower to or for the benefit of Agent by which Agent, on behalf
of the Credit Parties, acquires a Lien on Borrower's Real Estate or a collateral
assignment of Borrower's interest under leases of Real Estate, and all
amendments, modifications and supplements thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which Borrower or a Related Company is required to
contribute or has contributed within the immediately preceding six (6) years.
"NATIONSBANK" means NationsBank of Texas, N.A., a national banking
association whose principal office is located at 901 Main Street, Dallas, Dallas
County, Texas 75202, and each of its successors and assigns.
"NET AMOUNT" means, with respect to any Investments made by any Person, the
gross amount of all such Investments minus the aggregate amount of all cash
received and the fair value, at the time of receipt by such Person, of all
property received as payments of principal or premiums, returns of capital,
liquidating dividends or distributions, proceeds of sale or other dispositions
with respect to such Investments.
"NET INCOME" means, as applied to any Person, the net income (or net loss)
of such Person for the period in question after giving effect to deduction of or
provision for all operating expenses, all taxes and reserves (including reserves
for deferred taxes) and all other proper deductions, all determined in
accordance with GAAP, PROVIDED that there shall be excluded:
(a) the net income (or net loss) of any Person accrued prior to the
date it becomes a Subsidiary of, or is merged into or Consolidated with,
the Person whose Net Income is being determined or a Consolidated
Subsidiary of such Person;
(b) the net income (or net loss) of any Person in which the Person
whose Net Income is being determined or any Subsidiary of such Person has
an ownership interest, EXCEPT, in the case of net income, to the extent
that any such income has actually been received by such Person or such
Subsidiary in the form of cash dividends or similar distributions;
(c) any restoration of any contingency reserve, EXCEPT to the extent
that provision for such reserve was made out of income during such period;
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(d) any net gains or losses on the sale or other disposition, not in
the ordinary course of business, of Investments, Business Units and other
capital assets, PROVIDED that there shall also be excluded any related
charges for taxes thereon;
(e) any net gain arising from the collection of the proceeds of any
insurance policy;
(f) any write-up of any asset; and
(g) any other extraordinary item;
PROVIDED, HOWEVER, in determining Borrower's Net Income to calculate EBITDA for
purposes of SECTION 14.1(b), such calculation shall be based on results of
Borrower only without adjustment due to principles of consolidation otherwise
required under GAAP.
"NET OUTSTANDINGS" of any Lender means, at any time, the sum of (a) all
amounts paid by such Lender (other than pursuant to SECTION 17.5) to Agent in
respect of Revolving Credit Loans under this Agreement, MINUS (b) all amounts
paid by Agent to such Lender which are received by Agent and which, pursuant to
this Agreement, are paid over to such Lender for application in reduction of the
outstanding principal balance of the Revolving Credit Loans.
"NET PROCEEDS" means proceeds received by Borrower or any of its
Subsidiaries in cash from any Asset Disposition (including, without limitation,
payments under notes or other debt securities received in connection with any
Asset Disposition), net of: (a) the transaction costs of such Asset Disposition;
(b) any tax liability arising from such Asset Disposition; and (c) amounts
applied to repayment of Indebtedness (other than the Secured Obligations)
secured by a Lien on the asset or property disposed of.
"NET WORTH" means, with respect to any Person, such Person's total
shareholder's equity (including, without limitation, Capital Stock, additional
paid-in capital and retained earnings, after deducting treasury stock) which
would appear as such on a balance sheet of such Person prepared in accordance
with GAAP.
"NEW CANAAN" means New Canaan Investments, Inc., a Delaware corporation,
with its chief executive office located at 1177 Summer Street, Stamford,
Connecticut 06905, and whose tax identification number is 06-128-3088, including
its officers, directors and employees.
"NON-RATABLE LOAN" means a Revolving Credit Loan made by NationsBank in
accordance with the provisions of SECTION 6.10(c).
"NOTE" means any of the Revolving Credit Notes, the CAPEX Notes and the
Term Notes and "NOTES" means more than one or all of such Notes, collectively,
as the context may indicate.
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"NOTICE OF BORROWING" means a Notice of Borrowing, Prepayment, Conversion
or Continuation, signed by Borrower's President or a Financial Officer, in
substantially the form attached hereto as EXHIBIT "G".
"OPERATING LEASE" means any lease, excluding any lease constituting a
Capitalized Lease Obligation, of real or personal property.
"OTHER TAXES" shall have the meaning set forth in SECTION 7.6(b) of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PBGC AGREEMENT" means the certain Agreement dated August __, 1997, between
Borrower and PBGC, as such agreement may be amended, restated or otherwise
modified to the extent allowed by the PBGC Intercreditor Agreement.
"PBGC INTERCREDITOR AGREEMENT" means the certain Subordination and Standby
Agreement of even date herewith among Agent, PBGC and Borrower, as such
agreement may be amended, restated or otherwise modified.
"PBGC LIENS" means the Liens granted or to be granted by Borrower to PBGC,
for the benefit of itself and for the benefit of Kerr Group, Inc. Retirement
Income Plan, pursuant to the PBGC Agreement, PROVIDED that such Liens at all
times are expressly subject to the PBGC Intercreditor Agreement.
"PATENT SECURITY AGREEMENT" means any Patent Security Agreement executed by
Borrower to Agent, for the benefit of the Credit Parties, as such agreement may
be amended, modified, restated or supplemented from time to time.
"PATENTS" means and includes, in each case whether now existing or
hereafter arising, all of Borrower's right, title and interest in and to:
(a) any and all patents and patent applications;
(b) all inventions and improvements described and claimed therein;
(c) all reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof;
(d) all income, royalties, damages, claims and payments now or
hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past and future infringements
thereof;
(e) all rights to sue for past, present and future infringements
thereof; and
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(f) all rights corresponding to any of the foregoing throughout the
world.
"PENSION LIABILITY ACCRUALS" means all costs and expenses as reflected on
Borrower's financial statements delivered pursuant to SECTION 13.1 relating to
any Benefit Plan maintained by Borrower.
"PENSION LIABILITY FUNDINGS" means "Enhanced Contributions" as such term is
defined in the PBGC Agreement.
"PERMITTED INVESTMENTS" means Investments of Borrower in:
(a) cash or Cash Equivalents;
(b) negotiable certificates of deposit and time deposits issued by
(i) Agent, any Lender or any of their Affiliates, (ii) any U.S. bank or
trust company having capital, surplus and undivided profits in excess of
$100,000,000, or (iii) any U. S. thrift or savings and loan, to the extent
that the full amount of such certificate of deposit is insured by any U. S.
Governmental Authority;
(c) any direct obligation of the U.S. or any Governmental Authority
thereof which has a remaining maturity at the time of purchase of not more
than one (1) year and repurchase agreements relating to the same;
(d) Receivables arising from sales of Inventory on credit in the
ordinary course of business;
(e) shares of Capital Stock, evidence of Indebtedness or other
security acquired by Borrower in consideration for or as evidence of past
due or restructured Receivables in an aggregate face amount of such
Receivables at any time not to exceed $100,000;
(f) Guaranties permitted pursuant to SECTION 14.3;
(g) those items described on SCHEDULE 1.1B ("Permitted Investments");
(h) loans by Borrower to any customer of Borrower (excluding any
Affiliate or Subsidiary of Borrower), made by Borrower in the ordinary
course of business, the proceeds of which are used by such customer to
purchase molds and tooling to be used by Borrower in the production of
Inventory for sale to such customer; and
(i) other Investments, the net aggregate amount of which does not at
any time exceed $100,000 individually or $250,000 in the aggregate in any
fiscal year of Borrower.
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"PERMITTED LIENS" means:
(a) Liens securing taxes, assessments and other charges or levies of
a Governmental Authority (excluding any Lien imposed pursuant to any of the
provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals
incurred in the ordinary course of business, but (i) in all cases only if
payment shall not at the time be required to be made in accordance with
SECTION 12.6, and (ii) in the case of warehousemen or landlords, only if
such Liens are junior to the Security Interest in any of the Collateral;
(b) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance, social security or
similar legislation or under payment, bid, surety, appeal or performance
bonds;
(c) Liens constituting encumbrances in the nature of zoning
restrictions, easements, leases, subleases, rights or restrictions of
record on the use of Real Estate and other minor defects or irregularities
in title and other similar charges or encumbrances, none of such Liens
which materially detract from the value of such property or impair the use
thereof in the business of Borrower;
(d) Purchase Money Liens securing Permitted Purchase Money
Indebtedness incurred for the purchase of Equipment after the Agreement
Date;
(e) Liens shown on SCHEDULE 1.1C ("Permitted Liens");
(f) Liens of Agent, for the benefit of the Credit Parties, arising
under this Agreement and the other Loan Documents;
(g) to the extent not otherwise covered by the foregoing, matters
disclosed on any mortgagee's policy of title insurance delivered to and
accepted by Agent that insures any of the Mortgages;
(h) Liens arising in connection with judgments for the payment of
money of an amount not to exceed $250,000 in any one case or $500,000 in
the aggregate; PROVIDED that, as to any of such Liens, (i) the judgment or
other court order giving rise to such Lien is being contested in good faith
by appropriate proceedings diligently pursued and available to Borrower
prior to the commencement of any foreclosure or similar proceeding,
(ii) execution thereon is at all times effectively stayed, (iii) an
adequate reserve for the Indebtedness which such Lien secures has been
established on Borrower's books in accordance with GAAP, (iv) Borrower
shall have given notice of such Lien to Agent pursuant to the terms of
SECTION 18.1 hereof, and (v) Agent shall, at its option, have established a
reserve against the Borrowing Base for the amount of such Lien; and
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(i) the PBGC Liens (if any), subject at all times to the PBGC
Intercreditor Agreement.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means Purchase Money Indebtedness
of Borrower incurred after the Agreement Date:
(a) which is secured by a Purchase Money Lien;
(b) the aggregate principal amount of which does not exceed an amount
equal to one hundred percent (100%) of the lesser of
(i) the cost (including the principal amount of such
Indebtedness, whether or not assumed) of the property (excluding
Inventory) subject to such Lien, and
(ii) the fair value of such property (excluding Inventory) at the
time of its acquisition, and
(c) which, when aggregated with the principal amount of all other
such Indebtedness and Capitalized Lease Obligations of Borrower at the time
outstanding, does not exceed $5,000,000.
For the purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of Capitalized Leases shall be computed as a Capitalized
Lease Obligation.
"PERSON" means any individual, corporation, limited liability company,
joint venture, general or limited partnership, association, trust,
unincorporated organization or Governmental Authority, or other similar entity.
"PLAN" means any employee benefit plan as defined in Section 3(3) of ERISA
in respect of which Borrower or any Related Company is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA, including, without limitation, a "multiemployer plan" as defined
in Section 3(37) or Section 4001(a)(3) of ERISA.
"PRIME RATE" means the per annum rate of interest established from time to
time by NationsBank as its "prime rate", which rate may not be the lowest rate
of interest charged by NationsBank to its customers.
"PRINCIPAL OFFICE" means the principal office of Agent specified in or
determined in accordance with the provisions of SECTION 18.1.
"PRO FORMA" means (i) the pro forma projected financial statements of the
Loan Parties, giving effect to the Acquisition, the transactions contemplated in
connection therewith and this Agreement, and reflecting estimated purchase price
accounting adjustments and including a balance sheet and income and cash flow
statements, previously delivered to Agent by Borrower.
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"PROPRIETARY RIGHTS" means all of Borrower's now owned and hereafter
arising or acquired: Patents, Copyrights, Trademarks and Licenses, including,
without limitation, those Proprietary Rights set forth on SCHEDULE 9.1(bb)
hereto, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations and continuations-in-part of any of
the foregoing, and all rights to sue for past, present and future infringement
of any of the foregoing.
"PURCHASE MONEY INDEBTEDNESS" means:
(a) Indebtedness created to secure the payment of all or any part of
the purchase price of any property (excluding Inventory);
(b) any Indebtedness incurred at the time of or within forty-five
(45) days prior to or after the acquisition of any property (excluding
Inventory) for the purpose of financing all or any part of the purchase
price thereof; and
(c) any renewals, extensions or refinancings thereof, but not any
increases in the principal amounts thereof outstanding at the time of any
such renewal, extension or refinancing.
"PURCHASE MONEY LIEN" means any Lien securing Purchase Money Indebtedness,
but only if such Lien shall at all times be confined solely to the property
(excluding Inventory) the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien.
"REAL ESTATE" means all of Borrower's now or hereafter owned or leased
estates in real property, including, without limitation, all fees, leaseholds
and future interests, together with all of Borrower's now or hereafter owned or
leased interests in the improvements and emblements thereon, the fixtures
attached thereto and the easements appurtenant thereto, including, without
limitation, the real property described on SCHEDULE 9.1(w).
"RECEIVABLES" means and includes:
(a) any and all rights to the payment of money or other forms of
consideration of any kind (whether classified under the UCC as accounts,
contract rights, chattel paper, general intangibles or otherwise)
including, but not limited to, accounts receivable, letters of credit and
the right to receive payment thereunder, chattel paper, tax refunds,
insurance proceeds, Contract Rights, notes, drafts, instruments, documents,
acceptances and all other debts, obligations and liabilities in whatever
form from any Person;
(b) all guarantees, security and Liens for payment of any Receivables
listed in CLAUSE (a);
(c) all goods, whether now owned or hereafter acquired, and whether
sold, delivered, undelivered, in transit or returned, which may be
represented by, or the sale or
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lease of which may have given rise to, any such right to payment or other
debt, obligation or liability; and
(d) all proceeds of any of the foregoing.
"REGISTER" has the meaning set forth in SECTION 16.1(b) of this Agreement.
"REGULATION U" means Regulation U as promulgated by the Board of Governors
of the Federal Reserve System (or any successor Governmental Authority), as the
same may be amended or supplemented from time to time.
"REIMBURSEMENT AGREEMENT" means, with respect to a Letter of Credit, such
form of application therefor and form of reimbursement agreement therefor
(whether in a single document or several documents) as L/C Issuer may employ in
the ordinary course of business for its own account, with such modifications
thereto as may be agreed upon by L/C Issuer and Borrower, PROVIDED that such
application and agreement and any modifications thereto are not inconsistent
with the terms of this Agreement.
"REIMBURSEMENT OBLIGATIONS" means the reimbursement or repayment
obligations of Borrower to any of the Credit Parties pursuant to SECTION 3.6 or
pursuant to a Reimbursement Agreement with respect to amounts that have been
drawn under Letters of Credit.
"RELATED COMPANY" means any (i) corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Internal Revenue Code) as Borrower or any of its Subsidiaries, (ii) partnership
or other trade or business (whether or not incorporated) under common control
(within the meaning of Section 414(c) of the Internal Revenue Code) with
Borrower or any of its Subsidiaries, or (iii) member of the same affiliated
service group (within the meaning of Section 414(m) of the Internal Revenue
Code) as Borrower or any of its Subsidiaries, any corporation described in
CLAUSE (i) above or any partnership, trade or business described in CLAUSE (ii)
above.
"RELEASE" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including, without
limitation, the movement of Contaminants through or in the air, soil, surface
water or groundwater.
"REMEDIAL ACTION" means actions required to (i) clean up, remove, treat or
in any other way address Contaminants in the indoor or outdoor environment, (ii)
prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment, or (iii) perform pre-
remedial studies and investigations and post-remedial monitoring and care.
"REPORTABLE EVENT" has the meaning set forth in Section 4043(b) of ERISA,
but shall not include a Reportable Event as to which the provision for thirty
(30) days' notice to the PBGC is waived under applicable regulations.
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"REQUIRED LENDERS" means, at any time, any combination of Lenders whose
Commitment Percentages at such time aggregate in excess of fifty-one percent
(51.0%).
"RESERVE REQUIREMENT" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against, in the case of
Eurodollar Loans, "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by reference
to which the Adjusted Eurodollar Rate is to be determined, or (ii) any category
of extensions of credit or other assets which include Eurodollar Loans. The
Adjusted Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.
"RESTRICTED DIVIDEND PAYMENT" means any dividend, distribution or payment
on or with respect to any shares of a Person's Capital Stock (other than
dividends payable solely in shares or other evidence of ownership of its Capital
Stock), excluding, however, any such dividend, distribution or payment to
Borrower by any Subsidiary of Borrower.
"RESTRICTED PAYMENT" means (a) any redemption or prepayment or other
retirement, prior to the stated maturity thereof or prior to the due date of any
regularly scheduled installment or amortization payment with respect thereto, of
any Indebtedness for Borrowed Money or of any Indebtedness that is junior and
subordinate to the Secured Obligations, (b) the payment by any Person of the
principal amount of or interest on any Indebtedness (other than trade debt)
owing to a shareholder, partner or equity holder of such Person or to any
Affiliate of any such shareholder, partner or equity holder and (c) the payment
of any management, consulting or similar fee by any Person to any Affiliate of
such Person.
"RESTRICTED PURCHASE" means any payment on account of the purchase,
redemption or other acquisition or retirement by a Person of any shares of such
Person's Capital Stock (except shares acquired on the conversion thereof into
other shares of Capital Stock of such Person).
"RESTRUCTURING COST FUNDINGS" means all costs chargeable to a restructuring
reserve in accordance with GAAP.
"RETIREE HEALTH AND MEDICAL FUNDINGS" means all cash fundings related to
any retiree health or medical plan of Borrower for its retired employees.
"REVOLVING CREDIT FACILITY" means the facility provided by ARTICLE 2 of
this Agreement for Revolving Credit Loans up to the maximum principal sum of
Twenty Million and No/100 Dollars ($20,000,000.00).
"REVOLVING CREDIT LOAN" means each Loan made to Borrower pursuant to
SECTION 2.1 as well as all such Loans, collectively, as the context requires.
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"REVOLVING CREDIT NOTE" means a Revolving Credit Note made by Borrower
payable to the order of a Lender evidencing the obligation of Borrower to pay
the aggregate unpaid principal amount of the Revolving Credit Loans made to it
by such Lender (and any promissory note or notes that may be issued from time to
time in substitution, renewal, extension, replacement or exchange therefor
whether payable to such Lender or to a different Lender in connection with a
Person becoming a Lender after the Effective Date or otherwise) substantially in
the form of EXHIBIT "A" hereto, with all blanks properly completed, either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or refinanced.
"SCHEDULE OF INVENTORY" means a schedule delivered by Borrower to Agent
pursuant to the provisions of SECTION 11.12(b).
"SCHEDULE OF RECEIVABLES" means a schedule delivered by Borrower to Agent
pursuant to the provisions of SECTION 11.12(a).
"SECURED OBLIGATIONS" means, in each case whether now in existence or
hereafter arising:
(a) the principal of, and interest and premium, if any, on, the
Loans;
(b) the Reimbursement Obligations and all other obligations of
Borrower to L/C Issuer or any Lender arising in connection with the
issuance of any Letter of Credit;
(c) all obligations of Borrower under any Interest Rate Protection
Agreement between Borrower and any Lender; and
(d) all indebtedness, liabilities, obligations, covenants and duties
of Borrower to any of the Credit Parties of every kind, nature and
description arising under or in respect of this Agreement, the Notes or any
of the other Loan Documents, whether direct or indirect, absolute or
contingent, due or not due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note, and whether or not
for the payment of money, including, without limitation, fees required to
be paid pursuant to ARTICLE 6 and expenses required to be paid or
reimbursed pursuant to SECTION 18.2.
"SECURITIES ACCOUNT" means any account to which a Financial Asset is or may
be credited in accordance with an agreement under which the Person maintaining
the account undertakes to treat the Person for whom the account is maintained as
entitled to exercise the rights that comprise the Financial Asset.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITIES INTERMEDIARY" means any (i) Clearing Corporation, or (ii)
Person, including a bank or Broker, that in the ordinary course of its business
maintains Securities Accounts for others and is acting in that capacity.
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"SECURITY" means any "security," as such term is defined in Chapter 8 (or
Article 8) of the UCC and, in any event, shall include, but not be limited to,
any obligation of an Issuer or a share, participation or other interest in an
Issuer or in property or an enterprise of an Issuer: (i) which is represented by
a Security Certificate in bearer or registered form, or the transfer of which
may be registered upon books maintained for that purpose by or on behalf of the
Issuer; (ii) which is one of a class or series or by its terms is divisible into
a class or series of shares, participations, interests or obligations; and
(iii) which (a) is, or is of a type, dealt in or traded on securities exchanges
or securities markets or (b) is a medium for investment and by its terms
expressly provides that it is a security governed by Chapter 8 (or Article 8) of
the UCC.
"SECURITY CERTIFICATE" means any certificate representing a Security.
"SECURITY DOCUMENTS" means each of the following:
(a) the Mortgages;
(b) the Financing Statements;
(c) the Affiliate Guaranties;
(d) the Copyright Security Agreement, the Patent Security Agreement
and the Trademark Agreement; and
(e) each other writing executed and delivered by Borrower or any
other Person securing or Guaranteeing the Secured Obligations.
"SECURITY ENTITLEMENT" means any of the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
"SECURITY INTEREST" means the Liens of Agent, for the benefit of the Credit
Parties, on and in the Collateral effected by this Agreement or by any of the
Security Documents or pursuant to the terms hereof or thereof.
"SETTLEMENT DATE" means each Business Day after the Effective Date selected
by Agent in its sole discretion subject to and in accordance with the provisions
of SECTION 6.10(c)(i) as of which a Settlement Report is delivered by Agent and
on which settlement is to be made among the Lenders in accordance with the
provisions of SECTION 6.10.
"SETTLEMENT REPORT" means each report, substantially in the form attached
hereto as EXHIBIT "F", prepared by Agent and delivered to each Lender and
setting forth, among other things, as of the Settlement Date indicated thereon
and as of the next preceding Settlement Date, the aggregate principal balance of
all Revolving Credit Loans outstanding, each Lender's Commitment Percentage
thereof, each Lender's Net Outstandings and all Non-Ratable Loans made, and all
payments of principal, interest and fees received by Agent from Borrower during
the period beginning on such next preceding Settlement Date and ending on such
Settlement Date.
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"SOLVENT" means, as to Borrower, that on the Agreement Date and as of the
Effective Date (both before and after the granting of all security interests and
liens contemplated hereby and the funding of the initial Loan(s) under this
Agreement) (and both before and after giving effect to the Acquisition) (a) the
sum of Borrower's debts is not greater than all of Borrower's property, at a
fair valuation, (b) the sum of Borrower's debts is not greater than all of
Borrower's assets, at a fair valuation, (c) Borrower is generally paying its
debts as they become due, (d) Borrower is not engaged or about to engage in any
business or any transaction for which (i) its property is an unreasonably small
capital or (ii) the remaining assets of Borrower are unreasonably small in
relation to any such business or transaction, (e) Borrower does not intend to
incur, and does not believe that it will incur, debts that are or would be
beyond its ability to pay as such debts mature or become due, and (f) Borrower
does not intend to hinder, delay or defraud any creditor of Borrower. For this
purpose (i) "debts," "property" and "assets," respectively, includes anything
included within the definition of "debt," "property" and "assets," respectively,
as used in Section 548 of the United States Bankruptcy Code or other Applicable
Law. Contingent, unliquidated or disputed obligations or liabilities (if any)
are valued at the amount which, in light of all relevant facts and
circumstances, is reasonably expected to become absolute, liquidated or mature.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of Borrower or any of
its Subsidiaries which is subordinate in right of payment and claim in favor of
the Credit Parties pursuant to any written subordination agreement satisfactory
to Agent.
"SUBSIDIARY" shall
(a) when used to determine the relationship of a Person to another
Person, mean a Person of which an aggregate of more than fifty percent
(50%) or more of the Capital Stock is owned of record or beneficially by
such other Person, or by one or more Subsidiaries of such other Person, or
by such other Person and one or more Subsidiaries of such Person,
(i) if the holders of such Capital Stock (A) are ordinarily, in
the absence of contingencies, entitled to vote for the election of a
majority of the directors (or other individuals performing similar
functions) of such Person, even though the right so to vote has been
suspended by the happening of such a contingency, or (B) are entitled,
as such holders, to vote for the election of a majority of the
directors (or individuals performing similar functions) of such
Person, whether or not the right so to vote exists by reason of the
happening of a contingency, or
(ii) in the case of Capital Stock which is not issued by a
corporation, if such ownership interests constitute a majority voting
interest, and
(b) when used with respect to a Plan, ERISA or a provision of the
Internal Revenue Code pertaining to employee benefit plans, also mean any
corporation, trade or business (whether or not incorporated) which is under
common control with Borrower and is treated as a single employer with
Borrower under Section 414(b) or (c) of the Internal Revenue Code and the
regulations thereunder.
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"SUPPORTING LETTER OF CREDIT" shall have the meaning set forth in SECTION
3.9 of this Agreement.
"TAXES" shall have the meaning set forth in SECTION 7.6(a) of this
Agreement.
"TENDER OFFER STATEMENT" means that certain Tender Offer Statement on
Schedule 14D-1, dated July 8, 1997, all attachments thereto and each other
agreement, certificate, document and instrument executed or delivered in
connection with such Tender Offer Statement or otherwise related to the
Acquisition.
"TERM LOAN" means each loan made to Borrower pursuant to SECTION 4.1, as
well as all such loans collectively, as the context requires.
"TERM LOAN AMORTIZATION PAYMENT" means the amount set forth below for each
Installment Payment Date occurring within the corresponding period, which shall
be the principal amount payable in respect of the Term Loan on such Installment
Payment Date pursuant to SECTION 4.3 of this Agreement.
------------------------------------------------------------
------------------------------------------------------------
PERIOD AMOUNT
------------------------------------------------------------
------------------------------------------------------------
September 1, 1997 through and including
August 1, 1998 $333,333.33
------------------------------------------------------------
September 1, 1998 through and including
August 1, 1999 $416,666.66
------------------------------------------------------------
September 1, 1999 through and including
August 1, 2000 $500,000.00
------------------------------------------------------------
September 1, 2000 through and including
August 1, 2001 $500,000.00
------------------------------------------------------------
September 1, 2001 through and including
July 1, 2002 $916,666.66
------------------------------------------------------------
------------------------------------------------------------
"TERM LOAN FACILITY" means the facility provided by SECTION 4.1 of this
Agreement for the Term Loan in the maximum principal amount of Thirty-two
Million and No/100 Dollars ($32,000,000.00).
"TERM NOTE" means each Term Note made by Borrower payable to the order of a
Lender evidencing the obligation of Borrower to pay the aggregate unpaid
principal amount of the Term Loan made to it by such Lender (and any promissory
note or notes that may be issued from time to time in substitution, renewal,
extension, replacement, restatement or exchange therefor whether payable to such
Lender or to a different Lender in connection with a Person becoming a Lender
after the Effective Date or otherwise) substantially in the form of EXHIBIT "B"
hereto, with all blanks
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properly completed, either as originally executed or as the same may from
time to time be supplemented, modified, amended, renewed, restated, extended
or refinanced.
"TERMINATION DATE" means (a) with respect to the Revolving Credit Facility,
the earlier of (i) August 26, 2002, or (ii) such earlier date as all Secured
Obligations shall have been irrevocably paid in full and the Revolving Credit
Facility shall have been terminated, or such later date as to which the same may
be extended pursuant to the provisions of SECTION 2.5, and (b) with respect to
the Term Loan Facility, the earlier of (i) the Termination Date with respect to
the Revolving Credit Facility, or (ii) August 26, 2002, and (c) with respect to
the CAPEX Loan Facility, the earlier of (i) the Termination Date with respect to
the Revolving Credit Facility, or (ii) August 26, 2002.
"TERMINATION EVENT" means
(a) a Reportable Event, or
(b) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA,
or
(c) the institution of proceedings to terminate a Plan by the PBGC
under Section 4042 of ERISA, or the appointment of a trustee to administer
any Plan.
"TOTAL COMMITMENT" means the sum of the Commitments.
"TRADEMARK SECURITY AGREEMENT" means any Trademark Security Agreement
executed by Borrower in favor of Agent for the benefit of the Credit Parties, as
the same may be amended, modified, restated or supplemented from time to time.
"TRADEMARKS" means and includes, with respect to a Person, in each case
whether now existing or hereafter arising, all of such Person's right, title and
interest in and to the following:
(a) all trademarks (including service marks), trade names, trade
dress and trade styles and the registrations and applications for
registration thereof and the goodwill of the business symbolized by the
foregoing;
(b) all licenses of the foregoing, whether as licensee or licensor;
(c) all renewals of the foregoing;
(d) all income, royalties, damages and payments now or hereafter due
and/or payable with respect thereto, including, without limitation,
damages, claims and payments for past and future infringements thereof;
(e) all rights to sue for past, present and future infringements of
the foregoing, including the right to settle suits involving claims and
demands for royalties owing; and
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(f) all rights corresponding to any of the foregoing throughout the
world.
"TYPE" means any type of Loan (i.e., Base Rate Loan or a Eurodollar Loan).
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of Texas, as amended from time to time, and the Uniform Commercial
Code applicable in such other states as any Collateral may be located.
"UNCERTIFICATED SECURITY" means any "uncertificated security," as such term
is defined in Chapter 8 (or Article 8) of the UCC, and in any event shall
include, but not be limited to, any Security that is not represented by a
certificate.
"UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures which are paid
for by a Person other than with the proceeds of Indebtedness for Money Borrowed
(other than the Loans) incurred to finance such Capital Expenditures and other
than those represented by Capitalized Lease Obligations.
"UNFUNDED VESTED ACCRUED BENEFITS" means with respect to any Plan at any
time, the amount (if any) by which
(a) the present value of all vested nonforfeitable benefits under
such Plan exceeds,
(b) the fair market value of all Plan assets allocable to such
benefits,
all determined as of the then most recent valuation date for such Plan.
"U.S." means the United States of America.
"VOTING STOCK" means Capital Stock of a Person having ordinary voting power
for the election of a majority of the members of its board of directors or other
governing body (not including shares having such power only in the event of a
contingency).
"WHOLLY-OWNED SUBSIDIARY" when used to determine the relationship of a
Subsidiary to a Person, means a Subsidiary all of the issued and outstanding
Capital Stock (other than directors' qualifying shares) of which shall at the
time be owned by such Person or one or more of such Person's Wholly-Owned
Subsidiaries or by such Person and one or more of such Person's Wholly-Owned
Subsidiaries.
Section 1.2 GENERAL. All terms of an accounting nature not specifically
defined herein shall have the meaning ascribed thereto by GAAP. The terms
accounts, chattel paper, contract rights, documents, equipment, instruments,
general intangibles and inventory, as and when used in this Agreement or the
Security Documents, shall have the meanings given those terms in the UCC.
Unless otherwise specified, a reference in this Agreement to a particular
section or subsection is a reference to that section or subsection of this
Agreement, and the words "hereof," "herein,"
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"hereunder" and words of similar import, when used in this Agreement, refer
to this Agreement as a whole and not to any particular provision, section or
subsection of this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include
the singular and plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter.
Words denoting individuals include corporations, limited liability companies,
partnerships, joint ventures and other business entities and vice versa.
References to any legislation or statute or code, or to any provisions of any
legislation or statute or code, shall include any modification or reenactment
of, or any legislative, statutory or code provision substituted for, such
legislation, statute or code or provision thereof. References to any
document or agreement (including this Agreement) shall include references to
such document or agreement as amended, restated, novated, supplemented,
modified or replaced from time to time, so long as and to the extent that
such amendment, restatement, novation, supplement, modification or
replacement is either not prohibited by the terms of this Agreement or is
consented to by the Required Lenders and Agent. References to any Person
include its successor or permitted substitutes and assigns. Standards of
"reasonableness," or requirements of similar import, and the conduct of any
Credit Party or Loan Party in connection with the Loan Documents, shall be
measured according to applicable standards prescribed by the UCC. Borrower
and Agent, on behalf of itself and the Lenders, each acknowledges and agrees
that this Agreement and the other Loan Documents are the result of
negotiation between such parties, that each has participated in the drafting
and preparation thereof and that this Agreement and the other Loan Documents
shall not be construed against either such party by reason of such
participation.
Section 1.3 EXHIBITS AND SCHEDULES. All Exhibits and Schedules attached
hereto are incorporated fully herein by reference thereto.
ARTICLE 2
REVOLVING CREDIT FACILITY
Section 2.1 REVOLVING CREDIT LOANS. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, each Lender agrees, severally, but not jointly, to make
Revolving Credit Loans to Borrower from time to time from the Effective Date to
but not including the Termination Date, as requested or deemed requested by
Borrower in accordance with the terms of SECTION 2.2, in amounts equal to such
Lender's Commitment Percentage of each such Loan requested or deemed requested
hereunder up to an aggregate amount at any one time outstanding equal to such
Lender's Commitment Percentage of the Borrowing Base; PROVIDED, HOWEVER, that
the aggregate principal amount of all outstanding Revolving Credit Loans (after
giving effect to the Loans requested) shall not exceed the Borrowing Base. It
is expressly understood and agreed that the Lenders may and at present intend to
use the Borrowing Base as a maximum ceiling on Revolving Credit Loans to
Borrower; PROVIDED, HOWEVER, that it is agreed that should the Revolving Credit
Loans exceed the ceiling so determined or any other limitation set forth in this
Agreement, such Revolving Credit Loans shall nevertheless constitute Secured
Obligations and, as such, shall be entitled to all benefits thereof and security
therefor. The principal amount of any Revolving Credit Loan which is repaid
pursuant to SECTION 2.3(c) may be reborrowed by Borrower, subject to the terms
and conditions of this Agreement, in
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accordance with the terms of this SECTION 2.1. Agent's and each Lender's
books and records reflecting the date and the amount of each Revolving Credit
Loan and each repayment of principal thereof shall constitute PRIMA FACIE
evidence of the accuracy of the information contained therein, subject to the
provisions of SECTION 6.10.
Section 2.2 MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings
under the Revolving Credit Facility shall be made as follows:
(a) REQUESTS FOR BORROWING. A request for a borrowing shall be made,
or shall be deemed to be made, in the following manner:
(i) requests for a Revolving Credit Loan shall be made in the
manner prescribed by Article 6 (with respect to the initial Revolving
Credit Loan, Borrower shall give Agent reasonable prior notice of the
occurrence of the Effective Date, which notice shall be irrevocable);
(ii) whenever a check or other item is presented to a Disbursing
Bank for payment against a Disbursement Account in an amount greater
than the then available balance in such account, such Disbursing Bank
shall, and is hereby irrevocably authorized by Borrower to, give Agent
notice thereof, which notice shall be deemed to be a request for a
Revolving Credit Loan on the date of such notice in an amount equal to
the excess of such check or other item over such available balance;
(iii) unless payment is otherwise made by Borrower, the
becoming due of any amount required to be paid under this Agreement or
any of the Notes as interest shall be deemed to be a request for a
Revolving Credit Loan on the due date in the amount required to pay
such interest;
(iv) unless payment is otherwise made by Borrower, the becoming
due of any other Secured Obligation shall be deemed to be a request
for a Revolving Credit Loan on the due date in the amount then so due,
and such request shall be irrevocable; and
(v) the receipt by Agent of notification from L/C Issuer to the
effect that a drawing has been made under a Letter of Credit and that
Borrower has failed to reimburse L/C Issuer therefor in accordance
with the terms of the Letter of Credit, the Reimbursement Agreement
and ARTICLE 3, shall be deemed to be a request for a Revolving Credit
Loan on the date such notification is received in the amount of such
drawing which is so unreimbursed.
(b) DISBURSEMENT OF LOANS. Borrower hereby irrevocably authorizes
Agent to disburse the proceeds of each borrowing requested, or deemed to be
requested, pursuant to this SECTION 2.2 as follows:
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(i) the proceeds of each borrowing requested under SECTIONS
2.2(a)(i) or (ii) shall be disbursed by Agent in Dollars in
immediately available funds, (A) in the case of the initial borrowing
under the Revolving Credit Facility, in accordance with the terms of
the certificate from Borrower to Agent referred to in SECTION
8.1(f)(xvii), and (B) in the case of each subsequent borrowing, by
wire transfer to a Disbursement Account or, in the absence of a
Disbursement Account, by wire transfer to such other account as may be
agreed upon by Borrower and Agent from time to time;
(ii) the proceeds of each borrowing deemed requested under
SECTION 2.2(a)(iii) or (iv) shall be disbursed by Agent by way of
direct payment of the relevant interest or Secured Obligation, as the
case may be; and
(iii) the proceeds of each borrowing deemed requested under
SECTION 2.2(a)(v) shall be disbursed by Agent directly to L/C Issuer
on behalf of Borrower.
Section 2.3 REPAYMENT OF REVOLVING CREDIT LOANS. The Revolving Credit
Loans will be repaid as follows:
(a) Whether or not any Default or Event of Default has occurred, the
outstanding principal amount of all the Revolving Credit Loans is due and
payable, and shall be repaid by Borrower in full, not later than the
Termination Date;
(b) If at any time the aggregate outstanding unpaid principal amount
of the Revolving Credit Loans exceeds the Borrowing Base in effect at such
time, Borrower shall repay the Revolving Credit Loans in an amount
sufficient to reduce the aggregate unpaid principal amount of such
Revolving Credit Loans by an amount equal to such excess, together with
accrued and unpaid interest on the amount so repaid to the date of
repayment; and
(c) Borrower hereby instructs Agent to repay the Revolving Credit
Loans outstanding on any day in an amount equal to the amount received by
Agent on such day pursuant to SECTION 11.1(b).
Section 2.4 REVOLVING CREDIT NOTE. Each Lender's Revolving Credit Loans
and the obligation of Borrower to repay such Revolving Credit Loans shall be
evidenced by a Revolving Credit Note payable to the order of such Lender. Each
Revolving Credit Note shall be dated the Effective Date, or with respect to any
Lender which is a party to an Assignment and Acceptance, the date of such
Assignment and Acceptance, and be duly and validly executed and delivered by
Borrower.
Section 2.5 EXTENSION OF REVOLVING CREDIT FACILITY. Upon the request of
Borrower, the Lenders may, in their sole discretion, effective as of any
anniversary of the Effective Date, agree to extend the Revolving Credit Facility
for such a period of time such that the Termination Date would fall on a date
that is up to but not in excess of five years from such anniversary date. Each
such
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extension shall be effected by the delivery to Borrower of a written notice
to that effect by the Lenders, not less than thirty (30) days prior to such
anniversary date.
ARTICLE 3
LETTER OF CREDIT FACILITY
Section 3.1 AGREEMENT TO ISSUE. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, L/C Issuer agrees to issue for the account of Borrower
one or more Letters of Credit in accordance with this ARTICLE 3, from time to
time during the period commencing on the Effective Date and ending on the
Termination Date.
Section 3.2 AMOUNTS. L/C Issuer shall not have any obligation to issue
any Letter of Credit at any time:
(a) if, after giving effect to the issuance of the requested Letter
of Credit, (i) the aggregate Letter of Credit Obligations of Borrower would
exceed the maximum amount of the Letter of Credit Facility then in effect
or (ii) the aggregate principal amount of the Revolving Credit Loans
outstanding would exceed the Borrowing Base (after reduction for the Letter
of Credit Reserve in respect of such Letter of Credit); or
(b) which has a term longer than one (1) calendar year or an
expiration date after the last Business Day that is more than thirty (30)
days prior to the Termination Date.
Section 3.3 CONDITIONS. The obligation of L/C Issuer to issue any
Letter of Credit is subject to the satisfaction of (i) the conditions precedent
contained in ARTICLE 8 and (ii) the following additional conditions precedent in
a manner satisfactory to Agent and L/C Issuer:
(a) Borrower shall have delivered to L/C Issuer and Agent, at such
times and in such manner as L/C Issuer or Agent may prescribe, an
application in form and substance satisfactory to L/C Issuer and Agent for
the issuance of the proposed Letter of Credit, a Reimbursement Agreement
and such other documents as may be required pursuant to the terms thereof,
and the form and terms of the proposed Letter of Credit shall be
satisfactory to L/C Issuer and Agent; and
(b) as of the date of issuance, no order of any court, arbitrator or
other Governmental Authority having jurisdiction or authority over L/C
Issuer shall purport by its terms to enjoin or restrain banks generally
from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit, and no law, rule or regulation applicable to
banks generally and no request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over banks
generally shall prohibit or request that L/C Issuer refrain from the
issuance of letters of credit generally or the issuance of such Letter of
Credit.
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(c) L/C Issuer shall have received from Agent confirmation of
Borrower's compliance with the requirements of SECTION 3.4(b) and Agent's
authorization to issue the requested Letter of Credit.
Section 3.4 ISSUANCE OF LETTERS OF CREDIT.
(a) REQUEST FOR ISSUANCE. Borrower shall give L/C Issuer and Agent
written notice of Borrower's request for the issuance of a Letter of Credit
no later than five (5) Business Days prior to the proposed date of issuance
of the Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a
single or in multiple draws, the date on which such requested Letter of
Credit is to expire (which date shall be a Business Day that is more than
thirty (30) days prior to the Termination Date), the purpose for which such
Letter of Credit is to be issued and the beneficiary of the requested
Letter of Credit. Borrower shall attach to such notice the form of the
Letter of Credit that Borrower requests to be issued.
(b) RESPONSIBILITIES OF AGENT; ISSUANCE. Agent shall determine, as
of the Business Day immediately preceding the requested effective date of
issuance of the Letter of Credit set forth in the notice from Borrower
pursuant to SECTION 3.4(a), the amount of the unused portion of the Letter
of Credit Facility and the Borrowing Base. If (i) the form of the Letter
of Credit delivered by Borrower to Agent is acceptable to L/C Issuer and
Agent in their sole, reasonable discretion, (ii) the undrawn face amount of
the requested Letter of Credit is less than or equal to the lesser of (A)
the amount of the unused portion of the Letter of Credit Facility and (B)
the unused Borrowing Base, and (iii) Agent has received a certificate from
Borrower stating that the applicable conditions set forth in ARTICLE 8 have
been satisfied, then L/C Issuer will cause the Letter of Credit to be
issued. NationsBank in its sole discretion may cause any Affiliate of
NationsBank to issue any requested Letter of Credit, whereupon such
Affiliate shall be L/C Issuer with respect to such Letter of Credit and
shall have all of the rights, benefits and interests of L/C Issuer as are
specified by the Loan Documents in connection therewith. Each such
Affiliate, if any, shall be a third party beneficiary of the Loan Documents
and shall be entitled to rely upon all representations, warranties and
covenants contained herein and therein. Borrower hereby authorizes
NationsBank and Agent to deliver or otherwise disclose to L/C Issuer copies
of any of the Loan Documents and any other information from time to time in
NationsBank's or Agent's possession concerning Borrower or any of the other
Loan Parties or the transactions contemplated by the Loan Documents.
(c) NOTICE OF ISSUANCE. Promptly after the issuance of any Letter of
Credit, L/C Issuer shall give Agent written or facsimile notice, or
telephonic notice confirmed promptly thereafter in writing, of the issuance
of such Letter of Credit, and Agent shall give each Lender written or
facsimile notice, or telephonic notice confirmed promptly thereafter in
writing, of the issuance of such Letter of Credit.
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(d) NO EXTENSION OR AMENDMENT. No Letter of Credit shall be extended
or amended unless the requirements of this SECTION 3.4 are met as though a
new Letter of Credit were being requested and issued.
Section 3.5 DUTIES OF L/C ISSUER. Any action taken or omitted to be
taken by L/C Issuer under or in connection with any Letter of Credit, if taken
or omitted in the absence of gross negligence or willful misconduct, shall not
result in any liability of L/C Issuer to any Lender or relieve any Lender of its
obligations hereunder to L/C Issuer. In determining whether to pay under any
Letter of Credit, L/C Issuer shall have no obligation to any Lender other than
to confirm that any documents required to be delivered under such Letter of
Credit in connection with such drawing have been presented and appear on their
face to comply with the requirements of such Letter of Credit.
Section 3.6 PAYMENT OF REIMBURSEMENT OBLIGATIONS.
(a) PAYMENT TO ISSUER. Notwithstanding any provisions to the
contrary in any Reimbursement Agreement, Borrower agrees to reimburse L/C
Issuer for any drawings (whether partial or full) under each Letter of
Credit issued by L/C Issuer and agrees to pay to L/C Issuer the amount of
all other Reimbursement Obligations and other amounts payable to L/C Issuer
under or in connection with such Letter of Credit immediately when due,
irrespective of any claim, set-off, defense or other right which Borrower
may have at any time against L/C Issuer or any other Person.
(b) RECOVERY OR AVOIDANCE OF PAYMENTS. In the event any payment by
or on behalf of Borrower with respect to any Letter of Credit (or any
Reimbursement Obligation relating thereto) received by L/C Issuer, or by
Agent, and distributed by Agent to the Lenders on account of their
respective participations therein, is thereafter set aside, avoided or
recovered from L/C Issuer or Agent in connection with any receivership,
liquidation or bankruptcy proceeding, the Lenders shall, upon demand by
Agent pay to Agent, for the account of Agent or L/C Issuer, their
respective Commitment Percentages of such amount set aside, avoided or
recovered together with interest at the rate required to be paid by L/C
Issuer, or by Agent, upon the amount required to be repaid by it.
Section 3.7 PARTICIPATIONS.
(a) PURCHASE OF PARTICIPATIONS. Immediately upon issuance by L/C
Issuer of a Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received without recourse or
warranty, an undivided interest and participation in such Letter of Credit,
equal to such Lender's Commitment Percentage of the face amount thereof
(including, without limitation, all obligations of Borrower with respect
thereto).
(b) SHARING OF LETTER OF CREDIT PAYMENTS. In the event that L/C
Issuer makes a payment under any Letter of Credit and L/C Issuer shall not
have been repaid such amount pursuant to SECTION 3.6, then NationsBank may
make such repayment to L/C Issuer and thereupon be deemed to have made a
Non-Ratable Loan in the amount of such repayment,
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and notwithstanding the occurrence or continuance of a Default or Event of
Default at the time of such repayment, such Non-Ratable Loan shall be
subject to the provisions of SECTION 6.10(c) and the absolute obligations
of the Lenders to pay for their respective participation interests therein.
(c) SHARING OF REIMBURSEMENT OBLIGATION PAYMENTS. Whenever L/C
Issuer receives a payment from or on behalf of Borrower on account of a
Reimbursement Obligation as to which Agent has previously received for the
account of L/C Issuer payment from a Lender pursuant to this SECTION 3.7,
L/C Issuer shall promptly pay to Agent, for the benefit of such Lender,
such Lender's Commitment Percentage of the amount of such payment from
Borrower in Dollars. Each such payment shall be made by L/C Issuer on the
Business Day on which L/C Issuer receives immediately available funds
pursuant to the immediately preceding sentence, if received prior to 11:00
a.m. (Dallas, Texas time) on such Business Day and otherwise on the next
succeeding Business Day.
(d) DOCUMENTATION. Upon the request of any Lender, Agent shall
furnish to such Lender copies of any Letter of Credit, Reimbursement
Agreement or application for any Letter of Credit and such other
documentation as may reasonably be requested by such Lender.
(e) OBLIGATIONS IRREVOCABLE. The obligations of each Lender to make
payments to Agent as required by SECTION 3.6(b) with respect to any Letter
of Credit and their participations therein pursuant to the provisions of
SECTION 6.10(c) hereof or otherwise and the obligations of Borrower to make
payments to L/C Issuer or to Agent, for the account of the Lenders, shall
be irrevocable, shall not be subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of
this Agreement (assuming, in the case of the obligations of the Lenders to
make such payments, that the Letter of Credit has been issued in accordance
with SECTION 3.4), including, without limitation, any of the following
circumstances:
(i) Any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense or other right
which Borrower may have at any time against a beneficiary named in a
Letter of Credit or any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), any Lender, Agent,
L/C Issuer or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transactions
between Borrower or any other Person and the beneficiary named in any
Letter of Credit);
(iii) Any draft, certificate or any other document presented
under the Letter of Credit upon which payment has been made in good
faith and according to its terms proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
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(iv) The surrender or impairment of any Collateral or any other
security for the Secured Obligations or the performance or observance
of any of the terms of any of the Loan Documents;
(v) The occurrence of any Default or Event of Default; or
(vi) Agent's failure to deliver to the Lenders the notice
provided for in SECTION 3.4(c).
Section 3.8 INDEMNIFICATION, EXONERATION.
(a) INDEMNIFICATION. WITHOUT LIMITING SECTION 18.12 AND IN ADDITION
TO AMOUNTS PAYABLE AS ELSEWHERE PROVIDED IN THIS ARTICLE 3, BORROWER AGREES
TO PROTECT, INDEMNIFY, PAY AND SAVE THE CREDIT PARTIES HARMLESS FROM AND
AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES, COSTS,
CHARGES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) WHICH
L/C/ISSUER, ANY LENDER OR AGENT MAY INCUR OR BE SUBJECT TO AS A
CONSEQUENCE, DIRECTLY OR INDIRECTLY, OF (i) THE ISSUANCE OF ANY LETTER OF
CREDIT, OTHER THAN AS A RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, AS DETERMINED BY A COURT OF COMPETENT JURISDICTION OR (ii) THE
FAILURE OF L/C/ISSUER TO HONOR A DRAWING UNDER ANY LETTER OF CREDIT AS A
RESULT OF ANY ACT OR OMISSION, WHETHER RIGHTFUL OR WRONGFUL, OR ANY PRESENT
OR FUTURE DE JURE OR DE FACTO GOVERNMENTAL AUTHORITY (ALL SUCH ACTS OR
OMISSIONS BEING HEREINAFTER REFERRED TO COLLECTIVELY AS "GOVERNMENT ACTS".
(b) ASSUMPTION OF RISK BY BORROWER. As among Borrower and the Credit
Parties, Borrower assumes all risks of the acts and omissions of, or misuse
of any of the Letters of Credit by, the respective beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing,
subject to the provisions of the applications for the issuance of Letters
of Credit, the Credit Parties and Agent shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any Person in connection
with the application for and issuance of and presentation of drafts
with respect to any of the Letters of Credit, even if it should prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or
in part, which may prove to be invalid or ineffective for any reason;
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(iii) the failure of the beneficiary of any Letter of Credit
to comply duly with conditions required in order to draw upon such
Letter of Credit;
( iv) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of
Credit or of the proceeds thereof;
(vii) the misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control
of any Credit Party, including, without limitation, any Government
Acts.
None of the foregoing shall affect, impair or prevent the vesting of any of
the Credit Parties' rights or powers under this SECTION 3.8.
(c) EXONERATION. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken or
omitted by any of the Credit Parties under or in connection with any of the
Letters of Credit or any related certificates, if taken or omitted in good
faith, shall not result in any liability of any Credit Party to Borrower or
relieve Borrower of any of its obligations hereunder to any such Person.
(d) INDEMNIFICATION. WITHOUT LIMITING SECTION 17.5, THE LENDERS
AGREE TO INDEMNIFY L/C ISSUER (TO THE EXTENT NOT REIMBURSED UNDER SECTION
18.2 HEREOF, BUT WITHOUT LIMITING THE OBLIGATIONS OF BORROWER UNDER SUCH
SECTION) RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENTS, FOR ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) OR
DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST L/C ISSUER (INCLUDING BY ANY LENDER) AS
DESCRIBED IN THIS SECTION 3.8 OR OTHERWISE IN ANY WAY RELATING TO OR
ARISING OUT OF ANY LETTER OF CREDIT OR THE TRANSACTIONS CONTEMPLATED
THEREBY OR ANY ACTION TAKEN OR OMITTED BY L/C ISSUER UNDER ANY LETTER OF
CREDIT OR ANY LOAN DOCUMENT IN CONNECTION THEREWITH (INCLUDING ANY OF THE
FOREGOING ARISING FROM THE NEGLIGENCE OF L/C ISSUER); PROVIDED THAT NO
LENDER SHALL BE
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LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.
WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE L/C
ISSUER PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY COSTS OR
EXPENSES PAYABLE BY BORROWER TO L/C ISSUER UNDER SECTION 18.2, TO THE
EXTENT THAT L/C ISSUER IS NOT PROMPTLY REIMBURSED FOR SUCH COSTS AND
EXPENSES BY BORROWER. THE AGREEMENTS CONTAINED IN THIS SECTION SHALL
SURVIVE PAYMENT IN FULL OF ALL SECURED OBLIGATIONS.
Section 3.9 SUPPORTING LETTER OF CREDIT; CASH COLLATERAL. If,
notwithstanding the provisions of SECTION 3.2(b), any Letter of Credit is
outstanding on the Termination Date, then on or prior to such Termination Date,
or in any case upon the occurrence of an Event of Default, Borrower shall,
promptly on demand by Agent, deposit with Agent, for the ratable benefit of the
Credit Parties, with respect to each Letter of Credit then outstanding, as Agent
shall specify, either (a) a standby letter of credit (a "SUPPORTING LETTER OF
CREDIT") in form and substance satisfactory to Agent, issued by an issuer
reasonably satisfactory to Agent in an amount equal to the greatest amount for
which such Letter of Credit may be drawn, under which Supporting Letter of
Credit Agent is entitled to draw amounts necessary to reimburse the Credit
Parties for payments made by the Credit Parties resulting from any drawing under
such Letter of Credit or under any reimbursement or guaranty agreement with
respect thereto, or (b) Cash Collateral in an amount necessary to reimburse the
Credit Parties for payments made by the Credit Parties resulting from any
drawing under such Letter of Credit or under any reimbursement or guaranty
agreement with respect thereto. Such Supporting Letter of Credit or Cash
Collateral shall be held by Agent for the benefit of the Credit Parties, as
security for, and to provide for the payment of, the Reimbursement Obligations.
In addition, Agent may at any time after the Termination Date apply any or all
of such Cash Collateral to the payment of any or all of the Secured Obligations
then due and payable. At Borrower's request, but subject to Agent's reasonable
approval, Agent shall invest any Cash Collateral consisting of cash or any
proceeds of Cash Collateral consisting of cash in Cash Equivalents, and any
commissions, expenses and penalties incurred by Agent in connection with any
investment and redemption of such Cash Collateral shall be Secured Obligations
hereunder secured by the Collateral, shall bear interest at the rates provided
herein for the Loans and shall be charged to Borrower's Loan Accounts, or, at
Agent's option, shall be paid out of the proceeds of any earnings received by
Agent from the investment of such Cash Collateral as provided herein or out of
such cash itself. Agent makes no representation or warranty as to, and shall
not be responsible for, the rate of return, if any, earned on any Cash
Collateral. Any earnings on Cash Collateral shall be held as additional Cash
Collateral on the terms set forth in this SECTION 3.9.
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ARTICLE 4
TERM LOAN FACILITY
Section 4.1 TERM LOAN. Upon the terms and subject to the conditions of,
and in reliance upon the representations and warranties made under, this
Agreement, each Lender agrees severally, but not jointly, to make a Term Loan to
Borrower on the Effective Date in a principal amount equal to such Lender's
Commitment Percentage of the Term Loan Facility.
Section 4.2 MANNER OF BORROWING AND DISBURSING TERM LOAN. Requests for
the Term Loan shall be made in the manner prescribed by ARTICLE 6 (Borrower
shall give Agent reasonable prior written notice of the occurrence of the
Effective Date, which notice shall be irrevocable). Borrower hereby irrevocably
authorizes Agent to disburse the proceeds of the Term Loan in Dollars in
immediately available funds in accordance with the terms of the certificate from
Borrower to Agent referred to in SECTION 8.1(f)(xvii).
Section 4.3 REPAYMENT OF TERM LOAN. The principal of the Term Loan is
due and payable, and shall be repaid in full by Borrower, in consecutive monthly
payments on each Installment Payment Date each in the amount equal to the Term
Loan Amortization Payment corresponding to each date as set forth in the
definition thereof, plus one final installment of all remaining unpaid principal
and interest which shall be due and payable on the Termination Date. Accrued
interest under the Term Loan Facility shall be payable as provided by SECTION
6.2.
Section 4.4 TERM NOTES. The Term Loan made by each Lender and the
obligation of Borrower to repay such Loan shall be evidenced by a Term Note
payable to the order of such Lender. Each such Term Note shall be dated the
Effective Date, or with respect to any Lender which is a party to an Assignment
and Acceptance, the date of such Assignment and Acceptance, and be duly and
validly executed and delivered by Borrower.
ARTICLE 5
CAPEX LOAN FACILITY
Section 5.1 CAPEX LOAN. Upon the terms and subject to the conditions
of, and in reliance upon the representations and warranties made under, this
Agreement, each Lender agrees severally, but not jointly, to make CAPEX Loans to
Borrower from time to time from the Effective Date to but not including the
fifth anniversary of the Agreement Date, as requested by Borrower in accordance
with the terms of SECTION 5.2, in an amount equal to such Lender's Commitment
Percentage of each such Loan requested hereunder up to an aggregate amount equal
to such Lender's Commitment Percentage of the CAPEX Loan Availability, PROVIDED
that the maximum aggregate amount funded by the Lenders under the CAPEX Loan
shall not exceed amount of the CAPEX Loan Facility. Subject to the terms of
this Agreement, each Loan under the CAPEX Loan Facility shall be funded at such
times on and after the Effective Date as Agent and Borrower may determine by
mutual agreement.
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Section 5.2 MANNER OF BORROWING AND DISBURSING CAPEX LOAN. Borrower
shall give Agent reasonable prior written notice of its request for funding a
CAPEX Loan and sufficient information to allow Agent to confirm Borrower's
compliance with the conditions required by ARTICLE 8, PROVIDED that the minimum
amount which may be requested by Borrower and funded at any time shall not in
any event be less than Five Hundred Thousand Dollars ($500,000). Borrower
hereby authorizes Agent to disburse the proceeds of the CAPEX Loan in accordance
with Borrower's instructions, PROVIDED, that at Agent's option such proceeds may
be disbursed directly to the holder of any Lien on Eligible Purchased Equipment
which is the subject of any such CAPEX Loan as necessary to cause the release of
such Lien.
Section 5.3 REPAYMENT OF CAPEX LOAN. The principal of the CAPEX Loan is
due and payable, and shall be repaid in full by Borrower in consecutive monthly
payments on each Installment Payment Date each in an amount equal to the CAPEX
Loan Amortization Payment, plus one final payment of all remaining unpaid
principal which shall be due and payable on the Termination Date. Accrued
interest under the CAPEX Loan Facility shall be payable as provided by SECTION
6.2.
Section 5.4 CAPEX NOTES. The CAPEX Loan made by each Lender and the
obligation of Borrower to repay such CAPEX Loan shall be evidenced by a CAPEX
Note payable to the order of such Lender, in substantially the form of EXHIBIT
"C". Each such CAPEX Note shall be dated the Effective Date, or with respect to
any Lender which is a party to an Assignment and Acceptance, the date of such
Assignment and Acceptance, and be duly and validly executed by Borrower.
ARTICLE 6
GENERAL LOAN PROVISIONS
Section 6.1 PROCEDURE FOR BORROWING.
(a) In order to receive any Loan, Borrower shall notify Agent of a
request for a Loan by means of a Notice of Borrowing or other notice
acceptable to Agent, therein designating the amount of the Loan requested
and the date on which funding is requested. Each request for a Loan shall
be delivered to Agent not later than 11:00 a.m. (Dallas, Texas time) (i) in
the case of a Base Rate Loan, on the Business Day on which funding of such
Loan is requested and (ii) in the case of a Eurodollar Loan, at least two
(2) Eurodollar Business Days prior to the Business Day on which funding of
such Loan is requested. Such notice may be made in writing, by telephone
or by telecopy or other electronic means and, unless otherwise agreed by
Agent, shall be irrevocable upon receipt by Agent. Without limiting the
other terms and conditions of this Agreement, at the time of each borrowing
hereunder Borrower must be current in the delivery of all Compliance
Certificates and Borrowing Base Certificates required to be delivered to
Agent and the Lenders pursuant to this Agreement.
(b) Unless Agent has elected periodic settlements pursuant to SECTION
6.10, Agent shall promptly notify the Lenders of any Notice of Borrowing
given or deemed given
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pursuant to this Agreement by 12:00 noon (Dallas, Texas time) on the
proposed borrowing date. Not later than 1:30 p.m. (Dallas, Texas time)
on the proposed borrowing date, each Lender will make available to
Agent, for the account of Borrower, at Agent's Principal Office in funds
immediately available to Agent, an amount equal to such Lender's
Commitment Percentage of the Revolving Credit Loans to be made on such
borrowing date.
Section 6.2 INTEREST.
(a) Subject to the provisions of SECTION 6.2(b), Borrower will pay
interest on the unpaid principal amount of the Loans, for each day from the
day each such Loan was made until such Loan is due (whether upon demand, at
maturity, by reason of acceleration or otherwise) at a rate per annum equal
to the lesser of the Applicable Rate or the Maximum Rate. Interest shall
be payable monthly in arrears as it accrues on each Interest Payment Date.
(b) If Borrower shall fail to pay when due (whether upon demand, at
maturity, by reason of acceleration or otherwise) all or any portion of the
principal amount of any Loan or if there shall occur any other Event of
Default, at Agent's election (except with respect to any Event of Default
arising from noncompliance with SECTION 14.1(b) for any applicable period
ending on or after March 31, 1998, in which event the following provision
of this SECTION 6.2(b) shall be applicable automatically without necessity
of such election), the balance of the Loans shall no longer bear interest
in accordance with the terms of SECTION 6.2(a), but shall bear interest for
each day from the date of such failure to pay or other Event of Default, as
the case may be, until such failure to pay or other Event of Default shall
have been cured or waived in compliance with the terms of this Agreement,
at a rate per annum equal to the lesser of (i) the sum of (1) the Default
Margin and (2) the Applicable Rate, or (ii) the Maximum Rate, payable on
demand. The interest rate provided for in the preceding sentence shall, to
the extent permitted by Applicable Law, apply to and accrue on the amount
of any judgment entered with respect to any Secured Obligation and shall
continue to accrue at such rate during any proceeding described in SECTION
15.1(g) or (h).
(c) Borrower will, to the extent permitted by Applicable Law, pay
interest on the unpaid principal amount of any Secured Obligation that is
due and payable other than the Loans in accordance with SECTIONS 6.2(a) or
(b), as applicable, as if such Secured Obligation were a Loan.
(d) The interest rates provided for in SECTION 6.2(a), SECTION 6.2(b)
and SECTION 6.2(c) shall be computed on the basis of a year of 360 days and
the actual number of days elapsed, and with respect to any Base Rate Loan
shall be adjusted automatically as of the first day of the calendar month
next following the calendar month of the effective date of each change in
the Base Rate.
(e) It is not intended by the Lenders, and nothing contained in this
Agreement or the Notes shall be deemed, to establish or require the payment
of a rate of interest in excess of the maximum rate permitted by Applicable
Law (the "MAXIMUM RATE"). If, in any month,
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the Effective Interest Rate, absent such limitation, would have exceeded
the Maximum Rate, then the Effective Interest Rate for that month shall
be the Maximum Rate, and, if in future months, the Effective Interest
Rate would otherwise be less than the Maximum Rate, then the Effective
Interest Rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which
would have been paid if the same had not been limited by the Maximum
Rate. In the event, upon payment in full of the Secured Obligations,
the total amount of interest paid or accrued under the terms of this
Agreement is less than the total amount of interest which would have
been paid or accrued if the Effective Interest Rate had at all times
been in effect, then Borrower shall, to the extent permitted by
Applicable Law, pay to the Lenders an amount equal to the excess, if
any, of (i) the lesser of (A) the amount of interest which would have
been charged if the Maximum Rate had, at all times, been in effect and
(B) the amount of interest which would have accrued had the Effective
Interest Rate, at all times, been in effect, and (ii) the amount of
interest actually paid or accrued under this Agreement. In the event
the Lenders receive, collect or apply as interest any sum in excess of
the Maximum Rate, such excess amount shall be applied to the reduction
of the principal balance of the Secured Obligations, and if no such
principal is then outstanding, such excess or part thereof remaining,
shall be paid to Borrower.
Section 6.3 INTEREST RATE OPTION. Subject to the provisions hereof,
Borrower shall have the option to have designated portions of the Loans bear
interest at an Applicable Rate determined according to the Base Rate or the
Adjusted Eurodollar Rate; PROVIDED, HOWEVER, that any portion of the Loans
designated to bear interest at an Applicable Rate determined according to the
Adjusted Eurodollar Rate for any particular Interest Period shall not be for
less than $2,000,000 of unpaid principal or an integral multiple thereof, and no
more than five (5) Interest Periods shall be allowed to exist at any one time.
Any such option shall be exercised in the manner provided below:
(a) AT TIME OF BORROWING. Contemporaneously with each request for a
Loan, Borrower shall give Agent a Notice of Borrowing indicating the
interest rate option selected with respect to the principal balance of such
Loan. If the required Notice of Borrowing shall not have been timely
received by Agent, Borrower shall be deemed to have designated the Base
Rate and to have given Agent notice of such designation. Notwithstanding
the foregoing, any request for a Revolving Credit Loan made pursuant to
CLAUSES (ii), (iii), (iv) or (v) of SECTION 2.2(a) shall be deemed to be a
request for a Base Rate Loan.
(b) AT EXPIRATION OF INTEREST PERIODS. Not less than two (2)
Eurodollar Business Days prior to the termination of any Interest Period
for any Eurodollar Loan, Borrower shall give Agent a Notice of Borrowing
indicating the interest rate option to be applicable to such Eurodollar
Loan upon the expiration of such Interest Period if Borrower elects to have
such Loan Continued as a Eurodollar Loan. If the required Notice of
Borrowing shall not have been timely received by Agent prior to the
expiration of such Interest Period, Borrower shall be deemed to have
selected a rate based upon the Base Rate to be applicable to such
Eurodollar Loan upon the expiration of such Interest Period and to have
given Agent notice of such selection.
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(c) CONVERSION FROM BASE RATE. Subject to the other provisions of
this Agreement, during any period in which any Base Rate Loan is in
existence, Borrower shall have the right, on any Eurodollar Business Day,
to Convert all or a portion thereof to a Eurodollar Loan by giving Agent a
Notice of Borrowing of such Conversion not less than two (2) Eurodollar
Business Days prior to the date of such Conversion.
Agent, at its option, may accept telephonic instructions as a Notice of
Borrowing (PROVIDED that Borrower agrees that any such telephonic request shall
promptly be confirmed to Agent by Borrower delivering a written Notice of
Borrowing to Agent) and Agent hereby is authorized and directed to honor all
telephonic or other oral notices from any Person authorized by Borrower to
request a Loan. Borrower agrees to indemnify and hold Agent and the Lenders
harmless from any loss or liability incurred by any of them in connection with
honoring any telephonic or other oral notices. All written Notices of Borrowing
are effective only upon receipt by Agent. Each Notice of Borrowing, whether
written or oral, shall be irrevocable and binding upon Borrower.
Section 6.4 CERTAIN FEES.
(a) COMMITMENT FEE. Subject to the provisions of SECTION 18.22, in
connection with and as consideration for the holding available for the use
of Borrower hereunder the full amount of the Revolving Credit Facility,
Borrower will pay a fee to Agent, for the ratable benefit of the Lenders,
for each day from the Effective Date until the Termination Date, in an
amount equal to one-half of one percent (0.5%) per annum of the unused
portion of the Revolving Credit Facility for such day. Such fee shall be
payable monthly in arrears on each Interest Payment Date and on the date of
any permanent reduction in the Revolving Credit Facility and shall be fully
earned when due and payable and shall not be subject to refund or rebate.
Such fee is not, and shall not be deemed to be, interest or a charge for
the use of money.
(b) LETTER OF CREDIT FEES.
(i) Borrower agrees to pay to Agent, for the ratable benefit of
the Lenders, Letter of Credit fees equal to two and one-quarter
percent (2.25%) per annum based on the average daily aggregate Letter
of Credit Amount of all Letters of Credit from time to time
outstanding during the term of this Agreement. Such fees shall be
payable to Agent, for the ratable benefit of the Lenders in accordance
with their respective Commitment Percentages, quarterly in advance on
the date of issuance of each such Letter of Credit for the remaining
portion of such calendar quarter and on the first Business Day of each
January, April, July and October thereafter, as applicable, and shall
be calculated according to the anticipated average daily Letter of
Credit Amount based on the stated term of each Letter of Credit in a
year of 360 days and for the actual number of days elapsed.
(ii) Borrower agrees to pay to Agent, for the account of L/C
Issuer, the standard fees and charges of L/C Issuer for issuing,
administering, amending, renewing, paying and canceling Letters of
Credit, as and when assessed.
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(c) Subject to the provisions of SECTION 18.22, Borrower agrees to
pay all other fees and expenses set forth in the certain letter agreement
dated as of the Agreement Date between Agent and Borrower.
Section 6.5 MANNER OF PAYMENT.
(a) Except as otherwise expressly provided in SECTION 11.1(b), each
payment (including prepayments) by Borrower on account of the principal of
or interest on the Loans or of any other amounts payable to the Lenders
under this Agreement or any Note shall be made not later than 12:00 noon
(Dallas, Texas time) on the date specified for payment under this Agreement
to Agent, for the account of the Lenders, at Agent's Principal Office, in
Dollars, in immediately available funds and shall be made without any
set-off, counterclaim or deduction whatsoever. Any payment received after
such time but before 1:00 p.m. (Dallas, Texas time) on such day shall be
deemed a payment on such date for the purposes of SECTION 15.1, but for
all other purposes shall be deemed to have been made on the next succeeding
Business Day.
(b) Borrower hereby irrevocably authorizes each Lender and each
Affiliate of such Lender and each participant herein to charge any account
of Borrower maintained with such Lender or such Affiliate or participant
with such amounts as may be necessary from time to time to pay any Secured
Obligations (whether or not owed to such Lender, Affiliate or participant)
which are not paid when due.
Section 6.6 PAYMENTS ON BUSINESS DAYS. If any payment under this
Agreement or any Note shall be specified to be made upon a day which is not a
Business Day, it shall be made on the next succeeding day which is a Business
Day and such extension of time shall in such case be included in computing
interest, if any, in accordance with such payment.
Section 6.7 LOAN ACCOUNTS; STATEMENTS OF ACCOUNT.
(a) Each Lender shall open and maintain on its books a loan account
in Borrower's name (each, a "LOAN ACCOUNT" and collectively, the "LOAN
ACCOUNTS"). Each such Loan Account shall show as debits thereto each Loan
made under this Agreement by such Lender to Borrower and as credits thereto
all payments received by such Lender and applied to principal of such Loan,
so that the balance of the Loan Account at all times reflects the principal
amount due such Lender from Borrower.
(b) Agent shall maintain on its books a control account for Borrower
in which shall be recorded (i) the amount of each disbursement made
hereunder, (ii) the amount of any principal or interest due or to become
due from Borrower hereunder, and (iii) the amount of any sum received by
Agent hereunder from Borrower and each Lender's ratable share therein.
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(c) The entries made in the accounts pursuant to SUBSECTIONS (a) and
(b) shall be prima facie evidence, in the absence of manifest error, of the
existence and amounts of the obligations of Borrower therein recorded and
in case of discrepancy between such accounts, in the absence of manifest
error, the accounts maintained pursuant to SUBSECTION (b) shall be
controlling.
(d) Agent will account separately to Borrower monthly with a
statement of Loans, charges and payments made to and by Borrower pursuant
to this Agreement, and such accounts rendered by Agent shall be deemed
final, binding and conclusive, save for manifest error, unless Agent is
notified by Borrower in writing to the contrary within thirty (30) days of
the date the account to Borrower was so rendered. Such notice by Borrower
shall be deemed an objection to only those items specifically objected to
therein. Failure of Agent to render such account shall in no way affect
the rights of Agent or of the Lenders hereunder.
Section 6.8 TERMINATION OF AGREEMENT. Subject to the provisions of
SECTION 6.12, Borrower shall have the right, at any time, to terminate this
Agreement upon not less than thirty (30) Business Days' prior written notice of
its intention to terminate this Agreement, which notice shall specify the
effective date of such termination. Upon receipt of such notice, Agent shall
promptly notify each Lender thereof. On the date specified in such notice, such
termination shall be effected, PROVIDED, that Borrower shall, on or prior to
such date, pay to Agent, for the account of the Lenders, in same day funds, an
amount equal to all Secured Obligations then outstanding, including, without
limitation, all (i) accrued interest thereon, (ii) all accrued fees provided for
hereunder, and (iii) any amounts payable to the Lenders pursuant to SECTIONS
6.12, 18.2, 18.3 and 18.12, and, in addition thereto, shall deliver to Agent, in
respect of each outstanding Letter of Credit, either the Supporting Letter of
Credit or the Cash Collateral as provided in SECTION 3.9. Following the date
specified in a notice of termination as provided for in this SECTION 6.8 and
upon payment in full of the amounts specified in this SECTION 6.8, this
Agreement shall be terminated and Agent, the Lenders and Borrower shall have no
further obligations to any other party hereto except for the obligations to
Agent and the Lenders pursuant to SECTION 18.12 hereof.
Section 6.9 MAKING OF LOANS.
(a) NATURE OF OBLIGATIONS OF LENDERS TO MAKE LOANS. The obligations
of the Lenders under this Agreement to make the Loans are several and are
not joint or joint and several.
(b) ASSUMPTION BY AGENT. Subject to the provisions of SECTION 6.10
and notwithstanding the occurrence or continuance of a Default or Event of
Default or other failure of any condition to the making of Revolving Credit
Loans hereunder subsequent to the Revolving Credit Loans to be made on the
Effective Date, unless Agent shall have received notice from a Lender in
accordance with the provisions of SECTION 6.9(c) prior to a proposed
borrowing date that such Lender will not make available to Agent such
Lender's ratable portion of the amount to be borrowed on such date, Agent
may assume that such Lender will make such portion available to Agent in
accordance with SECTION 2.2(a), and Agent may, in reliance upon such
assumption, make available to Borrower on such date a
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corresponding amount. If and to the extent such Lender shall not make such
ratable portion available to Agent, such Lender and Borrower severally
agree to repay to Agent forthwith on demand such corresponding amount
(the "MAKE-WHOLE AMOUNT"), together with interest thereon for each day from
the date such amount is made available to Borrower until the date such
amount is repaid to Agent at the Effective Interest Rate or, if lower,
subject to SECTION 6.2(e), the Maximum Rate; PROVIDED, HOWEVER, if on the
Interest Payment Date next following the date on which any Lender pays
interest to Agent at the Effective Rate or the Maximum Rate on a Make-Whole
Amount as aforesaid, Borrower defaults in making the interest payment due
on such Interest Payment Date, then Agent shall reimburse such Lender for
the excess, if any, of the amount of interest so paid by such Lender on the
Make-Whole Amount and the amount of interest that such Lender would have
paid had the Lender been required to pay interest on the Make-Whole
Amount at the Federal Funds Rate. If such Lender shall repay to Agent
such corresponding amount, the amount so repaid shall constitute such
Lender's Commitment Percentage of the Loan made on such borrowing date for
purposes of this Agreement. The failure of any Lender to make its
Commitment Percentage of any Loan available shall not (without regard to
whether Borrower shall have returned the amount thereof to Agent in
accordance with this SECTION 6.9) relieve it or any other Lender of its
obligation, if any, hereunder to make its Commitment Percentage of such
Loan available on such borrowing date, but no Lender shall be responsible
for the failure of any other Lender to make its Commitment Percentage of
such Loan available on the borrowing date.
(c) DELEGATION OF AUTHORITY TO AGENT. Without limiting the
generality of SECTION 17.1, each Lender expressly authorizes Agent to
determine on behalf of such Lender (i) any reduction or increase of advance
rates applicable to the Borrowing Base, so long as such advance rates do
not at any time exceed the rates set forth in the Borrowing Base
definition, (ii) the creation or elimination of any reserves (other than
the Letter of Credit Reserve) against the Revolving Credit Facility and the
Borrowing Base, and (iii) whether or not Inventory or Receivables shall be
deemed to constitute Eligible Inventory or Eligible Receivables. Unless
and until Agent shall have received written notice from the Required
Lenders as to the existence of a Default, an Event of Default or some other
circumstance which would relieve the Lenders of their respective
obligations to make Loans hereunder, which notice shall be in writing and
shall be signed by the Required Lenders and shall expressly state that the
Required Lenders do not intend to make available to Agent such Lenders'
ratable share of Loans made after the effective date of such notice, Agent
shall be entitled to continue to make the assumptions described in SECTION
6.9(b). After receipt of the notice described in the preceding sentence,
which shall become effective on the third (3rd) Business Day after receipt
of such notice by Agent unless otherwise agreed by Agent, Agent shall be
entitled to make the assumptions described in SECTION 6.9(b) as to any
Loans as to which it has not received a written notice to the contrary
prior to 11:00 a.m. (Dallas, Texas time) on the Business Day next preceding
the day on which the Loan is to be made. Agent shall not be required to
make any Loan as to which it shall have received notice by a Lender of such
Lender's intention not to make its ratable portion of such Loan available
to Agent. Any withdrawal of authorization under this SECTION 6.9(c) shall
not affect the validity of any Loans made prior to the effectiveness
thereof.
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Section 6.10 SETTLEMENT AMONG LENDERS.
(a) TERM LOAN. Agent shall pay to each Lender on each Interest
Payment Date or Installment Payment Date, as the case may be, its ratable
share, based on the principal amount of the Term Loan owing to such Lender,
of all payments received by Agent hereunder in immediately available funds
in respect of the principal of, or interest on, the Term Loan, net of any
amounts payable by such Lender to Agent, by wire transfer of same day
funds.
(b) REVOLVING CREDIT LOANS. It is agreed that each Lender's Net
Outstandings are intended by the Lenders to be equal at all times to such
Lender's Commitment Percentage of the aggregate principal amount of all
Revolving Credit Loans outstanding. Notwithstanding such agreement, the
several and not joint obligation of each Lender to fund Revolving Credit
Loans made in accordance with the terms of this Agreement ratably in
accordance with such Lender's Commitment Percentage and each Lender's right
to receive its ratable share of principal payments on Revolving Credit
Loans in accordance with its Commitment Percentage, the Lenders agree that
in order to facilitate the administration of this Agreement and the Loan
Documents that settlement among them may take place on a periodic basis in
accordance with the provisions of this SECTION 6.10.
(c) SETTLEMENT PROCEDURES AS TO REVOLVING CREDIT LOANS. To the
extent and in the manner hereinafter provided in this SECTION 6.10,
settlement among the Lenders as to Revolving Credit Loans may occur
periodically on Settlement Dates determined from time to time by Agent,
which may occur before or after the occurrence or during the continuance of
a Default or Event of Default and whether or not all of the conditions set
forth in SECTION 8.2 have been met. On each Settlement Date payments shall
be made by or to the Lenders in the manner provided in this SECTION 6.10 in
accordance with the Settlement Report delivered by Agent pursuant to the
provisions of this SECTION 6.10 in respect of such Settlement Date so that
as of each Settlement Date, and after giving effect to the transactions to
take place on such Settlement Date, each Lender's Net Outstandings shall
equal such Lender's Commitment Percentage of the Revolving Credit Loans
outstanding.
(i) SELECTION OF SETTLEMENT DATES. If Agent elects, in its
discretion, but subject to the consent of NationsBank, to settle
accounts among the Lenders with respect to principal amounts of
Revolving Credit Loans less frequently than each Business Day, then
Agent shall designate periodic Settlement Dates which may occur on any
Business Day after the Effective Date; PROVIDED, HOWEVER, that Agent
shall designate as a Settlement Date any Business Day which is an
Interest Payment Date; and PROVIDED FURTHER, that a Settlement Date
shall occur at least once during each seven day period. Agent shall
designate a Settlement Date by delivering to each Lender a Settlement
Report not later than 12:00 noon (Dallas, Texas time) on the proposed
Settlement Date, which Settlement Report will be substantially in the
form of EXHIBIT "F" hereto and shall be with respect to the period
beginning on the next preceding Settlement Date and ending on such
designated Settlement Date.
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(ii) NON-RATABLE LOANS AND PAYMENTS. Between Settlement Dates,
Agent shall request and NationsBank may (but shall not be obligated
to) advance to Borrower out of NationsBank's own funds, the entire
principal amount of any Revolving Credit Loan requested or deemed
requested pursuant to SECTION 2.2(a) (any such Revolving Credit Loan
being referred to as a "NON-RATABLE LOAN"). The making of each
Non-Ratable Loan by NationsBank shall be deemed to be a purchase by
NationsBank of a 100% participation in each other Lender's Commitment
Percentage of the amount of such Non-Ratable Loan. All payments of
principal, interest and any other amount with respect to such
Non-Ratable Loan shall be payable to and received by Agent for the
account of NationsBank. Upon demand by NationsBank, with notice
thereof to Agent, each other Lender shall pay to NationsBank, as
the repurchase of such participation, an amount equal to one
hundred percent (100%) of such Lender's Commitment Percentage of
the principal amount of such Non-Ratable Loan. Any payments
received by Agent between Settlement Dates which in accordance with
the terms of this Agreement are to be applied to the reduction of
the outstanding principal balance of Revolving Credit Loans, shall
be paid over to and retained by NationsBank for such application,
and such payment to and retention by NationsBank shall be deemed, to
the extent of each other Lender's Commitment Percentage of such
payment, to be a purchase by each such other Lender of a participation
in the Revolving Credit Loans (including the repurchase of
participations in Non-Ratable Loans) held by NationsBank. Upon demand
by another Lender, with notice thereof to Agent, NationsBank shall pay
to Agent, for the account of such other Lender, as a repurchase of
such participation, an amount equal to such other Lender's
Commitment Percentage of any such amounts (after application
thereof to the repurchase of any participations of NationsBank in
such other Lender's Commitment Percentage of any Non-Ratable Loans)
paid only to NationsBank by Agent.
(iii) NET DECREASE IN OUTSTANDINGS. If on any Settlement
Date the increase, if any, in the amount of any Lender's Net
Outstandings which is required to comply with the first sentence of
SECTION 6.10(b) is less than such Lender's Commitment Percentage of
amounts received by Agent but paid only to NationsBank since the next
preceding Settlement Date, such Lender and Agent, in their respective
records, shall apply such Lender's Commitment Percentage of such
amounts to the increase in such Lender's Net Outstandings, and
NationsBank shall pay to Agent, for the account of such Lender, the
excess allocable to such Lender.
(iv) NET INCREASE IN OUTSTANDINGS. If on any Settlement Date the
increase, if any, in the amount of any Lender's Net Outstandings which
is required to comply with the first sentence of SECTION 6.10(b)
exceeds such Lender's Commitment Percentage of amounts received by
Agent but paid only to NationsBank since the next preceding Settlement
Date, such Lender and Agent, in their respective records, shall apply
such Lender's Commitment Percentage of such amounts to the increase
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in such Lender's Net Outstandings, and such Lender shall pay to Agent,
for the account of NationsBank, any excess.
(v) NO CHANGE IN OUTSTANDINGS. If a Settlement Report indicates
that no Revolving Credit Loans have been made during the period since
the next preceding Settlement Date, then such Lender's Commitment
Percentage of any amounts received by Agent but paid only to
NationsBank shall be paid by NationsBank to Agent, for the account of
such Lender. If a Settlement Report indicates that the increase in
the amount of a Lender's Net Outstandings which is required to comply
with the first sentence of SECTION 6.10(b) is exactly equal to such
Lender's Commitment Percentage of amounts received by Agent but paid
only to NationsBank since the next preceding Settlement Date, such
Lender and Agent, in their respective records, shall apply such
Lender's Commitment Percentage of such amounts to the increase in such
Lender's Net Outstandings.
(vi) RETURN OF PAYMENTS. If any amounts received by NationsBank
in respect of the Secured Obligations are later required to be
returned or repaid by NationsBank to Borrower or any other obligor or
their respective representatives or successors in interest, whether by
court order, settlement or otherwise, in excess of NationsBank's
Commitment Percentage of all such amounts required to be returned by
all Lenders, each other Lender shall, upon demand by NationsBank with
notice to Agent, pay to Agent for the account of NationsBank, an
amount equal to the excess of such Lender's Commitment Percentage of
all such amounts required to be returned by all Lenders over the
amount, if any, returned directly by such Lender.
(vii) PAYMENTS TO AGENT, LENDERS.
(A) Payment by any Lender to Agent shall be made not later
than 1:00 p.m. (Dallas, Texas time) on the Business Day such
payment is due, provided that if such payment is due on demand by
another Lender, such demand is made on the paying Lender not
later than 10:00 a.m. (Dallas, Texas time) on such Business Day.
Payment by Agent to any Lender shall be made by wire transfer,
promptly following Agent's receipt of funds for the account of
such Lender and in the type of funds received by Agent, provided
that if Agent receives such funds at or prior to 1:00 p.m.
(Dallas, Texas time), Agent shall pay such funds to such Lender
by 2:00 p.m. (Dallas, Texas time) on such Business Day. If a
demand for payment is made after the applicable time set forth
above, the payment due shall be made by 2:00 p.m. (Dallas, Texas
time) on the first Business Day following the date of such
demand.
(B) If a Lender shall, at any time, fail to make any
payment to Agent required hereunder, Agent may, but shall not be
required to, retain payments that would otherwise be made to such
Lender hereunder and apply such payments to such Lender's
defaulted obligations hereunder, at such time, and in such order,
as Agent may elect in its sole discretion.
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(C) With respect to the payment of any funds under this
SECTION 6.10(c), whether from Agent to a Lender or from a Lender
to Agent, the party failing to make full payment when due
pursuant to the terms hereof shall, upon demand by the other
party, pay such amount together with interest on such amount at
the Federal Funds Rate.
(d) SETTLEMENT OF OTHER SECURED OBLIGATIONS. All other amounts
received by Agent on account of, or applied by Agent to the payment of, any
Secured Obligation owed to the Lenders (including, without limitation, fees
payable to the Lenders pursuant to SECTIONS 6.4(a) and (d) and proceeds
from the sale of, or other realization upon, all or any part of the
Collateral following an Event of Default) that are received by Agent on or
prior to 1:00 p.m. (Dallas, Texas time) on a Business Day will be paid by
Agent to each Lender on the same Business Day, and any such amounts that
are received by Agent after 1:00 p.m. (Dallas, Texas time) will be paid by
Agent to each Lender on the following Business Day. Unless otherwise
stated herein, Agent shall distribute fees payable to the Lenders pursuant
to SECTIONS 6.4(a) and (d) ratably to the Lenders based on each Lender's
Commitment Percentage and shall distribute proceeds from the sale of, or
other realization upon, all or any part of the Collateral following an
Event of Default ratably to the Lenders based on the amount of the Secured
Obligations then owing to each Lender.
Section 6.11 MANDATORY PREPAYMENTS.
(a) PREPAYMENTS FROM ASSET DISPOSITIONS. Immediately upon receipt by
Borrower or any of its Subsidiaries of the Net Proceeds of any Asset
Disposition by Borrower or any of its Subsidiaries, Borrower shall make a
prepayment in respect of the Secured Obligations equal to the amount of
such Net Proceeds as provided in SECTION 6.11(d); PROVIDED, HOWEVER, that
if no Default or Event of Default has occurred and is continuing, Borrower
shall not be required to make such prepayment to the extent that the Net
Proceeds from such Asset Dispositions during any fiscal year of Borrower do
not exceed 50,000 in the aggregate. Concurrently with the making of any
such payment, Borrower shall deliver to Agent a certificate of Borrower's
Financial Officer demonstrating the calculations of the amount required to
be prepaid. Notwithstanding the foregoing, if no Default or Event of
Default has occurred and is continuing, or would result therefrom, to the
extent that the gross proceeds from such Asset Dispositions during any
fiscal year of Borrower do not exceed, in the aggregate, $500,000, if
Borrower reasonably expects such proceeds to be reinvested within six (6)
months in productive assets of a kind then used or useable in the business
of Borrower or its Subsidiaries and that are not subject to any Lien other
than in favor of Agent, for the benefit of the Credit Parties, then
Borrower shall provide Agent with notice of such intent in accordance with
SECTION 18.1, and (i) to the extent such proceeds do not exceed the balance
from time to time of the Revolving Credit Loans, such proceeds shall be
applied to the repayment of the outstanding balance of the Revolving Credit
Loans and Agent shall, until such time as the reinvestment of such
proceeds, establish a reserve against the Borrowing Base in the amount of
the proceeds so applied and (ii) to the extent such proceeds exceed the
balance from time to time of the Revolving Credit Loans, Borrower shall
deposit such proceeds with Agent to be held as Cash Collateral in which
Agent, for the
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ratable benefit of the Credit Parties, shall have a first priority security
interest. Upon Borrower's or its Subsidiaries' (as applicable)
reinvestment of such proceeds as described above, and provided that
Borrower provides Agent with copies of a purchase order, invoice or
other written evidence of the purchase price of the assets which such
proceeds are reinvested in, and such other information as may be requested
by Agent with respect thereto, Agent shall release its security interest in
such Cash Collateral in respect of the reinvested funds and shall eliminate
the reserve against the Borrowing Base. To the extent that Borrower or its
Subsidiaries (as applicable) fail to reinvest such proceeds within six (6)
months as provided above, Borrower authorizes and directs Agent to
eliminate such reserve, to apply the amount of the Cash Collateral in
respect of the unreinvested amount to the prepayment of the Loans as
provided in SECTION 6.11(d), to make Revolving Credit Loans in an amount
equal to the reserved amount that is not reinvested and to apply the
proceeds of such Revolving Credit Loans in prepayment of the Loans as
provided in SECTION 6.11(d).
(b) PREPAYMENTS FROM EQUITY OFFERINGS. In the event that at any time
after the Effective Date, any of the Loan Parties or any of their
respective Subsidiaries issues Capital Stock or other securities in any
public offering or receives an additional capital contribution in respect
of existing Capital Stock or other securities (excluding the net cash
proceeds from any such issuance to or contribution from Fremont Partners,
L.P. or New Canaan), no later than the third Business Day following the
date of receipt of the proceeds from such issuance, Borrower shall apply
such proceeds, net of underwriting discounts and commissions and other
reasonable costs associated therewith, in prepayment of the Loans as
provided in SECTION 6.11(d).
(c) PREPAYMENTS FROM EXCESS CASH FLOW. Commencing with the fiscal
year ending December 31, 1997, and continuing for each fiscal year end
thereafter until the principal balance of the Term Loan Facility shall have
been reduced to $27,000,000, or less, Borrower shall, no later than one
hundred sixty (160) days following each fiscal year end, make a prepayment
of the Loans as provided in SECTION 6.11(d) in an amount equal to fifty
percent (50.0%) of Borrower's Excess Cash Flow for such fiscal year.
(d) APPLICATION OF PROCEEDS OF PREPAYMENTS. All prepayments pursuant
to this SECTION 6.11 shall be accompanied by an appropriate Notice of
Borrowing and, except to the extent otherwise provided in CLAUSE (a), shall
be applied first to the outstanding principal balance of the Term Loan to
the extent thereof and thereafter to the outstanding balance of the CAPEX
Loan, to the extent thereof, and thereafter to the outstanding Revolving
Credit Loans to the extent thereof, with any excess to be deposited with
Agent to be held as Cash Collateral for the Secured Obligations and applied
by Agent from time to time to the outstanding Revolving Credit Loans
promptly upon the making of such Revolving Credit Loans or, after the
Termination Date, to any of the Secured Obligations in such manner as Agent
shall determine in its sole discretion. All prepayments of the Term Loan
or the CAPEX Loan shall be applied to the principal installments payable
thereon in inverse order of maturity.
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Section 6.12 PREPAYMENT FEE. Subject to the provisions of SECTION 18.22,
if Borrower prepays the Loans in whole and terminates this Agreement prior to
the Termination Date, for any reason other than refinancing of the Loans with
NationsBank or any of its Affiliates, Borrower shall pay to Agent, for the
ratable benefit of the Lenders, on the date of such prepayment, as liquidated
damages and compensation for the costs of making funds available to Borrower
under this Agreement, and not as a penalty, an amount equal to the percentage
amount specified below for the Loan Year in which such prepayment is made
multiplied by the sum of (a) the aggregate outstanding principal amount of the
Term Loan and the CAPEX Loan plus (b) the amount of the Revolving Credit
Facility then in effect:
Loan Year Percent
--------- --------
1 1.00%
2 0.50%
3 0.25%
4 0.25%
5 0.25%
ARTICLE 7
CHANGE OF CIRCUMSTANCES
Section 7.1 INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any Applicable Law or
any change in any Applicable Law or any change in the interpretation or
administration thereof by any Governmental Authority (including, without
limitation, any central bank or comparable agency) charged with the
interpretation or administration thereof, or compliance by any Lender (or
its Applicable Lending Office) with any request or directive (whether or
not having the force of law) of any such Governmental Authority:
(i) shall subject such Lender (or its Applicable Lending Office)
to any tax, duty or other charge with respect to any Eurodollar Loans,
its Notes, or its obligation to make Eurodollar Loans, or change the
basis of taxation of any amounts payable to such Lender (or its
Applicable Lending Office) under this Agreement or its Note in respect
of any Eurodollar Loans (other than taxes imposed on the overall net
income of such Lender by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office);
(ii) shall impose, modify or deem applicable any reserve, special
deposit, assessment, compulsory loan or similar requirement (other
than the Reserve Requirement utilized in the determination of the
Adjusted Eurodollar Rate) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities or
commitments of, such Lender (or its Applicable Lending Office),
including the Commitment of such Lender hereunder; or
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(iii) shall impose on such Lender (or its Applicable Lending
Office) or on the London interbank market any other condition
affecting this Agreement or its Notes or any of such extensions of
credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing or maintaining any Eurodollar Loans or to reduce any sum
received or receivable by such Lender (or its Applicable Lending Office)
under this Agreement or its Notes with respect to any Eurodollar Loans,
then Borrower shall pay to such Lender on demand such amount or amounts as
will compensate such Lender for such increased cost or reduction. If any
Lender requests compensation by Borrower under this SECTION 7.1(a),
Borrower may, by notice to such Lender (with a copy to Agent), suspend the
obligation of such Lender to make or Continue Loans of the Type with
respect to which such compensation is requested, or to Convert Loans of any
other Type into Loans of such Type, until the event or condition giving
rise to such request ceases to be in effect (in which case the provisions
of SECTION 7.4 shall be applicable); PROVIDED that such suspension shall
not affect the right of such Lender to receive the compensation so
requested.
(b) If, after the date hereof, any Lender shall have determined that
the adoption of any applicable law, rule or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any Governmental Authority (including, without limitation, any
central bank or comparable agency) charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority has or would have the effect of reducing the rate of return on
the capital of such Lender or any corporation controlling such Lender as a
consequence of such Lender's obligations hereunder to a level below that
which such Lender or such corporation could have achieved but for such
adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy), then, from time to time upon
demand, Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender for such reduction.
(c) Each Lender shall promptly notify Borrower and Agent of any event
of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Lender, be otherwise disadvantageous to it.
Any Lender claiming compensation under this Section shall furnish to
Borrower and Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the absence
of manifest error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
Section 7.2 LIMITATION ON TYPES OF LOANS. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:
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(a) Agent determines (which determination shall be conclusive) that
by reason of circumstances affecting the London interbank Eurodollar
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify Agent that the Adjusted Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding Eurodollar
Loans for such Interest Period;
then Agent shall give Borrower prompt notice thereof specifying the relevant
Type of Loans and the relevant amounts or periods, and so long as such condition
remains in effect, the Lenders shall be under no obligation to make additional
Loans of such Type, Continue Loans of such Type, or to Convert Loans of any
other Type into Loans of such Type and Borrower shall, on the last day(s) of the
then current Interest Period(s) for the outstanding Loans of the affected Type,
either prepay such Loans or Convert such Loans into another Type of Loan in
accordance with the terms of this Agreement.
Section 7.3 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain or fund Eurodollar Loans hereunder,
then such Lender shall promptly notify Borrower thereof and such Lender's
obligation to make or Continue Eurodollar Loans, and to Convert other Types of
Loans into Eurodollar Loans, shall be suspended until such time as such Lender
may again make, maintain and fund Eurodollar Loans (in which case the provisions
of SECTION 7.4 shall be applicable).
Section 7.4 TREATMENT OF AFFECTED LOANS. If the obligation of any
Lender to make Loans of a particular Type, or to Continue or Convert Loans of
any other Type into Loans of a particular Type, shall be suspended pursuant to
SECTION 7.1 or 7.3 hereof (Loans of such Type being herein called "AFFECTED
LOANS" and such Type being herein called the "AFFECTED TYPE"), such Lender's
Affected Loans shall be automatically Converted into Base Rate Loans on the last
day(s) of the then current Interest Period(s) for the Affected Loans (or, in the
case of a Conversion required by SECTION 7.3 hereof, on such earlier date as
such Lender may specify to Borrower with a copy to Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified in
SECTION 7.1 or SECTION 7.3 hereof that gave rise to such Conversion no longer
exist:
(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Affected Loans shall be applied instead to its
Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Loans of the Affected Type shall be made or Continued instead as
Base Rate Loans, and all Loans of such Lender that would otherwise be
Converted into Loans of the Affected Type shall be Converted instead into
(or shall remain as) Base Rate Loans.
If such Lender gives notice to Borrower (with a copy to Agent) that the
circumstances specified in SECTION 7.1 or SECTION 7.3 hereof that gave rise to
the Conversion of such Lender's Affected Loans pursuant to this SECTION 7.4 no
longer exist (which such Lender agrees to do promptly upon such
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circumstances ceasing to exist) at a time when Loans of the Affected Type
made by other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Loans of the Affected Type, to the extent
necessary so that, after giving effect thereto, all Loans held by the Lenders
holding Loans of the Affected Type and by such Lender are held pro rata (as
to principal amounts, Types and Interest Periods) in accordance with their
respective Commitments.
Section 7.5 COMPENSATION. Upon the request of any Lender, Borrower
shall pay to a Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment or Conversion of a Eurodollar Loan for
any reason (including, without limitation, the acceleration of the Loans
pursuant to SECTION 15.2) on a date other than the last day of the Interest
Period for such Loan; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in ARTICLE 8
to be satisfied) to borrow, Convert, Continue or prepay a Eurodollar Loan
on the date for such borrowing, Conversion, Continuation or prepayment
specified in the relevant Notice of Borrowing under this Agreement.
Section 7.6 TAXES.
(a) Any and all payments by Borrower to or for the account of any
Credit Party hereunder or under any other Loan Document shall be made free
and clear of, and without deduction for, any and all present or future
taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, EXCLUDING, in the case of each Credit
Party, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which any Lender (or its Applicable
Lending Office), L/C Issuer or Agent (as the case may be) is organized or
any political subdivision thereof (all such non-excluded taxes, duties,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "TAXES"). If Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable under this
Agreement or any other Loan Document to any Credit Party, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this SECTION 7.6) such Credit Party receives an amount equal to the
sum it would have received had no such deductions been made, (ii) Borrower
shall make such deductions, (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with Applicable Law, and (iv) Borrower shall furnish to Agent,
at its address referred to in SECTION 18.1, the original or a certified
copy of a receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which
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arise from any payment made under this Agreement or any other Loan
Document or from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Loan Document (hereinafter referred to as
"OTHER TAXES").
(c) BORROWER AGREES TO INDEMNIFY EACH CREDIT PARTY FOR THE FULL
AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY TAXES
OR OTHER TAXES IMPOSED OR ASSERTED BY ANY JURISDICTION ON AMOUNTS PAYABLE
UNDER THIS SECTION 7.6) PAID BY SUCH CREDIT PARTY (AS THE CASE MAY BE) AND
ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING
THEREFROM OR WITH RESPECT THERETO.
(d) Each Lender organized under the laws of a jurisdiction outside
the U.S., on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof
and on or prior to the date on which it becomes a Lender in the case of
each other Lender, and from time to time thereafter if requested in writing
by Borrower or Agent (but only so long as such Lender remains lawfully able
to do so), shall provide Borrower and Agent with (i) IRS Form 1001 or 4224,
as appropriate, or any successor form prescribed by the IRS, certifying
that such Lender is entitled to benefits under an income tax treaty to
which the U.S. is a party which reduces the rate of withholding tax on
payments of interest or certifying that the income receivable pursuant to
this Agreement is effectively connected with the conduct of a trade or
business in the U.S., (ii) IRS Form W-8 or W-9, as appropriate, or any
successor form prescribed by the IRS, and (iii) any other form or
certificate required by any taxing authority (including any certificate
required by Sections 871(h) and 881(c) of the Internal Revenue Code),
certifying that such Lender is entitled to an exemption from or a reduced
rate of tax on payments pursuant to this Agreement or any of the other Loan
Documents.
(e) For any period with respect to which a Lender has failed to
provide Borrower and Agent with the appropriate form pursuant to SECTION
7.6(d) (unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which a form originally was required to
be provided), such Lender shall not be entitled to indemnification under
SECTION 7.6(a) or 7.6(b) with respect to Taxes or Other Taxes imposed by
the U.S.; PROVIDED, HOWEVER, that should a Lender, which is otherwise
exempt from or subject to a reduced rate of withholding tax, become subject
to Taxes or Other Taxes because of its failure to deliver a form required
hereunder, Borrower shall take such steps as such Lender shall reasonably
request to assist such Lender to recover such Taxes or Other Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this SECTION 7.6, then such Lender will
agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender, is not otherwise disadvantageous to such Lender.
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(g) Within thirty (30) days after the date of any payment of Taxes or
Other Taxes, Borrower shall furnish to Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in
this SECTION 7.6 shall survive the termination of the Commitments and the
payment in full of the Notes.
ARTICLE 8
CONDITIONS PRECEDENT
Section 8.1 CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT.
Notwithstanding any other provision of this Agreement, no Loan will be made, and
no Letter of Credit shall be issued, until the fulfillment of each of the
following conditions, and with respect to any reports, appraisals, reviews or
other similar items, Agent's and the Lender's satisfaction with the contents
thereof, prior to or contemporaneously with the making of the first to be made
of such Loans or issuance of such Letter of Credit:
(a) FINANCIAL CONDITION. Borrower shall have delivered to Agent the
Pro Forma, together with a certificate executed by a Financial Officer and
an opinion of Houlihan, Lokey, Howard & Zukin (or such other firm as is
acceptable to Agent) concerning the financial condition and solvency of
Borrower as of the Effective Date (after giving effect to the Acquisition
and the initial Loan(s)), each in form and substance satisfactory to Agent,
and the Pro Forma shall reflect Borrower's Net Worth as of the Agreement
Date to be not less than $49,100,000.00.
(b) FEES AND EXPENSES. Borrower shall have paid all of the fees and
expenses payable on the Agreement Date.
(c) CAPITALIZATION. Fremont shall have received a capital
contribution of common equity of not less than $49,100,000, all of which
shall have been contributed by Fremont to KAC as common equity for the
purpose of consummating the Acquisition and the Merger and paying fees,
costs and expenses in connection therewith, paying Indebtedness of Borrower
and general corporate purposes of Borrower, and no dividends or
distributions or payments with respect to Borrower's Capital Stock shall
have been made as of the Effective Date except as required to comply with
the terms of the Acquisition Agreement.
(d) ACQUISITION DOCUMENTS. On the Effective Date, (i) Agent shall
have received true and complete executed or conformed copies of the
Acquisition Documents and any amendments thereto, (ii) the Acquisition
Documents shall be in full force and effect and no material term or
condition thereof shall have been amended, modified or waived after the
execution thereof except with the prior written consent of Agent, (iii)
none of the parties to any of the Acquisition Documents shall have failed
to perform any material obligation or covenant required by such Acquisition
Document to be performed or complied with by it on
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or before the Effective Date, (iv) all representations and warranties of
the parties to the Acquisition Documents contained therein shall be true
and correct in all material respects with the same effect as though made
on and as of the Effective Date, (v) all requisite approvals by
Governmental Authorities having jurisdiction over the parties to the
Acquisition Agreement in respect of the Acquisition or the Merger shall
have been obtained by such parties, as the case may be, and no such
approvals shall impose any conditions to the consummation of the
Acquisition or the Merger, (vi) the Acquisition shall have been
consummated in accordance with the terms and provisions of the
Acquisition Agreement and the other Acquisition Documents, without any
amendment or waiver of any material provision thereof, and (vii) Agent
shall have received a certificate from Borrower's chief executive
officer or other evidence satisfactory to it that each of the conditions
set forth in CLAUSES (i) through (vi) above shall have been satisfied.
In addition, each opinion letter (if any) delivered in connection with
the Acquisition Documents and the transactions contemplated thereby
shall be addressed to Agent, for the benefit of the Credit Parties, or
accompanied by a written authorization from the firm delivering such
opinion letter stating that Agent, for the benefit of the Credit
Parties, may rely on such opinion letter as though it were addressed to
it.
(e) SECURITY INTERESTS. Agent shall have received satisfactory
evidence that Agent (for the benefit of the Credit Parties) has a valid,
exclusive (except for Permitted Liens) and perfected first priority
security interest as of such date in all of the Collateral, subject only to
Permitted Liens.
(f) CLOSING DOCUMENTS. Agent shall have received each of the
following documents, all of which shall be satisfactory in form and
substance to Agent and its special counsel and to the Lenders:
(i) certified copies of the articles or certificate of
incorporation and bylaws of Borrower as in effect on the Effective
Date;
(ii) certified copies of all corporate action, including
shareholder approval, if necessary, taken by Borrower to authorize the
execution, delivery and performance of this Agreement, the other Loan
Documents, the borrowings under this Agreement and the execution,
delivery and performance of the Acquisition Agreement and the
Acquisition Documents;
(iii) certificates of incumbency and specimen signatures with
respect to each of the officers of Borrower authorized to execute and
deliver this Agreement and the other Loan Documents on behalf of
Borrower and each other Person executing any document, certificate or
instrument to be delivered in connection with this Agreement and the
other Loan Documents and, in the case of Borrower, to request
borrowings under this Agreement;
(iv) a certificate evidencing the good standing of Borrower in
the jurisdiction of its incorporation and in each other jurisdiction
in which it is required
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to be qualified as a foreign corporation to transact its business as
presently conducted;
(v) copies of all financial statements referred to in
SECTION 9.1(n) and meeting the requirements thereof;
(vi) a signed opinion of counsel for Borrower and the Guarantors
and of such local counsel for Borrower as may be required, opining as
to such matters in connection with the transactions contemplated by
this Agreement as Agent or its special counsel may reasonably request
in each case in form and substance satisfactory to Agent and the
Lenders;
(vii) the Financing Statements duly executed and delivered by
Borrower as required by this Agreement and the Security Documents, and
acknowledgment copies evidencing the filing of such Financing
Statements in each jurisdiction where such filing may be necessary or
appropriate to perfect the Security Interest;
(viii) a certification from the principal officers of Borrower
as to such factual matters as shall be requested by Agent;
(ix) certificates or binders of insurance relating to each of the
policies of insurance covering any of the Collateral together with
loss payable clauses which comply with the terms of SECTION 11.8;
(x) a certificate of the President or a Financial Officer of
Borrower stating that, to the best of his/her knowledge and based on
an examination sufficient to enable him/her to make an informed
statement,
(A) all of the representations and warranties made or
deemed to be made under this Agreement are true and correct as of
the Effective Date, after giving effect to the Revolving Credit
Loans and the Term Loan to be made at such time and the
application of the proceeds thereof, and
(B) no Default or Event of Default exists;
(xi) a Borrowing Base Certificate, a Schedule of Inventory and a
Schedule of Receivables, prepared as of the Effective Date;
(xii) copies of the Mortgages, covering Borrower's Real
Estate located in Lancaster County, Pennsylvania and Ahoskie County,
North Carolina, and at any time after the Effective Date, such other
parcels of real property comprising the Real Estate as Agent may
request pursuant to SECTION 11.14(a), duly executed and delivered by
Borrower and evidencing the recording of each such instrument in the
appropriate jurisdiction for the recording thereof on the Real Estate
subject thereto or, at the option of Agent, in proper form for
recording in such jurisdiction;
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(xiii) one or more fully paid mortgagee title insurance
policies or, at the option of Agent, unconditional commitments for the
issuance thereof with all requirements and conditions to the issuance
of the final policy deleted or marked satisfied, issued by a title
insurance company satisfactory to Agent, each in an amount equal to
not less than the fair market value of the Real Estate subject to the
Mortgage insured thereby, insuring that such Mortgage creates a valid
first lien on, and security title to, all Real Estate described
therein, with no survey exceptions and no other exceptions which Agent
shall not have approved in writing;
(xiv) such materials and information concerning the Real
Estate as Agent may require, including, without limitation, (A)
current and accurate surveys (prepared within one (1) year prior to
the Agreement Date) satisfactory to Agent of all of the owned Real
Estate, certified (as current as of a date not more than thirty (30)
days prior to the Agreement Date) to Agent by a credentialed surveyor
acceptable to Agent and showing the location of the 100-year and
50-year flood plains thereon, (B) zoning letters as to the zoning
status of all of the owned Real Estate, (C) certificates of occupancy
covering all of the Real Estate, and (D) owner's affidavits as to such
matters relating to the owned Real Estate as Agent may request;
(xv) landlord's or mortgagee's waiver and consent agreements duly
executed on behalf of each landlord or mortgagee, as the case may be,
of Real Estate and any other real property on which any Collateral is
located;
(xvi) each Agency Account Agreement duly executed by Borrower
and the Clearing Bank party thereto;
(xvii) a certificate from Borrower to Agent requesting the
initial Revolving Credit Loans and the Term Loan and specifying the
method of disbursement pursuant to SECTION 12.8;
(xviii) a report (or reports), including, without limitation
any previously existing report (or reports) from a qualified
engineering firm (or firms) or other qualified consultant with respect
to an investigation and audit of all Real Estate, which shall be
acceptable to Agent in its discretion and based on a thorough review
of past and present uses, occupants, ownership and tenancy of the
property and/or adjacent properties and/or up-gradient properties
regarding:
(A) subsurface ground water hazards, soils and/or test
boring reports;
(B) contact with local, state or federal agencies regarding
known or suspected hazardous material contamination of the
property or other properties in the area;
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(C) review of aerial photographs;
(D) visual site inspection noting unregulated fills,
storage tanks or areas, ground discoloration or soil odors; and
(E) other investigative methods deemed necessary by the
consultant or Agent to enable the consultant to report that there
is no apparent or likely contamination of the property or another
property in the area;
(xix) if deemed reasonably necessary to further investigate
suspected or likely contamination, supplemental environmental reports
prepared by qualified consultants of the analysis of core drilling or
ground water samples from the property;
(xx) certificates of title for all of Borrower's motor vehicles,
trailers and other property for which a certificate of title has been
issued, together with applications for the noting of Agent's security
interest (on behalf of the Lenders) thereon, duly executed by Borrower
and in form appropriate for submission to the applicable Governmental
Authority that issued such certificate of title;
(xxi) copies of each of the other Loan Documents duly
executed by the parties thereto, together with evidence satisfactory
to Agent of the due authorization and binding effect of each such Loan
Document on such party; and
(xxii) such other documents and instruments as Agent or any
Lender may reasonably request.
(g) GUARANTOR DOCUMENTS. Agent shall have received each of the
following documents, all of which shall be satisfactory in form and
substance to Agent and its special counsel and to the Lenders:
(i) certified copies of (A) the certificate of incorporation or
certificate of formation, as applicable, and (B) bylaws or operating
agreement, as applicable, of each Guarantor as in effect on the
Effective Date;
(ii) certified copies of all corporate action, including
shareholder or member approval, if necessary, taken by each Guarantor
to authorize the execution, delivery and performance of the Affiliate
Guaranty to which such Guarantor is a party;
(iii) certificates of incumbency and specimen signatures with
respect to each of the officers of each Guarantor authorized to
execute and deliver the Affiliate Guaranty to which such Guarantor is
a party on behalf of such Guarantor;
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(iv) certificates evidencing the existence and good standing of
each Guarantor in the jurisdiction of its incorporation or formation,
as applicable, and in each other jurisdiction in which it is required
to be qualified as a foreign business enterprise to transact its
business as presently conducted; and
(v) each Affiliate Guaranty, duly executed and delivered by the
Guarantor party thereto.
(h) NOTES. Each Lender shall have received a Revolving Credit Note,
a Term Note and a CAPEX Note duly executed and delivered by Borrower,
complying with the terms of SECTION 2.4 and SECTION 4.4, as applicable.
(i) OTHER SECURITY DOCUMENTS. Agent shall have received each other
Security Document, duly executed and delivered by Borrower.
(j) AVAILABILITY. Agent shall be provided with evidence satisfactory
to it confirmed by a certificate of a Financial Officer that, as of the
Effective Date and after giving effect to the Acquisition, the initial
Revolving Credit Loans and the refinancing of Borrower's existing
Indebtedness for Money Borrowed, the Availability is not less than Six
Million Five Hundred Thousand Dollars ($6,500,000).
(k) NO INJUNCTIONS, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed by or before any Governmental Authority to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or
arises out of the Acquisition or this Agreement or the consummation of the
transactions contemplated by the Acquisition or this Agreement,
respectively, or which, in the Agent's or the Lenders' reasonable
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement.
(l) MATERIAL ADVERSE CHANGE. Except as disclosed in writing to Agent
and the Lenders on or before the Agreement Date, as of the Effective Date,
there shall not have occurred any change which is materially adverse, in
the Lenders' reasonable discretion, to the assets, liabilities, businesses,
operations, condition (financial or otherwise) or prospects of Borrower in
comparison to such conditions as presented in the financial statements of
Borrower dated March 31, 1997, previously delivered to Agent and the
Lenders, and no Materially Adverse Effect with respect to any of the Loan
Parties shall have occurred.
(m) RELEASE OF SECURITY INTERESTS. Agent shall have received
evidence satisfactory to it of the release and termination of all Liens
other than Permitted Liens.
(n) PBGC AGREEMENTS. Agent shall have received copies of all
material agreements, if any, between Borrower and PBGC, together with all
exhibits and schedules thereto, and each such agreement shall be
satisfactory to Agent in its discretion.
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Section 8.2 ALL LOANS; LETTERS OF CREDIT. At the time of making of each
Loan, including the initial Revolving Credit Loan, the Term Loan and all
subsequent Loans, and the issuance of each Letter of Credit:
(a) all of the representations and warranties made or deemed to be
made under this Agreement shall be true and correct at such time both with
and without giving effect to the Loan to be made at such time and the
application of the proceeds thereof;
(b) the corporate actions of Borrower referred to in SECTION
8.1(f)(ii) shall remain in full force and effect and the incumbency of
officers shall be as stated in the certificates of incumbency delivered
pursuant to SECTION 8.1(f)(iii) or as subsequently modified and reflected
in a certificate of incumbency delivered to Agent; and
(c) each request or deemed request for any borrowing or the issuance
of any Letter of Credit hereunder shall be deemed to be a certification by
Borrower to the Credit Parties as to the matters set forth in SECTION
8.2(a) and (b) and Agent may, without waiving either condition, consider
the conditions specified in SECTIONS 8.2(a) and (b) fulfilled and a
representation by Borrower to such effect made, if no written notice to the
contrary is received by Agent prior to the making of the Loan, or the
issuance of the Letter of Credit then requested.
Section 8.3 CAPEX LOAN. At the time of making any CAPEX Loan:
(a) all of the requirements of SECTION 8.2 shall have been met by
Borrower to Agent's and the Lenders' satisfaction; and
(b) Borrower shall deliver to Agent, prior to Agent's funding of any
requested CAPEX Loan, a purchase order, invoice or other written evidence
of the purchase price of all Eligible Purchased Equipment to be financed by
such CAPEX Loan, and such other information as may be requested by Agent
with respect thereto.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF BORROWER
Section 9.1 REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to each of the Credit Parties as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. Borrower and each of the
other Loan Parties is a corporation (or, in the case of Fremont, a limited
partnership), duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, having the power and
authority to own its properties and to carry on its business as now being
and hereafter proposed to be conducted and is duly qualified and authorized
to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization. The jurisdictions in which each of
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Borrower and the other Loan Parties is qualified to do business as a foreign
organization are listed on SCHEDULE 9.1(a).
(b) CAPITALIZATION. The outstanding Capital Stock of Borrower has
been duly and validly issued and is fully paid and nonassessable, and the
number and owners of such shares of Capital Stock of Borrower and each of
the other Loan Parties, respectively, are set forth on SCHEDULE 9.1(b).
The issuance and sale of Borrower's Capital Stock have been registered or
qualified under applicable federal and state securities laws or are exempt
therefrom.
(c) SUBSIDIARIES. SCHEDULE 9.1(c) correctly sets forth the name of
each Subsidiary of Borrower, its jurisdiction of incorporation, the name of
its immediate parent or parents, and the percentage of its issued and
outstanding Capital Stock owned by Borrower or any other Subsidiary of
Borrower and indicating whether such Subsidiary is a Consolidated
Subsidiary. Except as set forth on SCHEDULE 9.1(c),
(i) no Subsidiary of Borrower has issued any securities
convertible into shares of such Subsidiary's Capital Stock or any
options, warrants or other rights to acquire any shares or securities
convertible into such Capital Stock,
(ii) the outstanding Capital Stock and other securities of each
Subsidiary of Borrower are owned by Borrower or a Wholly-Owned
Subsidiary of Borrower, or by Borrower and one or more of its Wholly-
Owned Subsidiaries, free and clear of all Liens, warrants, options and
rights of others of any kind whatsoever, and
(iii) Borrower has no other Subsidiaries.
The outstanding Capital Stock of each Subsidiary of Borrower has been duly and
validly issued and is fully paid and nonassessable by the issuer, and the number
and owners of the shares of such Capital Stock are set forth on SCHEDULE 9.1(c).
(d) AUTHORIZATION OF AGREEMENT, NOTES, LOAN DOCUMENTS AND BORROWING.
Borrower has the right and power, and has taken all necessary action to
authorize it, to execute, deliver and perform this Agreement and each of
the other Loan Documents in accordance with their respective terms. This
Agreement and each of the other Loan Documents have been duly executed and
delivered by the duly authorized officers of Borrower and each is, or each
when executed and delivered in accordance with this Agreement will be, a
legal, valid and binding obligation of Borrower, enforceable in accordance
with its terms.
(e) COMPLIANCE OF AGREEMENT, NOTES, LOAN DOCUMENTS AND BORROWING WITH
LAWS, ETC. Except as set forth on SCHEDULE 9.1(e), the execution, delivery
and performance of this Agreement and each of the other Loan Documents in
accordance with their respective terms and the borrowings hereunder do not
and will not, by the passage of time, the giving of notice or otherwise,
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(i) require any Governmental Approval or violate any Applicable
Law relating to Borrower or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute a default
under the articles or certificate of incorporation or bylaws of
Borrower or any of its Subsidiaries,
(iii) conflict with, result in a breach of or constitute a
default under any material provisions of any indenture, agreement or
other instrument to which Borrower or any of its Subsidiaries is a
party or by which Borrower, any of its Subsidiaries or any of
Borrower's or such Subsidiaries' property may be bound or any
Governmental Approval relating to Borrower or any of its Subsidiaries,
or
(iv) result in or require the creation or imposition of any Lien
upon or with respect to any property now owned or hereafter acquired
by Borrower other than the Security Interest.
(f) BUSINESS. Borrower is engaged principally in the business of
manufacturing packaging products.
(g) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS.
(i) Except as set forth in SCHEDULE 9.1(g), Borrower and each of
its Subsidiaries
(A) has all Governmental Approvals, including permits
relating to federal, state and local Environmental Laws,
ordinances and regulations, required by any Applicable Law for it
to conduct its business, each of which is in full force and
effect, is final and not subject to review on appeal and is not
the subject of any pending or, to the knowledge of Borrower,
threatened attack by direct or collateral proceeding, and
(B) is in compliance with each Governmental Approval
applicable to it and in compliance with all other Applicable Laws
relating to it, including, without being limited to, all
Environmental Laws and all occupational health and safety laws
applicable to Borrower, any of its Subsidiaries or their
respective properties,
except for instances of noncompliance which would not, singly or in the
aggregate, cause a Default or Event of Default or have a Materially Adverse
Effect on Borrower or any of its Subsidiaries and in respect of which
reserves in respect of Borrower's or such Subsidiary's reasonably
anticipated liability therefor have been established on the books of
Borrower or such Subsidiary, as applicable.
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(ii) Without limiting the generality of the above, except as set
forth on SCHEDULE 9.1(g) or as disclosed on a report delivered
pursuant to SECTION 8.1(f)(xviii) or (xix) or with respect to matters
which could not reasonably be expected to have, singly or in the
aggregate, a Materially Adverse Effect on Borrower or any of its
Subsidiaries:
(A) the operations of Borrower and each of its Subsidiaries
comply in all material respects with all applicable
environmental, health and safety requirements of Applicable Law;
(B) Borrower and each of its Subsidiaries has obtained all
environmental, health and safety permits necessary for its
operation, and all such permits are in good standing and Borrower
and each of its Subsidiaries is in compliance in all material
respects with all terms and conditions of such permits;
(C) neither Borrower nor any of its Subsidiaries nor any of
their respective present or past property or operations are
subject to any order from or agreement with any public authority
or private party respecting (1) any environmental, health or
safety requirements of Applicable Law, (2) any Remedial Action,
or (3) any liabilities and costs arising from the Release or
threatened Release of a Contaminant into the environment;
(D) none of the operations of Borrower or of any of its
Subsidiaries is subject to any judicial or administrative
proceeding or investigation alleging a violation of any
environmental, health or safety requirement of Applicable Law;
(E) none of the present nor past operations of Borrower or
any of its Subsidiaries is the subject of any investigation by
any Governmental Authority evaluating whether any Remedial Action
is needed to respond to a Release or threatened Release of a
Contaminant into the environment;
(F) neither Borrower nor any of its Subsidiaries has filed
any notice under any requirement of Environmental Law indicating
past or present treatment, storage or disposal of a hazardous
waste, as that term is defined under 40 CFR Part 261 or any state
equivalent;
(G) neither Borrower nor any of its Subsidiaries has filed
any notice that remains pending or outstanding under any
requirement of Applicable Law reporting a Release of a
Contaminant into the environment;
(H) Except in compliance in all material respects with
applicable Environmental Laws, during the course of Borrower's or
any of its Subsidiaries' ownership of or operations on the Real
Estate, there have been
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no generation, treatment, recycling, storage or disposal of
hazardous waste, as that term is defined under 40 CFR Part 261
or any state equivalent, use of underground storage tanks or
surface impoundments, use of asbestos containing materials, or
use of polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other equipment;
(I) neither Borrower nor any of its Subsidiaries has
entered into any negotiations or agreements with any Person
(including, without limitation, any prior owner of any of the
Real Estate or other property of Borrower or any of its
Subsidiaries) relating to any Remedial Action or environmental
related claim;
(J) neither Borrower nor any of its Subsidiaries has
received any notice or claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened
Release of a Contaminant into the environment;
(K) neither Borrower nor any of its Subsidiaries has any
material contingent liability in connection with any Release or
threatened Release of any Contaminant into the environment;
(L) no Environmental Lien has attached to any of the Real
Estate or other property of Borrower or of any of its
Subsidiaries;
(M) the presence and condition of all asbestos-containing
material which is on or part of the Real Estate (excluding any
raw materials used in the manufacture of products or products
themselves) do not violate in any material respect any currently
applicable requirement of Applicable Law; and
(N) neither Borrower nor any of its Subsidiaries
manufactures, distributes or sells, and has never manufactured,
distributed or sold, products which contain asbestos containing
material.
(iii) Borrower has notified Agent of the receipt by it or by
any of its Subsidiaries of any notice of a material violation of any
Environmental Laws and occupational health and safety laws applicable
to Borrower, any of its Subsidiaries or any of their respective
properties.
(h) TITLE TO PROPERTIES. Except as set forth in SCHEDULE 9.1(h),
Borrower and each of its Subsidiaries has valid and legal title to or
leasehold interest in all personal property, Real Estate owned and other
assets used in its business.
(i) LIENS. Except as set forth in SCHEDULE 9.1(i), none of the
properties and assets of Borrower or the other Loan Parties is subject to
any Lien, except Permitted Liens. Other than the Financing Statements, no
financing statement under the UCC of any state or other instrument
evidencing a Lien which names Borrower, or any other Loan Party, as debtor
has
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been filed (and has not been terminated) in any state or other
jurisdiction, and neither Borrower, nor any other Loan Party, has signed
any such financing statement or other instrument or any security
agreement authorizing any secured party thereunder to file any such
financing statement or instrument, except to perfect those Liens listed
on SCHEDULE 9.1(i).
(j) INDEBTEDNESS AND GUARANTIES. SCHEDULE 9.1(j) is a complete and
correct listing of all (i) Indebtedness for Money Borrowed, and
(ii) Guaranties of each of Borrower and the other Loan Parties. Each of
Borrower and the other Loan Parties has performed and is in compliance with
all of the terms of such Indebtedness and Guaranties and all instruments
and agreements relating thereto, and no default or event of default, or
event or condition which with notice or lapse of time or both would
constitute such a default or event of default, exists with respect to any
such Indebtedness or Guaranty.
(k) LITIGATION. Except as set forth on SCHEDULE 9.1(K), there are no
actions, suits or proceedings pending (nor, to the knowledge of Borrower,
are there any actions, suits or proceedings threatened, or any reasonable
basis therefor) against or in any other way relating to or affecting
Borrower or any of the other Loan Parties, or any of Borrower's or any
other Loan Parties' other properties in any court or before any arbitrator
of any kind or before or by any Governmental Authority, except actions,
suits or proceedings of the character normally incident to the kind of
business conducted by Borrower or such Loan Parties which, if adversely
determined, would not singly or in the aggregate have a Materially Adverse
Effect on Borrower or any other Loan Party, and there are no strikes or
walkouts in progress, pending or contemplated relating to any labor
contracts to which Borrower or any other Loan Party is a party, relating to
any labor contracts being negotiated, or otherwise.
(l) TAX RETURNS AND PAYMENTS. Except as set forth on SCHEDULE
9.1(l), all U.S. federal, state and local as well as foreign national,
provincial and local and other tax returns of Borrower and each of the
other Loan Parties required by Applicable Law to be filed have been duly
filed, and all U.S. federal, state and local and foreign national,
provincial and local and other taxes, assessments and other governmental
charges or levies upon Borrower and each of the other Loan Parties and
their respective property, income, profits and assets which are due and
payable have been paid, except any such nonpayment which is at the time
permitted under SECTION 12.6. The charges, accruals and reserves on the
books of Borrower and the other Loan Parties in respect of U.S. federal,
state and local and foreign national, provincial and local taxes for all
fiscal years and portions thereof since the organization of Borrower or any
such Loan Party are in the judgment of Borrower adequate, and Borrower
knows of no reason to anticipate any additional assessments for any of such
years which, singly or in the aggregate, might have a Materially Adverse
Effect on Borrower or any such Loan Party.
(m) BURDENSOME PROVISIONS. Neither Borrower nor any of the other
Loan Parties is a party to any indenture, agreement, lease or other
instrument, or subject to any charter or corporate restriction,
Governmental Approval or Applicable Law compliance with the terms
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of which might have a Materially Adverse Effect on Borrower or any of the
other Loan Parties.
(n) FINANCIAL STATEMENTS.
(i) Borrower has furnished to Agent and the Lenders copies of
Borrower's balance sheet as at Borrower's fiscal years ended 1994,
1995 and 1996, and the related statements of income and cash flow for
the twelve (12) month period then ended, which financial statements
are complete and correct and present fairly and in all material
respects in accordance with and copies of Borrower's unaudited balance
sheet as at June 30, 1997, and the related statements of income and
cash flow for the six (6) month period then ended, which financial
statements are complete and correct and present fairly and in all
material respects the financial position of Borrower as at such period
end and the results of operations of Borrower for the six (6) month
period then ended.
(ii) Borrower has furnished to Agent and the Lenders copies of
the Pro Forma. The Pro Forma is complete and correct and presents
fairly, on a pro forma basis, the financial position of Borrower as at
the Effective Date.
(iii) Except as disclosed or reflected in the financial
statements described in CLAUSES (i) and (ii) above, Borrower does not
have any material liabilities, contingent or otherwise, and there were
no material unrealized or anticipated losses of Borrower.
(o) ADVERSE CHANGE. Since the date of the last financial statements
of Borrower delivered to Agent pursuant to SECTION 9.1(n)(i), after giving
effect to the transactions reflected in the Pro Forma,
(i) no material adverse change has occurred in the business,
assets, liabilities, financial condition, results of operations or
business prospects of Borrower, and
(ii) no event has occurred or failed to occur which has had, or
may have, singly or in the aggregate, a Materially Adverse Effect on
Borrower.
(p) ERISA. Except as disclosed in SCHEDULE 9.1(p):
(i) Neither Borrower nor any Related Company maintains or
contributes to any Benefit Plan other than those listed on SCHEDULE
9.1(p).
(ii) No Benefit Plan has been terminated or partially terminated,
and no Multiemployer Plan is insolvent or in reorganization, nor have
any proceedings been instituted to terminate any Benefit Plan or to
reorganize any Multiemployer Plan.
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(iii) Neither Borrower nor any Related Company has withdrawn
from any Benefit Plan or Multiemployer Plan, nor has a condition
occurred which if continued would result in a withdrawal.
(iv) Neither Borrower nor any Related Company has incurred any
withdrawal liability under any section of Title IV of ERISA,
including, without limitation, any contingent withdrawal liability, to
any Multiemployer Plan pursuant to Title IV of ERISA.
(v) Neither Borrower nor any Related Company has incurred any
liability to the PBGC other than for required insurance premiums which
have been paid when due.
(vi) No Reportable Event has occurred with respect to a Plan.
(vii) No Benefit Plan has an "accumulated funding deficiency"
(whether or not waived) as defined in Section 302 of ERISA or in
Section 412 of the Internal Revenue Code.
(viii) Each Plan is in substantial compliance with ERISA, and
neither Borrower nor any Related Company has received any
communication from a Governmental Authority asserting that a Plan is
not in compliance with ERISA.
(ix) Each Plan which is intended to be a qualified Plan has been
determined by the IRS to be qualified under Section 401(a) of the
Internal Revenue Code as currently in effect or will be submitted to
the IRS for such determination prior to the end of the remedial
amendment period under Section 401(b) of the Internal Revenue Code and
the regulations promulgated thereunder and neither Borrower nor any
Related Company knows or has reason to know why each such Plan should
not continue to be so qualified, and each trust related to such Plan
that has been submitted to the IRS for determination of exempt status
has been determined to be exempt from federal income tax under Section
501(a) of the Internal Revenue Code or will be submitted to the IRS
for a determination of exempt status.
(x) Except as provided on SCHEDULE 9.1(p), neither Borrower nor
any Related Company maintains or contributes to any employee welfare
benefit plan within the meaning of Section 3(l) of ERISA which
provides benefits to employees after termination of employment other
than as required by Section 601 of ERISA.
(xi) Schedule B to the most recent annual report filed with the
IRS with respect to each Benefit Plan and furnished to the Lenders is
complete and accurate. Since the date of each such Schedule B, there
has been no adverse change in funding status or financial condition of
the Benefit Plan relating to such Schedule B.
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(xii) Neither Borrower nor any Related Company has failed to
make a required installment under Subsection (m) of Section 412 of the
Internal Revenue Code 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.
(xiii) Neither Borrower nor any Related Company is required to
provide security to a Benefit Plan under Section 401(a)(29) of the
Internal Revenue Code due to a Benefit Plan amendment that results in
an increase in current liability for the plan year.
(xiv) Neither Borrower, nor any Related Company, nor any
other "party-in-interest" or "disqualified person" has engaged in a
nonexempt "prohibited transaction," as such terms are defined in
Section 4975 of the Internal Revenue Code and Section 406 of ERISA, in
connection with any Plan or has taken or failed to take any action
which would constitute or result in a Termination Event.
(xv) Neither Borrower nor any Related Company has failed to
comply with the health care continuation coverage requirements of
Section 4980B of the Internal Revenue Code in respect of employees and
former employees of such Borrower or such Related Company and their
dependents and beneficiaries which alone or in the aggregate would
subject Borrower or such Related Company to any material liability.
(xvi) Neither Borrower nor any Related Company has (i) failed
to make a required contribution or payment to a Multiemployer Plan or
(ii) made a complete or partial withdrawal under Sections 4203 or 4205
of ERISA from a Multiemployer Plan. To the best knowledge of Borrower
after due inquiry, neither Borrower nor any Related Company shall have
any obligation to (A) make contributions to any Multiemployer Plan on
or after the Effective Date, or (B) pay withdrawal liability to any
Multiemployer Plan in an amount in excess of a "de minimis amount" as
such term is defined in Section 4209 of ERISA.
(q) ABSENCE OF DEFAULTS. Neither Borrower nor any of the other Loan
Parties is in default under its articles or certificate of incorporation or
bylaws (or other applicable constituent documents) and no event has
occurred, which has not been remedied, cured or waived,
(i) which constitutes a Default or an Event of Default, or
(ii) which constitutes, or which with the passage of time or
giving of notice or both would constitute, a default or event of
default by Borrower or any of the Loan Parties under any material
agreement (other than this Agreement) or judgment, decree or order to
which Borrower or any of the Loan Parties is a party or by which
Borrower, any of the Loan Parties or any of their respective
properties may be bound or which would require Borrower or any of the
Loan Parties to make any payment under any such agreement prior to the
scheduled maturity date therefor,
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except, in the case only of any such agreement, for alleged
defaults which are being contested in good faith by appropriate
proceedings and with respect to which reserves in respect of
Borrower's or such Loan Party's reasonably anticipated liability
have been established on the books of Borrower or such Loan Party.
(r) ACCURACY AND COMPLETENESS OF INFORMATION.
(i) All written information, reports and other papers and data
produced by or on behalf of Borrower or any of the other Loan Parties
and furnished to Agent, L/C Issuer or any Lender were, at the time the
same were so furnished, complete and correct in all material respects,
to the extent necessary to give the recipient a true and accurate
knowledge of the subject matter. No fact is known to Borrower which
has had, or may in the future have (so far as Borrower can foresee), a
Materially Adverse Effect upon Borrower or any of the other Loan
Parties which has not been set forth in the financial statements or
disclosure delivered prior to the Effective Date, in each case
referred to in SECTION 9.1(n), or in such written information, reports
or other papers or data or otherwise disclosed in writing to Agent and
the Lenders prior to the Agreement Date. No document furnished or
written statement made to Agent, L/C Issuer or any Lender by Borrower
in connection with the negotiation, preparation or execution of this
Agreement or any of the Loan Documents contains or will contain any
untrue statement of a fact material to the creditworthiness of
Borrower or omits or will omit to state a material fact necessary in
order to make the statements contained therein not misleading.
(ii) Borrower has no reason to believe that any document
furnished or written statement made to Agent, L/C Issuer or any Lender
by any Person other than Borrower in connection with the negotiation,
preparation or execution of this Agreement or any of the Loan
Documents contained any incorrect statement of a material fact or
omitted to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading.
(s) SOLVENCY. In each case after giving effect to the Indebtedness
represented by the Loans outstanding and to be incurred, the transactions
contemplated by this Agreement, the Acquisition Agreement and the
Acquisition Documents, Borrower and each of its Subsidiaries is Solvent.
(t) RECEIVABLES.
(i) STATUS.
(A) Each Receivable reflected in the computations included
in any Borrowing Base Certificate meets the criteria enumerated
in CLAUSES (a) through (t) of the definition of Eligible
Receivables, EXCEPT as disclosed in
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such Borrowing Base Certificate or as disclosed in a timely
manner in a subsequent Borrowing Base Certificate or
otherwise in writing to Agent.
(B) Borrower has no knowledge of any fact or circumstance
not disclosed to Agent in a Borrowing Base Certificate or
otherwise in writing which would impair the validity or
collectibility of any Receivable of any Account Debtor whose
Receivables aggregate $50,000 or more.
(ii) CHIEF EXECUTIVE OFFICE; TAX IDENTIFICATION NUMBER. The
chief executive office of Borrower and the books and records relating
to its Receivables are located at the address or addresses set forth
on SCHEDULE 9.1(t). Borrower has not maintained its chief executive
office or books and records relating to any of its Receivables at any
other address at any time during the five years immediately preceding
the Agreement Date except as disclosed on SCHEDULE 9.1(t). The
federal tax identification number for each of Borrower, Fremont and
KAC is as specified for each such Person in ARTICLE 1.
(u) INVENTORY.
(i) SCHEDULE OF INVENTORY. All Inventory included in any
Schedule of Inventory or Borrowing Base Certificate delivered to Agent
pursuant to SECTION 11.12 meets the criteria enumerated in CLAUSES (A)
through (H) of the definition of Eligible Inventory, EXCEPT as
disclosed in such Schedule of Inventory or Borrowing Base Certificate
or in a subsequent Schedule of Inventory or Borrowing Base
Certificate, or as otherwise specifically disclosed in writing to
Agent.
(ii) CONDITION. All Inventory is in good condition, meets all
standards imposed by any Governmental Authority having regulatory
authority over such goods, their use or sale, and is currently either
usable or salable in the normal course of Borrower's business, EXCEPT
to the extent reserved against in the financial statements referred to
in SECTION 9.1(n) or delivered pursuant to ARTICLE 13 or as disclosed
on a Schedule of Inventory delivered to Agent pursuant to SECTION
11.13(b).
(iii) LOCATION. All Inventory is located on the premises set
forth on SCHEDULE 9.1(u) or is Inventory in transit to one of such
locations, except as otherwise disclosed in writing to Agent.
Borrower has not, in the previous twelve (12) months, located such
Inventory at premises other than those set forth on SCHEDULE 9.1(u).
(v) EQUIPMENT. All Equipment is in good order and repair in all
material respects and is located at any one or more of the premises set
forth on SCHEDULE 9.1(v) and has been so located at all times during the
previous twelve (12) months (or, in the case of any newly acquired
Equipment, from the date of such acquisition).
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(w) REAL PROPERTY. Borrower owns no Real Estate and leases no Real
Estate other than that described on SCHEDULE 9.1(w) and other than Real
Estate acquired or leased after the Effective Date for which Borrower has
complied with the requirements of SECTION 11.14.
(x) CORPORATE AND FICTITIOUS NAMES. Except as otherwise disclosed on
SCHEDULE 9.1(x), during the five (5) year period preceding the Agreement
Date, neither Borrower nor any predecessor thereof has been known as or
used any corporate or fictitious name other than the corporate name of
Borrower on the Effective Date.
(y) FEDERAL RESERVE REGULATIONS. Neither Borrower nor any of its
Subsidiaries is engaged and none will engage, principally or as one of its
important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" (as each of the quoted
terms is defined or used in Regulations G and U of the Board of Governors
of the Federal Reserve System). No part of the proceeds of any of the
Loans will be used for so purchasing or carrying margin stock or, in any
event, for any purpose which violates, or which would be inconsistent with,
the provisions of Regulation G, T, U or X of such Board of Governors. If
requested by Agent or any Lender, Borrower will furnish to Agent and the
Lenders a statement or statements in conformity with the requirements of
said Regulation G, T, U or X to the foregoing effect.
(z) INVESTMENT COMPANY ACT. Borrower is not an "investment company"
or a company "controlled" by an "investment company" (as each of the quoted
terms is defined or used in the Investment Company Act of 1940, as
amended).
(aa) EMPLOYEE RELATIONS. Borrower and each of its Subsidiaries has a
stable work force in place and is not, except as set forth on SCHEDULE
9.1(aa), party to any collective bargaining agreement nor has any labor
union been recognized as the representative of Borrower's or any of its
Subsidiaries' employees, and Borrower knows of no pending, threatened or
contemplated strikes, work stoppage or other labor disputes involving
Borrower's or any of its Subsidiaries' employees.
(bb) PROPRIETARY RIGHTS. SCHEDULE 9.1(bb) sets forth a correct and
complete list of all of the Proprietary Rights. None of the Proprietary
Rights is subject to any licensing agreement or similar arrangement except
as set forth on SCHEDULE 9.1(bb) or as entered into in the sale or
distribution of Borrower's Inventory in the ordinary course of business.
To the best of Borrower's knowledge, none of the Proprietary Rights
infringes on or conflicts with any other Person's property, and no other
Person's property infringes on or conflicts with the Proprietary Rights.
The Proprietary Rights described on SCHEDULE 9.1(bb) constitute all of the
property of such type necessary to the current and anticipated future
conduct of Borrower's business.
(cc) TRADE NAMES. All trade names or styles under which Borrower
sells Inventory or Equipment or creates Receivables, or to which
instruments in payment of Receivables are made payable, are listed on
SCHEDULE 9.1(cc).
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(dd) ACQUISITION AGREEMENT. Borrower has heretofore furnished to
Agent true, complete and correct copies of the Acquisition Agreement
(including any schedules, exhibits and annexes thereto) and each other
Acquisition Document. The Acquisition Agreement has not been amended,
supplemented or modified except as previously disclosed in writing to Agent
and, together with the other Acquisition Documents, copies of which have
been delivered to Agent, constitute the complete understanding between the
parties thereto in respect of the Acquisition and the Merger and the other
matters and transactions covered thereby. To Borrower's knowledge, the
Acquisition Documents have been duly executed and delivered by the parties
thereto and constitute valid, legal and binding obligations of the parties
thereto. The representations and warranties of each Person contained in
the Acquisition Documents are (or will be) true and correct in all material
respects on the Effective Date as if made on and as of such date, and the
Credit Parties are entitled to rely on such representations and warranties
with the same force and effect as though they were incorporated in this
Agreement and made to the Credit Parties directly. On and as of the
Effective Date, Borrower knows of no reason to believe that the
representations and warranties of, and information concerning, any Person
contained in the Acquisition Documents are not true and correct in all
material respects.
(ee) CONSUMMATION OF TRANSACTIONS. Upon the Effective Date, the
transactions contemplated by the Acquisition Agreement and the other
Acquisition Documents (other than the Merger) will have been consummated in
accordance with Applicable Law and, except as previously disclosed in
writing to Agent, in the manner provided therein in accordance with the
terms thereof without any material waivers or amendments thereto, and each
of the conditions to such consummation set forth in the Acquisition
Agreement and the other Acquisition Documents shall have been fulfilled
without any waiver of any thereof.
(ff) INVESTMENT PROPERTY. All of Borrower's Investment Property is
set forth on SCHEDULE 9.1(ff). Borrower is the legal and beneficial owner
of all such Investment Property, free and clear of any Lien (other than the
security interest created by this Agreement), and Borrower has not sold,
granted any option with respect to, assigned, transferred or otherwise
disposed of any of its rights or interest therein.
Section 9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties set forth in this ARTICLE 9 and all statements
contained in any certificate, financial statement, or other instrument,
delivered by or on behalf of Borrower pursuant to or in connection with this
Agreement or any of the other Loan Documents (including, but not limited to, any
such representation, warranty or statement made in or in connection with any
amendment thereto) shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall be made or deemed to be made at and as of the Agreement Date, at and as of
the Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable only to one
such date shall be deemed to be made only at and as of such date. All
representations and warranties made or deemed to be made under this Agreement
shall survive and not be waived by the execution and delivery of this Agreement,
any investigation made by or on behalf of the Lender or any borrowing hereunder.
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ARTICLE 10
SECURITY INTEREST
Section 10.1 SECURITY INTEREST.
(a) To secure the payment, observance and performance of the Secured
Obligations, Borrower hereby mortgages, pledges and assigns all of the
Collateral to Agent, for the benefit of itself as Agent and the other
Credit Parties, and grants to Agent, for the benefit of itself as Agent and
the other Credit Parties, a continuing security interest in, and a
continuing Lien upon, all of the Collateral.
(b) As additional security for all of the Secured Obligations,
Borrower grants to Agent, for the benefit of itself as Agent and the other
Credit Parties, a security interest in, and assigns to Agent, for the
benefit of itself as Agent and the other Credit Parties, all of Borrower's
right, title and interest in and to, any deposits or other sums at any time
credited by or due from each Credit Party, and each Affiliate of any Credit
Party, to Borrower, or credited by or due from any participant of any
Credit Party to Borrower, with the same rights therein as if the deposits
or other sums were credited by or due from such Credit Party. Borrower
hereby authorizes each Credit Party, and each Affiliate of such Credit
Party, and each participant to pay or deliver to Agent, for the account of
the Credit Parties, without any necessity on any Credit Party's part to
resort to other security or sources of reimbursement for the Secured
Obligations, at any time during the continuation of any Event of Default or
in the event that Agent, on behalf of the Credit Parties, should make
demand for payment hereunder and without further notice to Borrower (such
notice being expressly waived), any of the aforesaid deposits (general or
special, time or demand, provisional or final) or other sums for
application to any Secured Obligation, irrespective of whether any demand
has been made or whether such Secured Obligation is mature, and the rights
given the Credit Parties, their Affiliates and participants hereunder are
cumulative with such Person's other rights and remedies, including other
rights of set-off. Agent will promptly notify Borrower of its receipt of
any such funds for application to the Secured Obligations, but failure to
do so will not affect the validity or enforceability thereof. Agent may
give notice of the above grant of a security interest in and assignment of
the aforesaid deposits and other sums, and authorization, to, and make any
suitable arrangements with, any Credit Party, any such Affiliate of any
Credit Party or participant for effectuation thereof, and Borrower hereby
irrevocably appoints Agent as its attorney to collect any and all such
deposits or other sums to the extent any such payment is not made to Agent
or any Credit Party by such Credit Party, Affiliate or participant.
Section 10.2 CONTINUED PRIORITY OF SECURITY INTEREST.
(a) The Security Interest granted by Borrower shall at all times be
valid, perfected and enforceable against Borrower and all third parties in
accordance with the terms of this Agreement, as security for the Secured
Obligations, and the Collateral shall not at any time
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be subject to any Liens that are prior to, on a parity with or junior to
the Security Interest, other than Permitted Liens.
(b) Borrower shall, at its sole cost and expense, take all action
that may be necessary or desirable, or that Agent may reasonably request,
so as at all times to maintain the validity, perfection, enforceability and
rank of the Security Interest in the Collateral in conformity with the
requirements of SECTION 10.2(a), or to enable Agent and the Credit Parties
to exercise or enforce their rights hereunder, including, but not limited
to:
(i) paying all taxes, assessments and other claims lawfully
levied or assessed on any of the Collateral, except to the extent that
such taxes, assessments and other claims constitute Permitted Liens;
(ii) obtaining, after the Agreement Date, landlords' and
mortgagees' releases, subordinations or waivers, and using all
reasonable efforts to obtain mechanics' releases, subordinations or
waivers;
(iii) delivering to Agent, for the benefit of the Credit
Parties, endorsed or accompanied by such instruments of assignment as
Agent may specify, and stamping or marking, in such manner as Agent
may specify, any and all chattel paper, instruments, letters and
advices of guaranty and documents evidencing or forming a part of the
Collateral;
(iv) executing and delivering such Copyright Security Agreements,
Patent Security Agreements and Trademark Security Agreements as Agent
may require in order to effectuate perfection and filing of the
Security Interest against any of Borrower's present or future
Proprietary Rights, as applicable; and
(v) executing and delivering financing statements, pledges,
designations, hypothecations, notices and assignments in each case in
form and substance satisfactory to Agent relating to the creation,
validity, perfection, maintenance or continuation of the Security
Interest under the UCC or other Applicable Law.
(c) Agent is hereby irrevocably authorized to file one or more
financing or continuation statements or amendments thereto without the
signature of or in the name of Borrower for any purpose described in
SECTION 10.2(b). A carbon, photographic, xerographic or other reproduction
of this Agreement or of any of the Security Documents or of any financing
statement filed in connection with this Agreement is sufficient as a
financing statement.
(d) Borrower shall mark its books and records as directed by Agent
and as may be necessary or appropriate to evidence, protect and perfect the
Security Interest and shall cause its financial statements to reflect the
Security Interest.
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ARTICLE 11
COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all the Secured
Obligations have been paid in full, unless the Required Lenders shall otherwise
consent in the manner provided in SECTION 18.9:
Section 11.1 COLLECTION OF RECEIVABLES.
(a) At the request of Agent, Borrower will cause all monies, checks,
notes, drafts and other payments relating to or constituting proceeds of
trade accounts receivable to be forwarded to a Lockbox for deposit in an
Agency Account in accordance with the procedures set out in the
corresponding Agency Account Agreement. Borrower will promptly cause all
monies, checks, notes, drafts and other payments relating to or
constituting proceeds of other Receivables, of any other Collateral and of
any trade accounts receivable that are not forwarded to a Lockbox, to be
transferred to or deposited in an Agency Account. In particular, Borrower
will:
(i) advise each Account Debtor on trade accounts receivable to
address all remittances with respect to amounts payable on account
thereof to a specified Lockbox;
(ii) advise each other Account Debtor that makes payment to
Borrower by wire transfer, automated clearinghouse transfer or similar
means to make payment directly to an Agency Account; and
(iii) stamp all invoices relating to trade accounts
receivable with a legend satisfactory to Agent indicating that payment
is to be made to Borrower via a specified Lockbox.
(b) Borrower and Agent shall cause all balances in each Agency
Account to be transmitted daily by wire transfer, depository transfer check
or other means in accordance with the procedures set forth in the
corresponding Agency Account Agreement, to Agent at its Principal Office:
(i) for application, on account of the Secured Obligations, as
provided in SECTIONS 2.3(c), 15.2, and 15.3, such credits to be
entered as of the Business Day they are received if they are received
prior to 1:30 p.m. (Dallas, Texas time) and to be conditioned upon
final payment in cash or solvent credits of the items giving rise to
them; and
(ii) with respect to the balance, so long as no Default or Event
of Default has occurred and is continuing, for transfer by wire
transfer or depository transfer check to a Disbursement Account;
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PROVIDED, HOWEVER, all deposits to any Lockbox maintained by Agent (or any
of its Affiliates) or any Lender pursuant to CLAUSE (a) and all receipts of
funds under this CLAUSE (b) shall at all times be subject to Agent's right
to assess interest for a deemed clearance period on such amount for one (1)
Business Day thereafter, which shall accrue and be payable on each monthly
Interest Payment Date.
(c) Any monies, checks, notes, drafts or other payments referred to
in SUBSECTION (a) of this SECTION 11.1 which, notwithstanding the terms of
such subsection, are received by or on behalf of Borrower will be held in
trust for Agent and will be delivered to Agent or a Clearing Bank, as
promptly as possible, in the exact form received, together with any
necessary endorsements for application by Agent directly to the Secured
Obligations or, if applicable, for deposit in the Agency Account maintained
with a Clearing Bank and processing in accordance with the terms of the
corresponding Agency Account Agreement.
Section 11.2 VERIFICATION AND NOTIFICATION. Agent shall have the right
at any time and from time to time,
(a) in the name of Agent, the Lenders or in the name of Borrower, to
verify the validity, amount or any other matter relating to any Receivables
by mail, telephone, telegraph or otherwise,
(b) to review, audit and make extracts from all records and files
related to any of the Receivables, and
(c) to notify the Account Debtors or obligors under any Receivables
of the assignment of such Receivables to Agent, for the benefit of the
Credit Parties.
Section 11.3 DISPUTES, RETURNS AND ADJUSTMENTS.
(a) In the event any amounts due and owing under any Receivable for
an amount in excess of $200,000 are in dispute between the Account Debtor
and Borrower, Borrower shall provide Agent with prompt written notice
thereof.
(b) Borrower shall notify Agent promptly of all returns and credits
in excess of $200,000 in respect of any Receivable, which notice shall
specify the Receivable affected.
(c) Borrower may, in the ordinary course of business and consistent
with past practice, unless a Default or an Event of Default has occurred
and is continuing, grant any extension of time for payment of any
Receivable or compromise, compound or settle the same for less than the
full amount thereof, or release wholly or partly any Person liable for the
payment thereof, or allow any credit or discount whatsoever therein;
PROVIDED that (i) no such action results in the reduction of more than
$200,000 in the amount payable with respect to any Receivable or of more
than $500,000 with respect to all Receivables in any fiscal year of
Borrower (in each case, excluding the allowance of credits or discounts
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generally available to Account Debtors in the ordinary course of Borrower's
business and appropriate adjustments to the accounts of Account Debtors in
the ordinary course of business), and (ii) Agent is promptly notified of
the amount of such adjustments and the Receivable(s) affected thereby.
Section 11.4 INVOICES.
(a) Borrower will not use any invoices other than invoices in the
form delivered to Agent prior to the Agreement Date without giving Agent
thirty (30) days' prior written notice of the intended use of a different
form of invoice together with a copy of such different form.
(b) Upon the request of Agent, Borrower shall deliver to Agent, at
Borrower's expense, copies of customers' invoices or the equivalent,
original shipping and delivery receipts or other proof of delivery,
customers' statements, customer address lists, the original copy of all
documents, including, without limitation, repayment histories and present
status reports, relating to Receivables and such other documents and
information relating to the Receivables as Agent shall specify.
Section 11.5 DELIVERY OF INSTRUMENTS. In the event any Receivable in
excess of $10,000 is at any time evidenced by a promissory note, trade
acceptance or any other instrument for the payment of money, Borrower will
immediately thereafter deliver such instrument to Agent, appropriately endorsed
to Agent, for the benefit of the Credit Parties; PROVIDED that, at any time that
the aggregate of all such Receivables exceeds $50,000, Borrower shall deliver
all such instruments to Agent, appropriately endorsed to Agent, for the benefit
of the Credit Parties.
Section 11.6 SALES OF INVENTORY. All sales of Inventory will be made in
compliance with all requirements of Applicable Law.
Section 11.7 OWNERSHIP AND DEFENSE OF TITLE.
(a) Except for Permitted Liens, Borrower shall at all times be the
sole owner or lessee of each and every item of Collateral and shall not
create any Lien on, or sell, lease, exchange, assign, transfer, pledge,
hypothecate, grant a security interest or security title in or otherwise
dispose of, any of the Collateral or any interest therein, except for sales
of Inventory in the ordinary course of business, for cash or on open
account or on terms of payment ordinarily extended to its customers, and
except for dispositions that are otherwise expressly permitted under this
Agreement. The inclusion of "proceeds" of the Collateral under the
Security Interest shall not be deemed a consent by Agent or the Lenders to
any other sale or other disposition of any part or all of the Collateral.
(b) Borrower shall defend its title or leasehold interest in and to,
and the Security Interest in, the Collateral against the claims and demands
of all Persons.
Section 11.8 INSURANCE.
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(a) Borrower shall at all times maintain insurance on the Inventory
and Equipment against loss or damage by fire, theft, burglary, pilferage,
loss in transit and such other hazards as Agent shall reasonably specify,
in amounts not to exceed those obtainable at commercially reasonable rates
and under policies issued by insurers acceptable to Agent in the exercise
of its reasonable judgment. All premiums on such insurance shall be paid
by Borrower and copies of the policies delivered to Agent. Borrower will
not use or permit the Inventory or Equipment to be used in violation of
Applicable Law or in any manner which might render inapplicable any
insurance coverage.
(b) All insurance policies required under SECTION 11.8(a) shall name
Agent, for the benefit of the Credit Parties, as an additional insured and
shall contain loss payable clauses in the form submitted to Borrower by
Agent, or otherwise in form and substance satisfactory to Agent, Lenders,
naming Agent, for the benefit of the Credit Parties, as loss payee, as its
interests may appear, and providing that:
(i) all proceeds thereunder shall be payable to Agent, for the
ratable benefit of the Credit Parties;
(ii) no such insurance shall be affected by any act or neglect of
the insured or owner of the property described in such policy; and
(iii) such policy and loss payable clauses may be canceled,
amended or terminated only upon at least ten (10) days' prior written
notice given to Agent.
(c) Any proceeds of insurance referred to in this SECTION 11.8 which
are paid to Agent, for the ratable benefit of the Credit Parties, shall be
distributed as follows:
(i) in the event the claim giving rise to such proceeds does not
exceed $250,000, and Borrower intends to repair or replace the damaged
property from which such proceeds arose, such proceeds shall, upon
Borrower's written request to Agent, provided that no Default or Event
of Default shall have occurred and be continuing, be disbursed by
Agent to Borrower pursuant to such procedures as Agent shall
reasonably establish;
(ii) in the event the claim giving rise to such proceeds exceeds
$250,000, and Borrower intends to repair or replace the damaged
property from which such proceeds arose within six (6) months after
the date of receipt of such proceeds, upon Borrower's written request
to Agent, therein stating such intention, (provided that no Default or
Event of Default shall have occurred and be continuing) (A) to the
extent such proceeds do not exceed the unpaid balance of the Revolving
Credit Loans, such proceeds shall be applied to the repayment of the
outstanding balance of the Revolving Credit Loans and Agent shall,
until such time as such repairs or replacement have been completed,
establish a reserve against the Borrowing Base in the amount of the
proceeds so applied and (B) to the extent such proceeds exceed the
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balance of the Revolving Credit Loans, Borrower shall deposit such
proceeds with Agent to be held as Cash Collateral in which Agent, for
the ratable benefit of the Credit Parties, shall have a first priority
security interest. Upon Borrower's completion of such repairs or
replacement as described above, Agent shall release its security
interest in such Cash Collateral in respect of such proceeds and shall
eliminate the reserve against the Borrowing Base; PROVIDED that upon
Borrower's written request to Agent, such request to include such
information as Agent may require, Agent may, at any time (and from
time to time) during the completion of such repairs or replacement,
partially release its security interest in such Cash Collateral in
respect of such proceeds and eliminate the reserve against the
Borrowing Base by a corresponding amount. To the extent that Borrower
fails to complete such repairs or replacement within six (6) months as
provided above, Borrower authorizes and directs Agent to eliminate
such reserve, to apply the amount of the Cash Collateral in respect of
such proceeds to the prepayment of the Loans as provided in SECTION
6.11(d), to make Revolving Credit Loans in an Amount equal to the
reserved amount that was not held as Cash Collateral and to apply the
proceeds of such Revolving Credit Loans in prepayment of the Loans as
provided in SECTION 6.11(d); and
(iii) in the event Borrower does not provide Agent with a
notice of its intent to repair or replace the damaged property as
required by either CLAUSE (i) or CLAUSE (ii) above, such proceeds
shall be applied by Agent in repayment of the Secured Obligations in
the manner provided in SECTION 6.11(d).
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Section 11.9 LOCATION OF OFFICES AND COLLATERAL.
(a) Borrower will not change the location of its chief executive
office or the place where it keeps its books and records relating to the
Collateral or change its name, its identity or corporate structure without
giving Agent sixty (60) days' prior written notice thereof.
(b) All Inventory, other than Inventory in transit, will at all times
be kept by Borrower at the locations set forth in SCHEDULE 9.1(u), and
shall not, without the prior written consent of Agent, be removed therefrom
except pursuant to sales of Inventory permitted under SECTION 11.7(a).
(c) If any Inventory is in the possession or control of any of
Borrower's agents or processors, Borrower shall notify such agents or
processors of the Security Interest (and shall promptly provide copies of
any such notice to Agent and the Lenders) and, upon the occurrence of an
Event of Default, shall instruct them (and cause them to acknowledge such
instruction) to hold all such Inventory for the account of the Lenders,
subject to the instructions of Agent.
Section 11.10 RECORDS RELATING TO COLLATERAL.
(a) Borrower will at all times:
(i) keep complete and accurate records of Inventory on a basis
consistent with past practices of Borrower so as to permit comparison
of Inventory records relating to different time periods, itemizing and
describing the kind, type and quantity of Inventory and Borrower's
cost therefor and a current price list for such Inventory, if such
list exists, or otherwise a recent price record for such Inventory;
and
(ii) keep complete and accurate records of all other Collateral.
(b) Borrower will prepare a physical listing of all Inventory,
wherever located, at least annually.
Section 11.11 INSPECTION. Agent and, with the consent of and accompanied
by Agent, each Lender (by any of their officers, employees or agents) shall have
the right, to the extent that the exercise of such right shall be within the
control of Borrower, at any time or times to:
(a) visit the properties of Borrower and its Subsidiaries, inspect
the Collateral and the other assets of Borrower and its Subsidiaries and
inspect and make extracts from the books and records of Borrower and its
Subsidiaries, including, but not limited to, management letters prepared by
independent accounts, all during customary business hours at such premises;
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(b) discuss Borrower's and its Subsidiaries' business, assets,
liabilities, financial condition, results of operations and business
prospects, insofar as the same are reasonably related to the rights of any
of the Credit Parties hereunder or under any of the other Loan Documents,
with Borrower's and its Subsidiaries' principal officers, independent
accountants and any other Person (except that any such discussion with any
third parties shall be conducted only in accordance with Agent's or such
Lender's standard operating procedures relating to the maintenance of the
confidentiality of confidential information of borrowers);
(c) verify the amount, quantity, value and condition of, or any other
matter relating to, any of the Collateral (other than Receivables, EXCEPT
to the extent permitted under SECTION 11.2(a)) and in this connection to
review, audit and make extracts from all records and files related to any
of the Collateral.
Borrower will deliver to Agent, for the benefit of the Credit Parties, any
instrument necessary for it to obtain records from any service bureau
maintaining records on behalf of Borrower.
Section 11.12 INFORMATION AND REPORTS.
(a) SCHEDULE OF RECEIVABLES. Borrower shall deliver to Agent, on or
before the Effective Date and not later than the 20th day of each calendar
month thereafter, a Schedule of Receivables which
(i) shall be as of the last Business Day of the immediately
preceding month,
(ii) shall be reconciled to the Borrowing Base Certificate as of
such last Business Day, and
(iii) shall set forth a detailed aged trial balance of all
its then existing Receivables, specifying the names, addresses and
balance due for each Account Debtor obligated on a Receivable so
listed.
(b) SCHEDULE OF INVENTORY. Borrower shall deliver to Agent, on or
before the Effective Date and not later than the 20th day of each calendar
month thereafter, a Schedule of Inventory as of the last Business Day of
the immediately preceding month of Borrower, itemizing and describing the
kind, type and quantity of Inventory, Borrower's cost thereof and the
location thereof.
(c) BORROWING BASE CERTIFICATE. After the Effective Date, Borrower
shall deliver to Agent on the first Business Day of each week a Borrowing
Base Certificate prepared as of the close of business on the last Business
Day of the previous week.
(d) NOTICE OF DIMINUTION OF VALUE. Borrower shall give prompt notice
to Agent of any matter or event which may be reasonably expected to result
in or has resulted in, the
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diminution in excess of $200,000 in the value of any of the Collateral,
except for any such diminution in the value of any assets generally in
the ordinary course of business which has been appropriately reserved
against, as reflected in financial statements previously delivered to
Agent and the Lenders pursuant to ARTICLE 13.
(e) ADDITIONAL INFORMATION. Agent may in its discretion from time to
time request that Borrower deliver the schedules and certificates described
in SECTIONS 11.12(a), (b) and (c) more or less often and on different
schedules than specified in such Sections and Borrower will comply with
such requests. Borrower will also furnish to Agent and each Lender such
other information with respect to the Collateral as Agent or such Lender
may from time to time reasonably request.
Section 11.13 POWER OF ATTORNEY. Borrower hereby appoints Agent as its
attorney, with power to:
(a) endorse the name of Borrower on any checks, notes, acceptances,
money orders, drafts or other forms of payment or security that may come
into Agent's or any Lender's possession, and
(b) sign the name of Borrower on any invoice or bill of lading
relating to any Receivable, Inventory or other Collateral, on any drafts
against customers related to letters of credit, on schedules and
assignments of Receivables furnished to Agent or any Lender by Borrower, on
notices of assignment, financing statements and other public records
relating to the perfection or priority of the Security Interest,
verifications of account and notices to or from customers.
Section 11.14 ADDITIONAL REAL ESTATE AND LEASES.
(a) Promptly upon Borrower's acquisition of any interest (including a
leasehold interest) in any Real Estate, Borrower shall deliver to Agent,
for the benefit of itself as Agent and the other Credit Parties, an
executed Mortgage in form and substance satisfactory to Agent, conveying to
Agent, for the benefit of itself and the other Credit Parties, a first
priority Lien on such Real Estate, subject only to Permitted Liens and such
other prior Liens as Agent shall consent to in writing. If requested by
Agent, Borrower shall also deliver to Agent, or Agent shall otherwise
receive, at Borrower's expense a mortgagee title insurance policy in favor
of Agent and the other Credit Parties insuring such Mortgage to create and
convey such Lien, subject only to such exceptions consented to by Agent and
shall deliver to Agent the other items set forth in SECTION 8.1(f)(xiii),
(xiv), (xv), (xviii), (xix), (xxii) and SECTION 13.10 with respect to such
Real Estate together with an appraisal prepared by a credentialed appraiser
acceptable to Agent and satisfying all requirements of applicable law, all
in form and substance satisfactory to Agent. Borrower shall also deliver
to Agent an executed landlord's waiver and consent, in form and substance
satisfactory to Agent, with respect to each leasehold interest referred to
in this Section. With respect to Borrower's Real Estate located in
Dunkirk, Indiana, Millville, New Jersey and Sand Springs, Oklahoma, upon
Agent's request, Borrower shall deliver each of the items referred to in
this CLAUSE (a).
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(b) Promptly upon Borrower's entry into any lease of Real Estate
(other than a lease conveying an interest in Real Estate, which shall be
subject to the provisions of CLAUSE (A) above), Borrower shall collaterally
assign to Agent, for the benefit of itself and the Lenders, Borrower's
interest in such lease, in form and substance satisfactory to Agent.
Borrower shall also deliver to Agent an executed landlord's waiver and
consent, in form and substance satisfactory to Agent, with respect to each
such lease.
Section 11.15 ASSIGNMENT OF CLAIMS ACT. Upon the request of Agent,
Borrower shall execute any documents or instruments and shall take such steps or
actions reasonably required by Agent so that all monies due or to become due
under any contract with the U.S., the District of Columbia or any state, county,
municipality or other domestic or foreign Governmental Authority, will be
assigned to Agent, for the benefit of itself and the Lenders, and notice given
thereof in accordance with the requirements of the Assignment of Claims Act of
1940, as amended, or any other laws, rules or regulations relating to the
assignment of any such contract and monies due to or to become due.
Section 11.16 VOTING RIGHTS, DISTRIBUTIONS, ETC., IN RESPECT OF INVESTMENT
PROPERTY.
(a) So long as no Event of Default shall have occurred and be
continuing (i) Borrower shall be entitled to exercise any and all voting
and other consensual rights (including, without limitation, the right to
give consents, waivers and notifications in respect of any Security)
pertaining to any Investment Property or any part thereof; PROVIDED,
HOWEVER, that without the prior written consent of Agent and Required
Lenders, no vote shall be cast or consent, waiver or ratification given or
action taken which would (A) be inconsistent with or violate any provision
of this Agreement or any other Loan Document or (B) amend, modify or waive
any material term, provision or condition of the certificate of
incorporation, bylaws, certificate of formation or other charter document
or other agreement relating to, evidencing, providing for the issuance of
or securing any such Investment Property, and (ii) Borrower shall be
entitled to receive and retain any and all dividends and interest paid in
respect of any of such Investment Property (unless otherwise required by
this Agreement).
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default, (i) Agent may, without notice to Borrower, transfer or
register in the name of Agent or any of its nominees, for the ratable
benefit of the Credit Parties, any or all of the Collateral consisting of
Investment Property, the proceeds thereof (in cash or otherwise) and all
liens, security, rights, remedies and claims of Borrower with respect
thereto (as used in this Section collectively, the "PLEDGED COLLATERAL")
held by Agent hereunder, and Agent or its nominee may thereafter, after
delivery of notice to Borrower, exercise all voting and corporate rights at
any meeting of any corporation, partnership or other business entity
issuing any of the Pledged Collateral and any and all rights of conversion,
exchange, subscription or any other rights, privileges or options
pertaining to any of the Pledged Collateral as if it were the absolute
owner thereof, including, without limitation, the right to exchange at its
discretion any and all of the Pledged Collateral upon the merger,
consolidation, reorganization,
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recapitalization or other readjustment of any corporation, partnership
or other business entity issuing any of such Pledged Collateral or upon
the exercise by any such issuer or Agent of any right, privilege or
option pertaining to any of the Pledged Collateral, and in connection
therewith, to deposit and deliver any and all of the Pledged Collateral
with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as it may determine,
all without liability except to account for property actually received
by it, but Agent shall have no duty to exercise any of the aforesaid
rights, privileges or options, and Agent shall not be responsible for
any failure to do so or delay in so doing, (ii) all rights of Borrower
to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to SECTION 11.16(a)(i) and to
receive the dividends, interest and other distributions which it would
otherwise be authorized to receive and retain pursuant to SECTION
11.16(a)(ii) shall be suspended until such Event of Default shall no
longer exist, and all such rights shall, until such Event of Default
shall no longer exist, thereupon become vested in Agent which shall
thereupon have the sole right to exercise such voting and other
consensual rights and to receive and hold as Pledged Collateral such
dividends, interest and other distributions, (iii) all dividends,
interest and other distributions which are received by Borrower contrary
to the provisions of this SECTION 11.16(b) shall be received in trust
for the benefit of Agent, shall be segregated from other funds of
Borrower and shall be forthwith paid over to Agent as Collateral in the
same form as so received (with any necessary endorsement), and (iv)
Borrower shall execute and deliver (or cause to be executed and
delivered) to Agent all such proxies and other instruments as Agent may
reasonably request for the purpose of enabling Agent to exercise the
voting and other rights which it is entitled to exercise pursuant to
this SECTION 11.16(b) and to receive the dividends, interest and other
distributions which it is entitled to receive and retain pursuant to
this SECTION 11.16(b). The foregoing shall not in any way limit Agent's
power and authority granted pursuant to PARAGRAPH 10.13.
ARTICLE 12
AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the Secured
Obligations have been paid in full, unless the Required Lenders shall otherwise
consent in the manner provided for in SECTION 18.9, Borrower will, and will
cause each of its Subsidiaries to keep the following covenants.
Section 12.1 PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS.
Borrower will, and will cause each other Loan Party to, preserve and maintain
its existence, rights, franchises, licenses and privileges in the jurisdiction
of its incorporation or formation (as applicable) and qualify and remain
qualified as a foreign business enterprise and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
Section 12.2 COMPLIANCE WITH APPLICABLE LAW. Except as referenced in
SECTION 12.9, Borrower will, and will cause each other Loan Party to, comply
with all Applicable Law relating to
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each such Loan Party except to the extent being contested in good faith by
appropriate proceedings and for which reserves in respect of each such Loan
Party's reasonably anticipated liability therefor has been appropriately
established.
Section 12.3 MAINTENANCE OF PROPERTY. In addition to, and not in
derogation of, the requirements of SECTION 11.7 and of the Security Documents,
Borrower will, and will cause each other Loan Party to:
(a) protect and preserve all properties material to its business,
including, without limitation, copyrights, patents, trade names and
trademarks, and maintain in good repair, working order and condition in all
material respects, with reasonable allowance for wear and tear, all
tangible properties material to its business, and
(b) from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such
properties necessary for the conduct of its business, so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times.
Section 12.4 CONDUCT OF BUSINESS. Borrower will, and will cause each
other Loan Party to, at all times carry on only the business described in
SECTION 9.1(f) and businesses related thereto.
Section 12.5 INSURANCE. Borrower will, and will cause each other Loan
Party to, maintain, in addition to the coverage required by SECTION 11.8 and the
Security Documents, insurance with responsible insurance companies against such
risks and in such amounts as is customarily maintained by similar businesses or
as may be required by Applicable Law, and from time to time deliver to Agent or
any Lender upon its request a detailed list of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of the
insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
Section 12.6 PAYMENT OF TAXES AND CLAIMS. Borrower will, and will cause
each other Loan Party to, pay or discharge when due
(a) all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or upon any properties belonging to
it, except that real property ad valorem taxes shall be deemed to have been
so paid or discharged if the same are paid before they become delinquent,
and
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals
which, if unpaid, might become a Lien on any properties of Borrower;
EXCEPT that this SECTION 12.6 shall not require the payment or discharge of any
such tax, assessment, charge, levy or claim which is being contested in good
faith by appropriate proceedings and for which reserves in respect of the
reasonably anticipated liability therefor have been appropriately established.
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Section 12.7 ACCOUNTING METHODS AND FINANCIAL RECORDS. Borrower will,
and will cause each other Loan Party to, maintain a system of accounting, and
keep such books, records and accounts (which shall be true and complete), as may
be required or as may be necessary to permit the preparation of financial
statements in accordance with GAAP.
Section 12.8 USE OF PROCEEDS.
(a) Borrower will use the proceeds of
(i) the initial Revolving Credit Loan and the Term Loan to pay
amounts indicated on SCHEDULE 12.8 to the Persons indicated thereon,
(ii) all subsequent Revolving Credit Loans only for working
capital and general business purposes, and
(iii) the CAPEX Loan to finance or refinance Eligible
Purchased Equipment, and
(b) Borrower will not use any part of such proceeds (i) to purchase
or, to carry or reduce or retire or refinance any credit incurred to
purchase or carry, any "margin stock" (within the meaning of Regulation G
or U of the Board of Governors of the Federal Reserve System) or, in any
event, for any purpose which would involve a violation of such Regulation G
or U or of Regulation T or X of such Board of Governors, (ii) in any manner
of settlement or payment in respect of that certain lawsuit entitled DR.
ALAN LATIES VS. KERR GROUP, INC., ET AL., Civil Action No. 15825-NC,
against Borrower and its directors in the Court of Chancery of the State of
Delaware in and for New Castle County, as set forth on SCHEDULE 9.1(k), or
(iii) for any purpose prohibited by law or by the terms and conditions of
this Agreement.
Section 12.9 HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL REQUIREMENTS.
(a) Borrower will, and will cause each other Loan Party to,
(i) comply with all Environmental Laws (except for (A) instances of
noncompliance that are being contested in good faith by appropriate
proceedings if reserves in respect of Borrower's or any such Loan Party's
reasonably anticipated liability therefor have been appropriately
established and for instances which could not reasonably be expected to
result in a Materially Adverse Effect, and (B) subject to the last sentence
of this SECTION 12.9(a) the items set forth in SCHEDULE 12.9),
(ii) promptly notify Agent of its receipt of any notice of a violation of
any such Environmental Laws or such other Applicable Laws received after
the Agreement Date, and (iii) indemnify and hold Agent and the Lenders
harmless from all loss, cost, damage, liability, claim and expense incurred
by or imposed upon Agent or any Lender on account of Borrower's failure to
perform its obligations under this SECTION 12.9. With respect to the
matters set forth in SCHEDULE 12.9 affecting Borrower's Real Estate,
Borrower will proceed diligently to comply with all Environmental Laws
except for instances of noncompliance which could not reasonably be
expected to result in a Materially Adverse Effect.
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(b) Whenever Borrower gives notice to Agent pursuant to SECTION
12.9(a)(ii) with respect to any matter not set forth on SCHEDULE 12.9 that
reasonably could be expected to result in liability to Borrower or any of
its Subsidiaries in excess of $100,000 in the aggregate, Borrower shall, at
Agent's request and Borrower's expense (i) cause an independent
credentialed environmental engineer acceptable to Agent to conduct an
assessment meeting all requirements of Agent and Applicable Law, including
tests where necessary, feasible and appropriate, of the site where the
noncompliance or alleged noncompliance with Environmental Law has occurred
and prepare and deliver to Agent a report setting forth the results of such
assessment, a proposed plan to bring Borrower into compliance with such
Environmental Law (if such assessment indicates noncompliance) and an
estimate of the costs thereof, and (ii) provide to Agent a supplemental
report of such engineer whenever the scope of the noncompliance, or the
response thereto or the estimated costs thereof, shall materially adversely
change; PROVIDED that prior to Agent's request as set forth above, to the
extent any Applicable Law, including, without limitation, any Environmental
Law, requires that Borrower obtain any assessment or supplemental report
otherwise required under this CLAUSE (b), any such assessment or
supplemental report received or requested by Borrower prior to Agent's
request shall satisfy the requirements of this CLAUSE (b), subject to
Agent's review and approval of such assessment or supplemental report in
Agent's discretion. Nothing herein, or as requested or required by Agent
under this Section shall impose any obligations on Borrower that are in
violation of any Applicable Law, including, without limitation, any
Environmental Law, or Governmental Approval.
Section 12.10 OBLIGATIONS TO AFFILIATES. With respect to any Indebtedness
at any time owing by Borrower to any of its Affiliates, at Agent's request,
Borrower will execute, and will cause such Affiliate to execute, a subordination
agreement in form satisfactory to Agent such that such Indebtedness shall become
Subordinated Indebtedness.
ARTICLE 13
INFORMATION
Until the Revolving Credit Facility has been terminated and all the Secured
Obligations have been paid in full, unless the Required Lenders shall otherwise
consent in the manner set forth in SECTION 18.9, Borrower will provide the
following information to Agent and to each Lender at the offices then designated
for such notices pursuant to SECTION 18.1 and keep the other covenants contained
in this ARTICLE 13.
Section 13.1 FINANCIAL STATEMENTS.
(a) AUDITED YEAR-END STATEMENTS. As soon as available, but in any
event within one hundred fifty (150) days after the end of each fiscal year
of Borrower, Borrower will provide Agent and the Lenders with copies of the
consolidating and consolidated balance sheets of Borrower and its
Consolidated Subsidiaries and Fremont and its Consolidated Subsidiaries,
respectively, as at the end of such fiscal year and the related statements
of
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earnings, shareholders' equity and statement of cash flows for such
fiscal year, in each case setting forth in comparative form the figures for
the previous fiscal year of such Person (as applicable), reported on, as to
such consolidated statements, without qualification as to the scope of the
audit or the status of such Person as a "going concern," by independent
certified public accountants of nationally recognized standing.
(b) MONTHLY FINANCIAL STATEMENTS OF BORROWER. As soon as available
after the end of each month, but in any event within forty-five (45) days
after the end of each month, Borrower will provide Agent and the Lenders
with copies of the unaudited consolidated and consolidating balance sheet
of Borrower and its Consolidated Subsidiaries as at the end of such month
and the related unaudited consolidated and consolidating statements of
earnings and cash flows for Borrower and its Consolidated Subsidiaries for
such month and for the portion of the fiscal year of Borrower and its
Consolidated Subsidiaries through such month, certified by a Financial
Officer as presenting fairly the financial condition and results of
operations of Borrower (subject to normal year-end audit adjustments).
All of the financial statements referenced in this SECTION 13.1 are to be
complete and correct in all material respects and prepared in accordance with
GAAP (except, with respect to the monthly financial statements referred to in
CLAUSE (C), for the omission of footnotes and for the effect of normal year-end
audit adjustments) applied consistently throughout the periods reflected
therein.
Section 13.2 ACCOUNTANTS' CERTIFICATE. Together with the financial
statements referred to in SECTION 13.1(a), Borrower shall deliver a certificate
of such accountants addressed to Agent
(a) stating that in making the examination necessary for the
certification of such financial statements, nothing has come to their
attention to lead them to believe that any Default or Event of Default
exists and, in particular, they have no knowledge of any Default or Event
of Default or, if such is not the case, specifying such Default or Event of
Default and its nature, and
(b) having attached the calculations, prepared by Borrower and
reviewed by such accountants, required to establish whether or not Borrower
is in compliance with the covenants contained in SECTIONS 14.1, 14.2, 14.9
and 14.10, as at the date of such financial statements.
Section 13.3 OFFICER'S CERTIFICATE. At the time that Borrower provides
the financial statements pursuant to SECTION 13.1(b) for any month that is the
last month of a fiscal quarter of Borrower, Borrower shall also provide a
Compliance Certificate which:
(a) sets forth as at the end of such fiscal quarter or fiscal year,
as the case may be, the calculations required to establish whether or not
Borrower was in compliance with the requirements of SECTIONS 14.1, 14.2,
14.9 and 14.10, as at the end of each respective period;
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(b) states that the information on the Schedules to this Agreement is
complete and accurate as of the date of such certificate or, if such is not
the case, attaches to such certificate updated Schedules, and
(c) states that, based on a reasonably diligent examination, no
Default or Event of Default has occurred or exists, or, if such is not the
case, specifies such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps taken or being taken by
Borrower with respect to such Default or Event of Default.
Section 13.4 COPIES OF OTHER REPORTS. Borrower will provide Agent and
the Lenders the following:
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to Borrower or its Board of Directors by its independent public
accountants, including, without limitation, any management report;
(b) As soon as practicable, copies of all financial statements and
reports that Borrower sends to its shareholders generally and of all
registration statements and all regular or periodic reports, if any, which
Borrower files with the Securities and Exchange Commission or any successor
commission;
(c) From time to time and as soon as reasonably practicable following
each request, such forecasts, data, certificates, reports, statements,
opinions of counsel, documents or further information regarding the
business, assets, liabilities, financial condition, results of operations
or business prospects of Borrower or any of its Subsidiaries as Agent may
reasonably request and that Borrower has or (except in the case of legal
opinions relating to the perfection or priority of the Security Interest)
without unreasonable expense can obtain; PROVIDED, HOWEVER, that Agent and
the Lenders shall, to the extent reasonably practicable, coordinate
examinations of Borrower's records by their respective internal auditors;
(d) If requested by Agent or any Lender, Borrower will provide to
Agent and the Lenders statements in conformity with the requirements of
Federal Reserve Form G-3 or U-1 referred to in Regulation G and U,
respectively, of the Board of Governors of the Federal Reserve System.
The rights of Agent and the Lenders under this SECTION 13.4 are in addition to
and not in derogation of their rights under any other provision of this
Agreement or of any other Loan Document.
Section 13.5 NOTICE OF LITIGATION AND OTHER MATTERS. Borrower will
provide Agent and the Lenders prompt notice of:
(a) the commencement, to the extent Borrower is aware of the same, of
all proceedings and investigations by or before any Governmental Authority
or nongovernmental body and all actions and proceedings in any court or
before any arbitrator against or in any other way relating to or affecting
any Loan Party or any of such Loan
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Party's properties, assets or businesses which would be treated as a
contingent liability under GAAP and is an amount in excess of $500,000,
or might, singly or in the aggregate, result in the occurrence of a
Default or an Event of Default, or have a Materially Adverse Effect on
any Loan Party;
(b) any amendment of the articles of incorporation or bylaws of any
Loan Party;
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of any Loan Party
which has had or may have, singly or in the aggregate, a Materially Adverse
Effect on any Loan Party and any change in the executive officers of any
Loan Party;
(d) any Default or Event of Default, or any event which constitutes
or which with the passage of time or giving of notice or both would
constitute a default or event of default by any Loan Party under any
material agreement (other than this Agreement) to which any Loan Party is a
party or by which any Loan Party or any of any Loan Party's properties may
be bound;
(e) any authorization by Borrower's board of directors of the filing
by Borrower of a petition in bankruptcy; and
(f) Borrower entering into any agreement with any Person which would
result in Borrower incurring any contingent liability under GAAP in an
amount in excess of $500,000.
Section 13.6 ERISA. As soon as possible and in any event within thirty
(30) days after Borrower knows, or has reason to know, that
(a) any Termination Event with respect to a Plan has occurred or will
occur, or
(b) the aggregate present value of the Unfunded Vested Accrued
Benefits under all Plans is equal to an amount in excess of $0, or
(c) Any Loan Party is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan required by
reason of any Loan Party's complete or partial withdrawal (as described in
Section 4203 or 4205 of ERISA) from such Multiemployer Plan,
Borrower will provide Agent and the Lenders a certificate of its President or a
Financial Officer setting forth the details of such event and the action which
is proposed to be taken with respect thereto, together with any notice or filing
which may be required by the PBGC or other Governmental Authority with respect
to such event.
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Section 13.7 ACCURACY OF INFORMATION. All written information, reports,
statements and other papers and data provided to the Credit Parties, whether
pursuant to this ARTICLE 13 or any other provision of this Agreement or of any
other Loan Document, shall be, at the time the same is so provided, complete and
correct in all material respects to the extent necessary to give the recipient
thereof true and accurate knowledge of the subject matter.
Section 13.8 REVISIONS OR UPDATES TO SCHEDULES. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, Borrower shall
deliver to the Credit Parties as part of the officer's certificate required
pursuant to SECTION 13.3(b) such revisions or updates to such Schedule(s) as may
be necessary or appropriate to update or correct such Schedule(s), PROVIDED that
no such revisions or updates to any Schedule(s) shall be deemed to have amended,
modified or superseded such Schedule(s) as originally attached hereto, or to
have cured any breach of warranty or representation resulting from the
inaccuracy or incompleteness of any such Schedule(s), unless and until the
Required Lenders in their sole and absolute discretion, shall have accepted in
writing such revisions or updates to such Schedule(s).
Section 13.9 ANNUAL PROJECTIONS. Not sooner than ninety (90) days prior
to the beginning of each of Borrower's fiscal years, but not less than thirty
(30) days prior to the beginning of each such fiscal year, Borrower will deliver
to the Credit Parties a budget and projection forecast of Borrower's anticipated
operations and financial performance for such fiscal year, in form reasonably
satisfactory to Agent and containing such information as Agent may reasonably
request.
Section 13.10 REAL ESTATE AND EQUIPMENT APPRAISALS. Within thirty (30)
days after the Agreement Date, Borrower will cause to be delivered to Agent, or
Agent shall otherwise receive, at Borrower's expense, for the benefit of the
Credit Parties, an appraisal of Borrower's Real Estate (including improvements)
located in Lancaster, Pennsylvania and Ahoskie, North Carolina, prepared by a
credentialed appraiser acceptable to Agent and satisfying all requirements of
applicable law. Within fifteen (15) days after the Agreement Date, Borrower
WILL CAUSE TO BE DELIVERED TO AGENT, FOR THE BENEFIT OF THE CREDIT PARTIES, AN
APPRAISAL OF ALL EQUIPMENT (INCLUDING WITHOUT LIMITATION MACHINERY, EQUIPMENT,
MOLDS, DIES AND TOOLING), PREPARED BY A CREDENTIALED APPRAISER ACCEPTABLE TO
AGENT.
Section 13.11 PBGC AGREEMENTS. BORROWER WILL NOTIFY AGENT AT LEAST TEN
(10) BUSINESS DAYS BEFORE ENTERING INTO THE PBGC AGREEMENT OR ENTERING INTO OR
AMENDING ANY OTHER MATERIAL AGREEMENT WITH PBGC. ANY AND ALL SUCH AGREEMENTS OR
AMENDMENTS SHALL BE SATISFACTORY TO AGENT IN ITS DISCRETION (AGENT SHALL BE
DEEMED TO BE SATISFIED WITH THE PBGC AGREEMENT ONLY UPON EXECUTION BY AGENT OF
THE PBGC INTERCREDITOR AGREEMENT).
SECTION 13.12 ADDITIONAL CAPITAL CONTRIBUTION. WITHIN THIRTY (30) DAYS
FOLLOWING THE AGREEMENT DATE, BORROWER SHALL HAVE RECEIVED FROM NEW CANAAN OR
FREMONT ADDITIONAL CAPITAL CONTRIBUTION OF COMMON EQUITY OF NOT LESS THAN
$900,000.
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ARTICLE 14
NEGATIVE COVENANTS
UNTIL THE REVOLVING CREDIT FACILITY HAS BEEN TERMINATED AND ALL THE SECURED
OBLIGATIONS HAVE BEEN PAID IN FULL, UNLESS THE REQUIRED LENDERS SHALL OTHERWISE
CONSENT IN THE MANNER SET FORTH IN SECTION 18.9:
SECTION 14.1 FINANCIAL PERFORMANCE.
(A) MINIMUM NET WORTH. BORROWER WILL NOT PERMIT ITS NET WORTH
CALCULATED AS OF THE END OF EACH OF BORROWER'S FISCAL QUARTERS, IN EACH
CASE DETERMINED AS OF SUCH DATE IN ACCORDANCE WITH GAAP (WITHOUT GIVING
EFFECT TO ANY PRINCIPLES OF CONSOLIDATION AND WITHOUT GIVING EFFECT TO ANY
INCREASE OR DECREASE IN STOCKHOLDER'S EQUITY ASSOCIATED WITH THE
APPLICATION OF THE FINANCIAL ACCOUNTING STANDARDS BOARD'S STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 87, AS SUCH STATEMENT MAY BE AMENDED
FROM TIME TO TIME) AND BASED ON THE FINANCIAL STATEMENTS DELIVERED PURSUANT
TO SECTION 13.1(a) AND SECTION 13.1(b), AS APPLICABLE, TO BE LESS THAN THE
FOLLOWING SPECIFIED AMOUNTS, AS APPLICABLE:
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-------------------------------------
-------------------------------------
Period End Requirement
-------------------------------------
-------------------------------------
September 30, 1997 42,000,000
December 31, 1997 42,000,000
March 31, 1998 42,000,000
June 30, 1998 42,300,000
September 30, 1998 43,100,000
December 31, 1998 44,000,000
March 31, 1999 44,500,000
June 30, 1999 45,100,000
September 30, 1999 46,000,000
December 31, 1999 46,900,000
March 31, 2000 47,700,000
June 30, 2000 48,700,000
September 30, 2000 50,100,000
December 31, 2000 51,500,000
March, 31, 2001 52,600,000
June 30, 2001 54,000,000
September 30, 2001 55,800,000
December 31, 2001 57,500,000
-------------------------------------
-------------------------------------
(b) MINIMUM FIXED CHARGE COVERAGE. Borrower will not permit its
Fixed Charge Coverage Ratio calculated as of the end of each of Borrower's
fiscal quarters and determined in accordance with GAAP (without giving
effect to any principles of consolidation) and based on the financial
statements delivered pursuant to SECTION 13.1(a) and SECTION 13.1(b), as
applicable, measured (i) as of March 31, 1998, June 30, 1998 and September
30, 1998, in each case for the calender year-to-date period, and
(ii) thereafter as of each fiscal quarter, in each case for the preceding
twelve (12) calendar months then ending, to be less than the following
specified amounts, as applicable:
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---------------------------------------------------
---------------------------------------------------
Period End Requirement
---------------------------------------------------
---------------------------------------------------
March 31, 1998 0.8 to 1.0
June 30, 1998 1.0 to 1.0
September 30, 1998 through and
including September 30, 2000 1.1 to 1.0
December 31, 2000 and each quarter-end
thereafter 1.2 to 1.0
---------------------------------------------------
---------------------------------------------------
Section 14.2 INDEBTEDNESS FOR MONEY BORROWED. Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create,
assume or otherwise become or remain obligated in respect of, or permit or
suffer to exist or to be created, assumed or incurred or to be outstanding any
Indebtedness for Money Borrowed, except that this SECTION 14.2 shall not apply
to:
(a) Indebtedness of Borrower for Money Borrowed represented by the
Loans and the Notes;
(b) Indebtedness for Money Borrowed reflected on SCHEDULE 9.1(j),
excluding any such Indebtedness that is to be paid in full on the Effective
Date; and
(c) Permitted Purchase Money Indebtedness.
Section 14.3 GUARANTIES. Borrower will not, and, except in connection
with Indebtedness permitted under SECTION 14.2(a) or SECTION 14.2(b), will not
permit any of its Subsidiaries to, directly or indirectly, become or remain
liable with respect to any Guaranty of any obligation of any other Person.
Section 14.4 INVESTMENTS. Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, acquire, after the Agreement Date,
any Business Unit or Investment (including, without limitation, loans, advances
and other Investments in any Affiliate) other than Permitted Investments or,
after such date, maintain any Investment other than Permitted Investments.
Section 14.5 RESTRICTED DIVIDEND PAYMENTS AND PURCHASES, ETC. Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, declare or make any Restricted Dividend Payment, Restricted Payment
or Restricted Purchase, except (i) (without limiting SECTION 14.1) for payment
of the "Option Price" and the "Merger Consideration" pursuant to (and as such
terms are defined in) the Acquisition Agreement, and (ii) for repurchase of
employee stock options granted in connection with any employee stock ownership
plan in effect for Borrower's employees generally.
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Section 14.6 MERGER, CONSOLIDATION AND SALE OF ASSETS. Borrower will
not, and will not permit any of its Subsidiaries to, merge or consolidate with
any other Person or sell, lease or transfer or otherwise dispose of all or a
substantial portion (other than as allowed by SECTION 6.11(d)) of its assets to
any Person other than sales of Inventory in the ordinary course of business;
PROVIDED that Borrower may consummate the Merger in accordance with the
Acquisition Documents.
Section 14.7 TRANSACTIONS WITH AFFILIATES. Borrower will not, and will
not permit any of its Subsidiaries to, effect any transaction with any Affiliate
on a basis less favorable to Borrower or such Subsidiary than would be the case
if such transaction had been effected with a Person not an Affiliate.
Section 14.8 LIENS. Borrower will not, and will not permit any of its
Subsidiaries to, create, assume or permit or suffer to exist or to be created or
assumed any Lien on any of the Collateral or its other assets, other than
Permitted Liens.
Section 14.9 CAPITALIZED LEASE OBLIGATIONS. Borrower will not, and will
not permit any of its Subsidiaries to incur or permit to exist any Capitalized
Lease Obligations if such Capitalized Lease Obligation when added to existing
Capitalized Lease Obligations and Permitted Purchase Money Indebtedness of
Borrower and its Subsidiaries would exceed $4,000,000 in the aggregate.
Section 14.10 OPERATING LEASES. Excluding renewals of preexisting
Operating Leases for Real Estate permitted pursuant to SECTION 14.11, Borrower
will not, and will not permit any of its Subsidiaries to enter into any
Operating Lease if the aggregate annual rental payable under all Operating
Leases of Borrower (excluding preexisting and renewed Operating Leases for Real
Estate) and its Subsidiaries would exceed $1,000,000 in the aggregate at any
time after the Effective Date.
Section 14.11 REAL ESTATE LEASES. Borrower will not, and will not permit
any of its Subsidiaries to, enter into any real property lease, including a
lease relating to the Real Estate occupied by Borrower on the Effective Date
(excluding renewals of such preexisting leases on terms substantially similar to
the preexisting lease in the ordinary course of Borrower's business), without
the prior written consent of Agent, on behalf of the Lenders, which consent
shall not be unreasonably withheld.
Section 14.12 PLANS. Except as disclosed on SCHEDULE 9.1(p), as of the
Agreement Date, Borrower will not, and will not permit any of its Subsidiaries
to, permit any condition to exist in connection with any Plan which might
constitute grounds for the PBGC to institute proceedings to have such Plan
terminated or a trustee appointed to administer such Plan, and any other
condition, event or transaction with respect to any Plan which could result in
the incurrence by Borrower or any of its Subsidiaries of any material liability,
fine or penalty.
Section 14.13 SALES AND LEASEBACKS. Except as may be otherwise
specifically allowed by this Agreement, Borrower will not, and will not permit
any of its Subsidiaries to, enter into any
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arrangement with any Person providing for Borrower or any of its Subsidiaries
to lease from such Person any real or personal property which has been or is
to be sold or transferred, directly or indirectly, by Borrower or any of its
Subsidiaries to such Person.
Section 14.14 SUBORDINATED INDEBTEDNESS. Borrower will not, and will not
permit any of its Subsidiaries to, make any payment of principal or interest in
respect of any Subordinated Indebtedness if any such payment is prohibited by
the terms thereof or by any subordination agreement applicable thereto.
Section 14.15 BUSINESS ACTIVITIES OF FREMONT AND KAC. KAC will not engage
in any business, activity or other operations other than owning and holding the
Capital Stock of Borrower, acting as a Guarantor hereunder, entering into the
Merger and other activities directly related to the foregoing. Fremont will not
engage in any business, activity or other operations other than owning the
Capital Stock of KAC, prior to the Merger, and the Borrower, following the
Merger, acting as a Guarantor hereunder and other activities directly related to
the foregoing. Neither Fremont nor KAC will merger with or into any other
Person; PROVIDED, that KAC and Borrower may consummate the Merger in accordance
with the Acquisition Documents.
Section 14.16 ACQUISITION FEES AND EXPENSES. The aggregate fees and
expenses of Fremont, KAC and Borrower incurred in connection with the
Acquisition shall not exceed $11,400,000.
ARTICLE 15
DEFAULT
Section 15.1 EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or nongovernmental body:
(a) DEFAULT IN PAYMENT. Borrower shall default in any payment of
principal of or interest on any Loan or any Note when and as due (whether
at maturity, by reason of acceleration or otherwise);
(b) OTHER PAYMENT DEFAULT. Borrower shall default in the payment, as
and when due, of principal of or interest on, any other Secured Obligation,
and such default shall continue for a period of ten (10) days after written
notice thereof has been given to Borrower by Agent;
(c) MISREPRESENTATION. Any representation or warranty made or deemed
to be made by Borrower under this Agreement or any other Loan Document, or
any amendment hereto or thereto, shall at any time prove to have been
incorrect or misleading in any material respect when made;
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(d) DEFAULT IN PERFORMANCE. Borrower shall default in the
performance or observance of any term, covenant, condition or agreement to
be performed by Borrower, contained in
(i) ARTICLES 10, 11, 13 or 14, SECTION 12.1 (insofar as it
requires the preservation of the corporate existence of Borrower), or
SECTION 12.8, and Agent shall have delivered to Borrower written
notice of such default, or
(ii) this Agreement (other than as specifically provided for
otherwise in this SECTION 15.1) and such default shall continue for a
period of thirty (30) days after written notice thereof has been given
to Borrower by Agent;
(e) INDEBTEDNESS CROSS-DEFAULT.
(i) Borrower or any Subsidiary of Borrower shall fail to pay
when due and payable the principal of or interest on any Indebtedness
for Money Borrowed (other than the Loans) in an amount in excess of
100,000, or
(ii) the maturity of any such Indebtedness shall have (A) been
accelerated in accordance with the provisions of any indenture,
contract or instrument providing for the creation of or concerning
such Indebtedness, or (B) been required to be prepaid prior to the
stated maturity thereof, or
(iii) any event shall have occurred and be continuing which
would permit any holder or holders of such Indebtedness, any trustee
or agent acting on behalf of such holder or holders or any other
Person so to accelerate such maturity, and Borrower shall have failed
to cure such default prior to the expiration of any applicable cure or
grace period;
(f) OTHER CROSS-DEFAULTS. Borrower or any of its Subsidiaries shall
default in the payment when due, or in the performance or observance, of
any obligation or condition of any agreement, contract or lease (other than
this Agreement, the Security Documents or any such agreement, contract or
lease relating to Indebtedness for Money Borrowed) if the existence of any
such defaults, singly or in the aggregate, could in the reasonable judgment
of Agent have a Materially Adverse Effect on Borrower or any of its
Subsidiaries; PROVIDED, HOWEVER, that for the purposes of this provision
where such a default could result only in a monetary loss, a Material
Adverse Effect shall not be deemed to have occurred unless the aggregate of
such losses would exceed $500,000;
(g) VOLUNTARY BANKRUPTCY PROCEEDING. Borrower, any of its
Subsidiaries or any other Loan Party shall
(i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect),
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(ii) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws,
(iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of a
substantial part of its property, domestic or foreign,
(v) admit in writing its inability to pay its debts as they
become due,
(vi) make a general assignment for the benefit of creditors, or
(vii) take any corporate action for the purpose of
authorizing any of the foregoing;
(h) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding
shall be commenced against Borrower, any of its Subsidiaries or any other
Loan Party in any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts,
(ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of Borrower, any of its Subsidiaries or of all
or any substantial part of the assets, domestic or foreign, of
Borrower or any of its Subsidiaries,
and such case or proceeding shall continue undismissed or unstayed for a
period of sixty (60) consecutive calendar days, or an order granting the
relief requested in such case or proceeding against Borrower, any of its
Subsidiaries or any other Loan Party (including, but not limited to, an
order for relief under such federal bankruptcy laws) shall be entered;
(i) FAILURE OF AGREEMENTS. Borrower or any other Loan Party, shall
challenge the validity and binding effect of any provision of any Loan
Document after delivery thereof hereunder or shall state in writing its
intention to make such a challenge, or any Loan Document, after delivery
thereof hereunder, shall for any reason (except to the extent permitted by
the terms thereof) cease to create a valid and perfected first priority
Lien (except for Permitted Liens) on, or security interest in, any of the
Collateral purported to be covered thereby;
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(j) JUDGMENT. A final, unappealable judgment or order for the
payment of money in an amount that exceeds the uncontested insurance
available therefor by $500,000 or more shall be entered against Borrower by
any court or other Governmental Authority and such judgment or order shall
continue undischarged or unstayed for thirty (30) days;
(k) ATTACHMENT. A warrant or writ of attachment or execution or
similar process which exceeds $500,000 in value shall be issued against any
property of Borrower or any of its Subsidiaries and such warrant or process
shall continue undischarged or unstayed for thirty (30) days;
(l) LOAN DOCUMENTS. Any event of default under any other Loan
Document shall occur or Borrower, any of its Subsidiaries or any other Loan
Party shall default in the performance or observance of any term, covenant,
condition or agreement contained in, or the payment of any other sum
covenanted to be paid by Borrower under, any such Loan Document; PROVIDED,
HOWEVER that no event of default under any such Loan Document shall be
deemed to have occurred until any notice required under such Loan Document
has been given and any grace period granted under such Loan Document has
expired;
(m) ERISA.
(i) Any Termination Event with respect to a Plan shall occur
that, after taking into account the excess, if any, of (A) the fair
market value of the assets of any other Plan with respect to which a
Termination Event occurs on the same day (but only to the extent that
such excess is the property of Borrower) over (B) the present value on
such day of all vested nonforfeitable benefits under such other Plan,
results in an Unfunded Vested Accrued Benefit in excess of $1,000,000,
(ii) any Plan shall incur an "accumulated funding deficiency" (as
defined in Section 412 of the Internal Revenue Code or Section 302 of
ERISA) for which a waiver has not been obtained in accordance with the
applicable provisions of the Internal Revenue Code and ERISA,
(iii) Borrower is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from Borrower's complete or partial withdrawal (as described
in Section 4203 or 4205 of ERISA) from such Multiemployer Plan, or
(iv) Any default under the PBGC Agreement;
(n) CHANGE IN CONTROL.
(i) KAC shall own, beneficially and of record, less than
fifty-one percent (51.0%) of the outstanding Capital Stock of Borrower,
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(ii) prior to the Merger, Fremont shall own, beneficially and of
record, less than one hundred percent (100%) of the Capital Stock of
KAC,
(iii) after the Merger, Fremont and New Canaan, together with
Persons who are officers, directors or employees of Borrower, shall
own, beneficially and of record, less than one hundred percent (100%)
of the outstanding Capital Stock of Borrower or Fremont shall own less
than ninety percent (90.0%) of such Capital Stock, or
(iv) Fremont Partners, L.P. shall own, beneficially and of
record, (A) prior to any public offering of the Capital Stock of
Fremont, less than eighty percent (80.0%) of the Voting Stock of
Fremont, (B) after any public offering of the Capital Stock of
Fremont, less than fifty-one percent (51.0%) of the Voting Stock of
Fremont.
(o) MATERIAL ADVERSE EFFECT. The occurrence of any event or
condition which constitutes a Materially Adverse Effect and thirty (30)
days have passed since written notification thereof to Borrower by Agent
(therein reasonably identifying such event or condition) without such event
or condition having been remedied, cured or waived.
Section 15.2 REMEDIES.
(a) AUTOMATIC ACCELERATION AND TERMINATION OF FACILITIES. Upon the
occurrence of an Event of Default specified in SECTION 15.1(g) or (h),
(i) the principal of and the interest on the Loans and any Note at the time
outstanding, and all other amounts owed to any of the Credit Parties under
this Agreement or any of the other Loan Documents and all other Secured
Obligations, shall thereupon become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly
waived, anything in this Agreement or any of the other Loan Documents to
the contrary notwithstanding, and (ii) the Revolving Credit Facility and
the CAPEX Facility and the right of Borrower to request borrowings and
Letters of Credit under this Agreement shall immediately terminate.
(b) OTHER REMEDIES. If any Event of Default shall have occurred, and
during the continuance of any such Event of Default, Agent may, and at the
direction of the Required Lenders in their sole and absolute discretion
shall, do any of the following:
(i) declare the principal of and interest on the Loans and any
Note at the time outstanding, and all other amounts owed to any of the
Credit Parties under this Agreement or any of the other Loan Documents
and all other Secured Obligations, to be forthwith due and payable,
whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which
are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding;
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(ii) terminate the Revolving Credit Facility and the CAPEX
Facility and any other right of Borrower to request borrowings or
Letters of Credit thereunder;
(iii) notify, or request Borrower to notify, in writing or
otherwise, any Account Debtor or obligor with respect to any one or
more of the Receivables to make payment to Agent, for the benefit of
the Credit Parties, or any agent or designee of Agent, at such address
as may be specified by Agent and if, notwithstanding the giving of any
notice, any Account Debtor or other such obligor shall make payments
to Borrower, Borrower shall hold all such payments it receives in
trust for Agent, for the account of the Credit Parties, without
commingling the same with other funds or property of, or held by,
Borrower, and shall deliver the same to Agent or any such agent or
designee of Agent immediately upon receipt by Borrower in the
identical form received, together with any necessary endorsements;
(iv) settle or adjust disputes and claims directly with Account
Debtors and other obligors on Receivables for amounts and on terms
which Agent considers advisable and in all such cases only the net
amounts received by Agent, for the account of the Credit Parties, in
payment of such amounts, after deductions of costs and attorneys'
fees, shall constitute Collateral and Borrower shall have no further
right to make any such settlements or adjustments or to accept any
returns of merchandise;
(v) enter upon any premises in which Inventory or Equipment may
be located and, without resistance or interference by Borrower, take
physical possession of any or all thereof and maintain such possession
on such premises or move the same or any part thereof to such other
place or places as Agent shall choose, without being liable to
Borrower on account of any loss, damage or depreciation that may occur
as a result thereof, so long as Agent shall act reasonably and in good
faith;
(vi) require Borrower to and Borrower shall, without charge to
Agent or any other Credit Party, assemble the Inventory and Equipment
and maintain or deliver it into the possession of Agent or any agent
or representative of Agent at such place or places as Agent may
designate and as are reasonably convenient to both Agent and Borrower;
(vii) at the expense of Borrower, cause any of the Inventory
and Equipment to be placed in a public or field warehouse, and Agent
shall not be liable to Borrower on account of any loss, damage or
depreciation that may occur as a result thereof, so long as Agent
shall act reasonably and in good faith;
(viii) without notice, demand or other process, and without
payment of any rent or any other charge, enter any of Borrower's
premises and, without
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breach of the peace, until Agent, on behalf of the Credit Parties,
completes the enforcement of its rights in the Collateral, take
possession of such premises or place custodians in exclusive
control thereof, remain on such premises and use the same and any
of Borrower's Equipment, for the purpose of (A) completing any work
in process, preparing any Inventory for disposition and disposing
thereof, and (B) collecting any Receivable, and Agent, for the
benefit of the Credit Parties, is hereby granted a license or
sublicense and all other rights as may be necessary, appropriate or
desirable to use the Proprietary Rights in connection with the
foregoing, and the rights of Borrower under all licenses,
sublicenses and franchise agreements shall inure to Agent, for the
benefit of the Credit Parties (PROVIDED, HOWEVER, that any use of
any federally registered trademarks as to any goods shall be
subject to the control as to the quality of such goods of the owner
of such trademarks and the goodwill of the business symbolized
thereby);
(ix) exercise any and all of its rights under any and all of the
Security Documents;
(x) apply any Collateral consisting of cash to the payment of
the Secured Obligations in any order in which Agent, on behalf of the
Credit Parties, may elect or use such cash in connection with the
exercise of any of its other rights hereunder or under any of the
Security Documents;
(xi) establish or cause to be established one or more Lockboxes
or other arrangement for the deposit of proceeds of Receivables, and,
in such case, Borrower shall cause to be forwarded to Agent at its
Principal Office, on a daily basis, copies of all checks and other
items of payment and deposit slips related thereto deposited in such
Lockboxes, together with collection reports in form and substance
satisfactory to Agent; and
(xii) exercise all of the rights and remedies of a secured
party under the UCC and under any other Applicable Law, including,
without limitation, the right, without notice except as specified
below and with or without taking the possession thereof, to sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any location chosen by Agent, for cash, on credit or
for future delivery, and at such price or prices and upon such other
terms as Agent may deem commercially reasonable. Borrower agrees
that, to the extent notice of sale shall be required by law, at least
ten (10) days' notice to Borrower of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification, but notice given in any other
reasonable manner or at any other reasonable time shall constitute
reasonable notification. Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.
Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
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(c) CASH COLLATERAL; INJUNCTIVE RELIEF. All cash proceeds of
Collateral from time to time existing, including, without limitation,
collections and payments of Receivables and cash receipts, if any, for
other Collateral, whether consisting of cash, checks or other similar
items, at all times shall be subject to an express trust for the benefit of
Agent, for the benefit of the Credit Parties. All such proceeds shall be
subject to Agent's continuing security interests under this Agreement.
Borrower is expressly prohibited from using, spending, retaining or
otherwise exercising any dominion over such proceeds in any manner in
contravention of the requirements of this Agreement. Borrower acknowledges
and agrees that an action for damages against Borrower for any breach of
such prohibitions shall not be an adequate remedy at law. In the event of
any such breach, Borrower agrees to the fullest extent allowed by law that
Agent shall be entitled to injunctive relief to restrain such breach and
require compliance with the requirements of this Agreement.
Section 15.3 APPLICATION OF PROCEEDS. All proceeds from each sale of, or
other realization upon, all or any part of the Collateral following an Event of
Default shall be applied or paid over as follows:
(a) FIRST: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including reasonable
attorneys' fees;
(b) SECOND: to the payment of the Secured Obligations (with Borrower
remaining liable for any deficiency) as Agent may elect; and
(c) THIRD: the balance (if any) of such proceeds shall be paid to
Borrower, subject to any duty imposed by law, or otherwise to whomsoever
shall be entitled thereto.
BORROWER SHALL REMAIN LIABLE AND WILL PAY, ON DEMAND, ANY DEFICIENCY REMAINING
IN RESPECT OF THE SECURED OBLIGATIONS, TOGETHER WITH INTEREST THEREON AT A RATE
PER ANNUM EQUAL TO THE HIGHEST RATE THEN PAYABLE HEREUNDER ON SUCH SECURED
OBLIGATIONS, WHICH INTEREST SHALL CONSTITUTE PART OF THE SECURED OBLIGATIONS.
Section 15.4 POWER OF ATTORNEY. In addition to the authorizations
granted to Agent under SECTION 11.13, SECTION 11.16 or under any other provision
of this Agreement or of any other Loan Document, during the continuance of an
Event of Default, Borrower hereby irrevocably designates, makes, constitutes and
appoints Agent (and all Persons designated by Agent from time to time) as
Borrower's true and lawful attorney, and agent in fact, and Agent, or any such
Person, may, without notice to Borrower, and at such time or times as Agent, or
any such Person in its sole discretion may determine, in the name of Borrower,
Agent or the Lenders,
(i) demand payment of the Receivables,
(ii) enforce payment of the Receivables by legal proceedings or
otherwise,
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(iii) exercise all of Borrower's rights and remedies with
respect to the collection of Receivables,
(iv) settle, adjust, compromise, extend or renew any or all of
the Receivables,
(v) settle, adjust or compromise any legal proceedings brought
to collect the Receivables,
(vi) discharge and release the Receivables or any of them,
(vii) prepare, file and sign the name of Borrower on any
proof of claim in bankruptcy or any similar document against any
Account Debtor,
(viii) prepare, file and sign the name of Borrower on any
notice of Lien, assignment or satisfaction of Lien, or similar
document in connection with any of the Collateral,
(ix) endorse the name of Borrower upon any chattel paper,
document, instrument, notice, freight bill, bill of lading or similar
document or agreement relating to the Receivables, the Inventory or
any other Collateral,
(x) use the stationery of Borrower and sign the name of Borrower
to verifications of the Receivables and on any notice to the Account
Debtors,
(xi) open Borrower's mail,
(xii) notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by
Agent, and
(xiii) use the information recorded on or contained in any
data processing equipment and computer hardware and software relating
to the Receivables, Inventory or other Collateral to which Borrower
has access.
Section 15.5 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES.
(a) RIGHTS CUMULATIVE. The rights and remedies of Agent and the
other Credit Parties under this Agreement, the Notes and each of the other
Loan Documents shall be cumulative and not exclusive of any rights or
remedies which it or they would otherwise have. In exercising such rights
and remedies, Agent and the other Credit Parties may be selective, and no
failure or delay by Agent or any Credit Party in exercising any right shall
operate as a waiver of it, nor shall any single or partial exercise of any
power or right preclude its other or further exercise or the exercise of
any other power or right.
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(b) WAIVER OF MARSHALING. Borrower hereby waives any right to
require any marshaling of assets and any similar right.
(c) LIMITATION OF LIABILITY. Nothing contained in this ARTICLE 15 or
elsewhere in this Agreement or in any of the other Loan Documents shall be
construed as requiring or obligating any Credit Party or any agent or
designee of any Credit Party to make any demand or to make any inquiry as
to the nature or sufficiency of any payment received by it, or to present
or file any claim or notice or take any action, with respect to any
Receivable or any other Collateral or the monies due or to become due
thereunder or in connection therewith, or to take any steps necessary to
preserve any rights against prior parties, and Agent, the other Credit
Parties, and their agents or designees, shall have no liability to Borrower
for actions taken pursuant to this ARTICLE 15, any other provision of this
Agreement or any of the other Loan Documents so long as Agent or any such
Credit Party shall act reasonably and in good faith.
(d) APPOINTMENT OF RECEIVER. In any action under this ARTICLE 15,
Agent shall be entitled during the continuance of an Event of Default to
the appointment of a receiver, without notice of any kind whatsoever, to
take possession of all or any portion of the Collateral and to exercise
such power as the court shall confer upon such receiver in accordance with
Applicable Law.
Section 15.6 REGISTRATION RIGHTS; PRIVATE SALES; ETC.
(a) If Agent shall determine to exercise its right to sell or
otherwise dispose of all or any Investment Property owned by Borrower,
pursuant to SECTION 15.2 or any other Loan Document, Borrower agrees that,
upon the reasonable request of Agent (which request may be made by Agent in
its sole discretion), Borrower will, at its own expense use its best
efforts to: (i) execute and deliver, and cause each Issuer of any
Collateral or other property contemplated to be sold and the directors and
officers thereof to execute and deliver, all such agreements, documents and
instruments, and do or cause to be done all such other acts and things, as
may be necessary or, in the opinion of Agent, advisable to register such
Collateral or other property to be sold under the provisions of the
Securities Act, and to cause the registration statement relating thereto to
become effective and to remain effective for such period as prospectuses
are required by law to be furnished and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
Agent, are necessary or advisable, all in conformity with the requirements
of the Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto; (ii) to qualify such Collateral or
other property to be sold under all applicable state securities or "Blue
Sky" laws and to obtain all necessary Governmental Approvals for the sale
of such Collateral or other property, as requested by Agent; (iii) cause
each such Issuer to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of
Section 11(a) of the Securities Act; and (iv) do or cause to be done all
such other acts and things as may be reasonably necessary to make the sale
of such Collateral or other property or any part thereof valid and binding
and in compliance with applicable law. Borrower will bear all
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reasonable costs and expenses, including reasonable attorneys' fees, of
carrying out its obligations under this SECTION 15.6.
(b) Borrower recognizes that Agent may be unable to effect a public
sale of any or all of the Collateral or other property to be sold by reason
of certain prohibitions contained in the laws of any jurisdiction outside
the United States or in the Securities Act and applicable state securities
laws but may be compelled to resort to one or more private sales thereof to
a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such Collateral or other property to be sold for their
own account for investment and not with a view to the distribution or
resale thereof. Borrower acknowledges and agrees that any such private
sale may result in prices and other terms less favorable to the seller than
if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall, to the extent permitted by law, be
deemed to have been made in a commercially reasonable manner. Agent shall
not be under any obligation to delay a sale of any of the Collateral or
other property to be sold for the period of time necessary to permit the
Issuer of such securities to register such securities under the laws of any
jurisdiction outside the United States, under the Securities Act or under
any applicable state securities laws, even if such Issuer would agree to do
so.
(c) Borrower further agrees to do or cause to be done, to the extent
that Borrower may do so under Applicable Law, all such other acts and
things as may be necessary to make such sales or resales of any portion or
all of the Collateral or other property to be sold valid and binding and in
compliance with any and all Applicable Law of any and all Governmental
Authorities having jurisdiction over any such sale or sales, all at
Borrower's expense. Borrower further agrees that a breach of any of the
covenants contained in this SECTION 15.6 will cause irreparable injury to
the Credit Parties and that the Credit Parties have no adequate remedy at
law in respect of such breach and, as a consequence, agrees that each and
every covenant contained in this SECTION 15.6 shall be specifically
enforceable against Borrower and Borrower hereby waives and agrees, to the
fullest extent permitted by law, not to assert as a defense against an
action for specific performance of such covenants that (i) Borrower's
failure to perform such covenants will not cause irreparable injury to the
Credit Parties or (ii) the Credit Parties have an adequate remedy at law in
respect of such breach. Borrower further acknowledges the impossibility of
ascertaining the amount of damages which would be suffered by the Credit
Parties by reason of a breach of any of the covenants contained in this
SECTION 15.6 and, consequently, agrees that, if Borrower shall breach any
of such covenants and the Credit Parties shall sue for damages for such
breach, Borrower shall pay to the Credit Parties, as liquidated damages and
not as a penalty, an aggregate amount equal to the value of the Collateral
or other property to be sold on the date Lender shall demand compliance
with this SECTION 15.6.
(d) BORROWER HEREBY AGREES TO INDEMNIFY, PROTECT AND SAVE HARMLESS
THE CREDIT PARTIES AND ANY CONTROLLING PERSONS THEREOF WITHIN THE MEANING
OF THE SECURITIES ACT FROM AND AGAINST ANY AND ALL LIABILITIES, SUITS,
CLAIMS, COSTS AND
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EXPENSES (INCLUDING COUNSEL FEES AND DISBURSEMENTS) ARISING UNDER THE
SECURITIES ACT, THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED,
ANY APPLICABLE STATE SECURITIES STATUTE, OR AT COMMON LAW, OR
PURSUANT TO ANY OTHER APPLICABLE LAW IN CONNECTION WITH THE ABOVE
REFERENCED REGISTRATION, INSOFAR AS SUCH LIABILITIES, SUITS, CLAIMS, COSTS
AND EXPENSES ARISE OUT OF, OR ARE BASED UPON, ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN ANY REGISTRATION
STATEMENT RELATING TO ANY PART OF THE COLLATERAL OR OTHER PROPERTY TO BE
SOLD, OR SUCH REGISTRATION STATEMENT AS AMENDED OR SUPPLEMENTED, OR ARISES
OUT OF, OR IS BASED UPON, THE OMISSION OR ALLEGED OMISSION TO STATE THEREIN
A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE
STATEMENTS THEREIN NOT MISLEADING; PROVIDED, THAT BORROWER SHALL NOT BE
LIABLE IN ANY SUCH CASE TO THE EXTENT THAT ANY SUCH LIABILITIES, SUITS,
CLAIMS, COSTS AND EXPENSES ARISE OUT OF, OR ARE BASED UPON, ANY UNTRUE
STATEMENT OR ALLEGED UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION MADE
IN SUCH REGISTRATION STATEMENT OR SUCH REGISTRATION STATEMENT AS AMENDED OR
SUPPLEMENTED, IN RELIANCE UPON AND IN CONFORMITY WITH WRITTEN INFORMATION
FURNISHED TO BORROWER BY ANY CREDIT PARTY SPECIFICALLY FOR INCLUSION
THEREIN. THE FOREGOING INDEMNITY AGREEMENT IS IN ADDITION TO ANY
INDEBTEDNESS, LIABILITY OR OBLIGATION THAT BORROWER MAY OTHERWISE HAVE TO
ANY CREDIT PARTY OR ANY SUCH CONTROLLING PERSON.
ARTICLE 16
ASSIGNMENTS
Section 16.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Loans, its Notes and its
Commitment); PROVIDED, HOWEVER, that:
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, any such partial assignment shall be in an amount at least
equal to $10,000,000 or an integral multiple of $10,000,000 in excess
thereof;
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(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its rights and
obligations under this Agreement and the Notes;
(iv) the parties to such assignment shall execute and deliver to
Agent for its acceptance an Assignment and Acceptance in the form of
EXHIBIT "E" hereto, together with any Notes subject to such assignment
and a processing fee of $3,500; and
(v) the prior written consent of Borrower (such consent to not
be unreasonably withheld) and Agent (such consent to not be
unreasonably withheld) shall be required; PROVIDED that no consent of
Borrower shall be necessary if any Default or Event of Default exists
at the time of such assignment.
Upon execution, delivery and acceptance of such Assignment and Acceptance,
the assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights and benefits of a Lender hereunder
and the assigning Lender shall, to the extent of such assignment,
relinquish its rights and be released from its obligations under this
Agreement. Upon the consummation of any assignment pursuant to this
Section, the assignor, Agent and Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the assignor and
the assignee. If the assignee is not incorporated under the laws of the
U.S., or a state thereof, it shall deliver to Borrower and Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with SECTION 7.6.
(b) Agent shall maintain at its address referred to in SECTION 18.1 a
copy of each Assignment and Acceptance delivered to and accepted by it and
a register for the recordation of the names and addresses of the Lenders
and the Commitment of, and principal amount of the 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 Borrower, 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 shall be available for inspection by Borrower or
any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such Assignment and
Acceptance and payment of the processing fee, Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the
form of EXHIBIT "E" hereto, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give
prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons in all
or a portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and its Loans); PROVIDED, HOWEVER, that
(i) such Lender's obligations under
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this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the participant shall be entitled to the benefit of
the yield protection provisions contained in ARTICLE 7 and the right of
set-off contained in SECTION 18.4, and (iv) Borrower shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain
the sole right to enforce the obligations of Borrower relating to its Loans
and its Notes and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
decreasing the amount of principal of or the rate at which interest is
payable on such Loans or Notes, extending any scheduled principal payment
date or date fixed for the payment of interest on such Loans or Notes, or
extending its Commitment).
(e) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its
Loans and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from
its obligations hereunder.
(f) Any Lender may furnish any information concerning Borrower or any
of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and
participants).
Section 16.2 REPRESENTATION OF LENDERS. Each Lender hereby represents
that it will make each Loan hereunder as a commercial loan for its own
account in the ordinary course of its business; PROVIDED, HOWEVER, that
subject to SECTION 15.1 hereof, the disposition of the Notes or other
evidence of the Secured Obligations held by any Lender shall at all times be
within its exclusive control.
ARTICLE 17
AGENT
Section 17.1 APPOINTMENT, POWERS, AND IMMUNITIES. Each Lender and L/C
Issuer hereby irrevocably appoints and authorizes Agent to act as its agent
under this Agreement and the other Loan Documents with such powers and
discretion as are specifically delegated to Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Agent (which term as used in this
sentence and in SECTION 17.5 and the first sentence of SECTION 17.6 hereof
shall include its Affiliates, and its own and its Affiliates', officers,
directors, employees and agents):
(a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender or L/C Issuer;
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(b) shall not be responsible to the Lenders or L/C Issuer for any
recital, statement, representation or warranty (whether written or oral)
made in or in connection with any Loan Document or any certificate or other
document referred to or provided for in, or received by any of them under,
any Loan Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any Loan Document, or any other document
referred to or provided for therein or for any failure by any Loan Party or
any other Person to perform any of its obligations thereunder;
(c) shall not be responsible for or have any duty to ascertain,
inquire into or verify the performance or observance of any covenants or
agreements by any Loan Party or the satisfaction of any condition or to
inspect the property (including the books and records) of any Loan Party or
any of its Subsidiaries or Affiliates;
(d) shall not be required to initiate or conduct any litigation or
collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted to be
taken by it under or in connection with any Loan Document, except for its
own gross negligence or willful misconduct.
Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
Section 17.2 RELIANCE BY AGENT. Agent shall be entitled to rely upon
any certification, notice, instrument, writing or other communication
(including, without limitation, any communication by telephone or telecopy)
believed by it to be genuine and correct and to have been signed, sent or
made by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel for any Loan Party),
independent accountants and other experts selected by Agent. Agent may deem
and treat the payee of any Note as the holder thereof for all purposes hereof
unless and until Agent receives and accepts an Assignment and Acceptance
executed in accordance with SECTION 16.1 hereof. As to any matters not
expressly provided for by this Agreement, Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and
such instructions shall be binding on all of the Lenders; PROVIDED, HOWEVER,
that Agent shall not be required to take any action that exposes Agent to
personal liability or that is contrary to any Loan Document or Applicable Law
or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by
reason of taking any such action.
Section 17.3 DEFAULTS. Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless Agent has
received written notice from a Lender or Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default." In
the event that Agent receives such a notice of the occurrence of a Default or
Event of Default, Agent shall give prompt notice thereof to the Lenders.
Agent shall
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(subject to SECTION 17.2 hereof) take such action with respect to such
Default or Event of Default as shall reasonably be directed by the Required
Lenders, PROVIDED that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
Section 17.4 RIGHTS AS LENDER. With respect to its Commitment and the
Loans made by it, NationsBank (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include Agent in its individual capacity. NationsBank
(and any successor acting as Agent) and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, make
investments in, provide services to and generally engage in any kind of
lending, trust or other business with any Loan Party or any of its
Subsidiaries or Affiliates as if it were not acting as Agent, and NationsBank
(and any successor acting as Agent) and its Affiliates may accept fees and
other consideration from any Loan Party or any of its Subsidiaries or
Affiliates for services in connection with this Agreement or otherwise
without having to account for the same to the other Lenders.
Section 17.5 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY AGENT (TO
THE EXTENT NOT REIMBURSED UNDER SECTION 18.2 HEREOF, BUT WITHOUT LIMITING THE
OBLIGATIONS OF BORROWER UNDER SUCH SECTION) RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENTS, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES) OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY
BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST AGENT (INCLUDING BY ANY
LENDER) IN ANY WAY RELATING TO OR ARISING OUT OF ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY OR ANY ACTION TAKEN OR OMITTED BY AGENT
UNDER ANY LOAN DOCUMENT (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF AGENT); PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. WITHOUT LIMITATION OF THE
FOREGOING, EACH LENDER AGREES TO REIMBURSE AGENT PROMPTLY UPON DEMAND FOR ITS
RATABLE SHARE OF ANY COSTS OR EXPENSES PAYABLE BY BORROWER UNDER SECTION
18.2, TO THE EXTENT THAT AGENT IS NOT PROMPTLY REIMBURSED FOR SUCH COSTS AND
EXPENSES BY BORROWER. THE AGREEMENTS CONTAINED IN THIS SECTION SHALL SURVIVE
PAYMENT IN FULL OF ALL SECURED OBLIGATIONS.
Section 17.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Credit
Party agrees that it has, independently and without reliance on any other
Credit Party, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Loan Parties and their
Subsidiaries and decision to enter into this Agreement and that it will,
independently and
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without reliance upon any other Credit Party, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under the Loan
Documents. Except for notices, reports and other documents and information
expressly required to be furnished to any Credit Party by Agent hereunder,
Agent shall not have any duty or responsibility to provide any Credit Party
with any credit or other information concerning the affairs, financial
condition or business of any Loan Party or any of its Subsidiaries or
Affiliates that may come into the possession of Agent or any of its
Affiliates.
Section 17.7 RESIGNATION OF AGENT. Agent may resign at any time by
giving notice thereof to the Lenders and Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment within thirty (30) days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be
a commercial bank organized under the laws of the U.S. having combined
capital and surplus of at least $100,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor, such successor shall thereupon
succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this ARTICLE 17
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
ARTICLE 18
MISCELLANEOUS
Section 18.1 NOTICES.
(a) METHOD OF COMMUNICATION. Except as specifically provided in this
Agreement or in any of the other Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by
telephone, subsequently confirmed in writing. Notices in writing shall be
delivered personally or sent by certified or registered mail, postage
prepaid, or by overnight courier, telex or facsimile transmission and shall
be deemed received in the case of personal delivery, when delivered, in the
case of mailing, when receipted for, in the case of overnight delivery, on
the next Business Day after delivery to the courier, and in the case of
telex and facsimile transmission, upon transmittal, PROVIDED that in the
case of notices to Agent, notice shall be deemed to have been given only
when such notice is actually received by Agent. A telephonic notice to
Agent, as understood by Agent, will be deemed to be the controlling and
proper notice in the event of a discrepancy with or failure to receive a
confirming written notice.
(b) ADDRESSES FOR NOTICES. Notices to any party shall be sent to it
at the following addresses, or any other address of which all the other
parties are notified in writing
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IF TO BORROWER:
DELIVERY ADDRESS:
Kerr Group, Inc. Kerr Group, Inc.
500 New Holland Avenue 500 New Holland Avenue
Lancaster, Pennsylvania 17602 Lancaster, Pennsylvania 17602
Attn: Geoffry A. Whynot Attn: Geoffry A. Whynot
Facsimile No.: (717) 394-6398
WITH A COPY TO:
DELIVERY ADDRESS:
Fremont Acquisition Corporation Fremont Acquisition Corporation
Fifty Fremont Street, Suite 3700 Fifty Fremont Street, Suite 3700
San Francisco, California 94105 San Francisco, California 94105
Attn: Gregory P. Spivy Attn: Gregory P. Spivy
Facsimile No.: (415) 284-8191
IF TO AGENT:
DELIVERY ADDRESS:
NationsBank of Texas, N.A. NationsBank of Texas, N.A.
P. O. Box 830732 901 Main Street, 6th Floor
Dallas, Texas 75283-0732 Dallas, Texas 75202
Attn: Business Credit/Regional Attn: Business Credit/Regional
Manager: URGENT Manager: URGENT
Facsimile No.: (214) 508-3501
WITH A COPY TO:
DELIVERY ADDRESS:
Jenkens & Gilchrist, P.C. Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200 1445 Ross Avenue, Suite 3200
Dallas, Texas 75202 Dallas, Texas 75202
Attn: Daniel C. Garner, Esq. Attn: Daniel C. Garner, Esq.
Facsimile No.: 214-855-4300
IF TO A LENDER: At the address of such Lender set forth on the signature
pages hereof.
(c) PRINCIPAL OFFICE. Agent hereby designates its office located at
901 Main Street, Dallas, Dallas County, Texas 75202, or any subsequent
office which shall have been specified for such purpose by written notice
to Borrower, as the office to which payments due are to be made and at
which Loans will be disbursed.
Section 18.2 EXPENSES. Borrower agrees to pay or reimburse on demand
all costs and expenses incurred by Agent, NationsBank or its Affiliates,
including, without limitation, the reasonable fees and disbursements of
counsel, in connection with the following:
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(a) the negotiation, preparation, execution, delivery,
administration, enforcement and termination of this Agreement and each of
the other Loan Documents, whenever the same shall be executed and
delivered, including, without limitation, the following:
(i) the out-of-pocket costs and expenses incurred in connection
with the administration and interpretation of this Agreement and the
other Loan Documents;
(ii) the costs and expenses of appraisals of the Collateral;
(iii) the costs and expenses of lien and title searches and
title insurance;
(iv) the costs and expenses of environmental reports with respect
to the Real Estate; and
(v) taxes, fees and other charges for recording the Mortgages,
filing the Financing Statements and continuations and the costs and
expenses of taking other actions to perfect, protect and continue the
Security Interests;
(b) the preparation, execution and delivery of any waiver, amendment,
supplement or consent by Agent and the Lenders relating to this Agreement
or any of the Loan Documents;
(c) sums paid or incurred to pay any amount or take any action
required of Borrower under the Loan Documents that Borrower fails to pay or
take;
(d) costs of inspections and verifications of the Collateral,
including, without limitation, standard per diem fees charged by Agent,
travel, lodging and meals for inspections of the Collateral and Borrower's
operations and books and records by Agent's agents up to four (4) times per
year and whenever an Event of Default exists;
(e) costs and expenses of forwarding loan proceeds, collecting checks
and other items of payment, and establishing and maintaining each
Disbursement Account, Agency Account and Lockbox;
(f) costs and expenses of preserving and protecting the Collateral;
(g) consulting, after the occurrence of a Default, with one or more
Persons, including appraisers, accountants and lawyers, concerning the
value of any Collateral for the Secured Obligations or related to the
nature, scope or value of any right or remedy of Agent or any Lender
hereunder or under any of the Loan Documents, including any review of
factual matters in connection therewith, which expenses shall include the
fees and disbursements of such Persons;
(h) reasonable costs and expenses paid or incurred to obtain payment
of the Secured Obligations, enforce the Security Interests, sell or
otherwise realize upon the
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Collateral, and otherwise enforce the provisions of the Loan Documents, or
to prosecute or defend any claim in any way arising out of, related to or
connected with this Agreement or any of the other Loan Documents, which
expenses shall include the reasonable fees and disbursements of counsel
and of experts and other consultants retained by Agent or any Lender; and
(i) all reasonable attorney's fees and expenses (including, without
limitation, the cost of internal counsel) incurred in connection with any
of the foregoing.
The foregoing shall not be construed to limit any other provisions of the
Loan Documents regarding costs and expenses to be paid by Borrower. Borrower
hereby authorizes Agent to debit Borrower's Loan Accounts (by increasing the
principal amount of the Revolving Credit Loan) in the amount of any such
costs and expenses owed by Borrower when due. Without prejudice to the
survival of any other agreement of Borrower hereunder, the agreements and
obligations of Borrower contained in this SECTION 18.2 shall survive the
payment in full of the Loans and all other amounts payable under this
Agreement.
Section 18.3 STAMP AND OTHER TAXES. Borrower will pay any and all
stamp, registration, recordation and similar taxes, fees or charges and shall
indemnify Agent and the Lenders against any and all liabilities with respect
to or resulting from any delay in the payment or omission to pay any such
taxes, fees or charges, which may be payable or determined to be payable in
connection with the execution, delivery, performance or enforcement of this
Agreement and any of the Loan Documents or the perfection of any rights or
security interest thereunder, including, without limitation, the Security
Interest.
Section 18.4 RIGHT OF SET-OFF; ADJUSTMENTS.
(a) Upon the occurrence and during the continuance of any Event of
Default, each Lender (and each of its Affiliates) is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other Indebtedness at any time
owing by such Lender (or any of its Affiliates) to or for the credit or the
account of Borrower against any and all of the obligations of Borrower now
or hereafter existing under this Agreement and the Notes held by such
Lender, irrespective of whether such Lender shall have made any demand
under this Agreement or such Notes and although such obligations may be
unmatured. Each Lender agrees promptly to notify Borrower after any such
set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender may have.
(b) If any Lender (a "BENEFITTED LENDER") shall at any time receive
any payment of all or part of the Loans owing to it, or interest thereon,
or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off or otherwise), in a greater
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proportion than any such payment to or Collateral received by any other
Lender, if any, in respect of such other Lender's Loans owing to it, or
interest thereon, such Benefitted Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender's Loans owing to it, or shall provide such other Lenders with the
benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds ratably with each of the Lenders;
PROVIDED, HOWEVER, that if all or any portion of such excess payment or
benefit is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest. Borrower agrees that any
Lender so purchasing a participation from a Lender pursuant to this
SECTION 18.4 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 Person were the direct creditor of
Borrower in the amount of such participation.
Section 18.5 LITIGATION; WAIVER OF TRIAL BY JURY. EACH OF BORROWER,
AGENT AND THE LENDERS HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVES
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT
IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST BORROWER, AGENT OR ANY
LENDER ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, THE
COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR
DISPUTE WHATSOEVER BETWEEN BORROWER AND AGENT OR ANY LENDER OF ANY KIND OR
NATURE. EACH SUCH PARTY ACKNOWLEDGES THAT SUCH WAIVER IS MADE WITH FULL
KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED
HEREBY AND WITH THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING. BORROWER,
AGENT AND THE LENDERS HEREBY AGREE THAT THE FEDERAL COURT OF THE NORTHERN
DISTRICT OF TEXAS OR, AT THE OPTION OF AGENT OR ANY LENDER, ANY COURT IN
WHICH AGENT OR SUCH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL
HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN BORROWER AND AGENT OR SUCH LENDER, PERTAINING DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING
THEREFROM. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. WITHOUT
LIMITING THE APPLICABILITY OF ANY LAW PROVIDING FOR SERVICE OF PROCESS UPON A
STATUTORY AGENT AND NOTIFICATION THEREOF BY MAIL, BORROWER HEREBY WAIVES (TO
THE FULLEST EXTENT ALLOWED BY LAW) PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS ISSUED THEREIN AND AGREES (TO THE
FULLEST EXTENT ALLOWED BY LAW) THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED
TO
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BORROWER AT THE ADDRESS OF BORROWER SET FORTH IN SECTION 18.1. SHOULD
BORROWER FAIL TO APPEAR OR ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS
SO SERVED WITHIN THIRTY (30) DAYS AFTER THE MAILING THEREOF, IT SHALL BE
DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS
DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE
NONEXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING
OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY APPROPRIATE
JURISDICTION.
Section 18.6 REVERSAL OF PAYMENTS. Agent and each Lender shall have
the continuing and exclusive right to apply, reverse and re-apply any and all
payments to any portion of the Secured Obligations in a manner consistent
with the terms of this Agreement. To the extent Borrower makes a payment or
payments to Agent, for the account of the Credit Parties, or any Credit Party
receives any payment or proceeds of the Collateral for Borrower's benefit,
which payment(s) or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Secured Obligations or
part thereof intended to be satisfied shall be revived and continued in full
force and effect, as if such payment or proceeds had not been received by
Agent or such other Credit Party.
Section 18.7 INJUNCTIVE RELIEF. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to Agent and the other Credit Parties; therefore, Borrower
agrees that if any Event of Default shall have occurred and be continuing,
Agent and the other Credit Parties, if Agent or any other Credit Party so
requests, shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damages.
Section 18.8 ACCOUNTING MATTERS. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by
Borrower to determine whether it is in compliance with any covenant contained
herein, shall, unless this Agreement otherwise provides or unless Required
Lenders shall otherwise consent in writing, be performed in accordance with
GAAP.
Section 18.9 AMENDMENTS.
(a) Except as set forth in SUBSECTION (b) below, any term, covenant,
agreement or condition of this Agreement or any of the other Loan Documents
may be amended or waived, and any departure therefrom may be consented to
by the Required Lenders, if, but only if, such amendment, waiver or consent
is in writing signed by the Required Lenders and, in the case of an
amendment (other than an amendment described in SECTION 18.9(d)), by
Borrower, and in any such event, the failure to observe, perform or
discharge any such term, covenant, agreement or condition (whether such
amendment is executed or such
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waiver or consent is given before or after such failure) shall not be
construed as a breach of such term, covenant, agreement or condition or
as a Default or an Event of Default. Unless otherwise specified in such
waiver or consent, a waiver or consent given hereunder shall be effective
only in the specific instance and for the specific purpose for which given.
In the event that any such waiver or amendment is requested by Borrower,
Agent and the Lenders may require and charge a fee in connection therewith
and consideration thereof in such amount as shall be determined by Agent
and the Required Lenders in their discretion.
(b) Except as otherwise set forth in this Agreement, without the
prior unanimous written consent of the Lenders,
(i) no amendment, consent or waiver shall affect the amount or
extend the time of the obligation of the Lenders to make Loans or
extend the originally scheduled time or times of payment of the
principal of any Loan or alter the time or times of payment of
interest on any Loan or the amount of the principal thereof, whether
scheduled or a mandatory prepayment, or the rate of interest thereon
or the amount of any commitment fee payable hereunder, or other fees
payable ratably to the Lenders hereunder, or permit any subordination
of the principal or interest on such Loan, permit the subordination of
the Security Interests in any material Collateral or amend the
provisions of ARTICLE 15 or of this SECTION 18.9(b),
(ii) no material Collateral shall be released by Agent other than
as specifically permitted in this Agreement;
(iii) except to the extent expressly provided herein, the
definition of "Borrowing Base" shall not be amended;
(iv) no Guarantor shall be released of its obligations under its
Affiliate Guaranty; or
(v) amend the Termination Date with respect to any Loan;
PROVIDED, HOWEVER, that anything herein to the contrary notwithstanding,
Required Lenders shall have the right to waive any Default or Event of
Default and the consequences hereunder of such Default or Event of Default
and shall have the right to enter into an agreement with Borrower or any
Guarantor providing for the forbearance from the exercise of any remedies
provided hereunder or under the other Loan Documents without waiving any
Default or Event of Default.
(c) The making of Loans hereunder by the Lenders, or the issuance of
any Letter of Credit by L/C Issuer, during the existence of a Default or
Event of Default shall not be deemed to constitute a waiver of such Default
or Event of Default.
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(d) Notwithstanding any provision of this Agreement or the other Loan
Documents to the contrary, no consent, written or otherwise, of Borrower
shall be necessary or required in connection with any amendment to ARTICLE
17 or SECTION 6.8, and any amendment to such provisions shall be effected
solely by and among Agent and the lenders, PROVIDED that no such amendment
shall impose any obligation on Borrower.
(e) Notwithstanding any provision of this Agreement to the contrary,
no consent of Borrower or any Lender, other than the affected Lenders,
shall be necessary or required in connection with any amendment of the
amount of a Lender's Commitment.
SECTION 18.10 ASSIGNMENT. All the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights under this Agreement.
SECTION 18.11 PERFORMANCE OF BORROWER'S DUTIES.
(a) Borrower's obligations under this agreement and each of the Loan
Documents shall be performed by Borrower at its sole cost and expense.
(b) If Borrower shall fail to do any act or thing which it has
covenanted to do under this Agreement or any of the other Loan Documents,
Agent, on behalf of the Lenders, may (but shall not be obligated to) do the
same or cause it to be done either in the name of Agent or the Lenders or
in the name and on behalf of Borrower, and Borrower hereby irrevocably
authorizes Agent so to act.
SECTION 18.12 INDEMNIFICATION.
(a) BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS AGENT AND EACH
OTHER CREDIT PARTY AND EACH OF THEIR AFFILIATES AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND ADVISORS (EACH, AN "INDEMNIFIED
PARTY") FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES,
COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS'
FEES AND EXPENSES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST
ANY INDEMNIFIED PARTY, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR
BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY
INVESTIGATION, LITIGATION OR PROCEEDING OR PREPARATION OF DEFENSE IN
CONNECTION THEREWITH) THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE
LOANS (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE
INDEMNIFIED PARTY), EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS,
LIABILITY, COST OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY
A COURT OF COMPETENT JURISDICTION TO HAVE
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RESULTED FROM SUCH INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER
PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 18.12 APPLIES, SUCH
INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION,
LITIGATION OR PROCEEDING IS BROUGHT BY BORROWER, ITS DIRECTORS,
SHAREHOLDERS OR CREDITORS OR AN INDEMNIFIED PARTY OR ANY OTHER PERSON OR
ANY INDEMNIFIED PARTY IS OTHERWISE A PARTY THERETO AND WHETHER OR NOT THE
TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED. BORROWER AGREES NOT TO
ASSERT ANY CLAIM AGAINST AGENT, ANY OTHER CREDIT PARTY, ANY OF THEIR
AFFILIATES OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
ATTORNEYS, AGENTS AND ADVISERS, ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE
RELATING TO THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN
OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE LOANS.
(B) WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER AGREEMENT OF
BORROWER HEREUNDER, THE AGREEMENTS AND OBLIGATIONS OF BORROWER CONTAINED IN
THIS SECTION 18.12 SHALL SURVIVE THE PAYMENT IN FULL OF THE LOANS AND ALL
OTHER AMOUNTS PAYABLE UNDER THIS AGREEMENT.
SECTION 18.13 ALL POWERS COUPLED WITH INTEREST. All powers of attorney
and other authorizations granted to Agent and the other Credit Parties and any
Persons designated by Agent or the other Credit Parties pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the Secured
Obligations remain unpaid or unsatisfied.
SECTION 18.14 SURVIVAL. Notwithstanding any termination of this
Agreement,
(A) until all Secured Obligations have been irrevocably paid in full
or otherwise satisfied, Agent, for the benefit of the Credit Parties, shall
retain its Security Interest and shall retain all rights under this
Agreement and each of the Security Documents with respect to such
Collateral as fully as though this Agreement had not been terminated,
(B) the indemnities to which Agent and the other Credit Parties are
entitled under the provisions of this ARTICLE 18 and any other provision of
this Agreement and the other Loan Documents shall continue in full force
and effect and shall protect Agent and the other Credit Parties against
events arising after such termination as well as before, and
(C) in connection with the termination of this Agreement and the
release and termination of the Security Interests, Agent, on behalf of
itself as agent and the other Credit Parties, may require such assurances
and indemnities as it shall reasonably deem
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necessary or appropriate to protect agent and the other credit parties
against loss on account of such release and termination, including,
without limitation, with respect to credits previously applied to the
secured obligations that may subsequently be reversed or revoked.
SECTION 18.15 TITLES AND CAPTIONS. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 18.16 SEVERABILITY OF PROVISIONS. Any provision of this Agreement
or any Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remainder of such
provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 18.17 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
PROVIDED THAT TO THE EXTENT FEDERAL LAW WOULD ALLOW A HIGHER RATE OF INTEREST
THAN WOULD BE ALLOWED BY THE LAWS OF THE STATE OF TEXAS, THEN WITH RESPECT TO
THE PROVISIONS OF ANY LAWS WHICH PURPORT TO LIMIT THE AMOUNT OF INTEREST THAT
MAY BE CONTRACTED FOR, CHARGED OR RECEIVED IN CONNECTION WITH ANY OF THE SECURED
OBLIGATIONS, SUCH FEDERAL LAW SHALL APPLY.
Section 18.18 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
Section 18.19 REPRODUCTION OF DOCUMENTS. This Agreement, each of the Loan
Documents and all documents relating thereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed,
(b) documents received by Agent or any other Credit Party, and (c) financial
statements, certificates and other information previously or hereafter furnished
to agent or any other credit party, may be reproduced by Agent or such Credit
Party by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and such Person may destroy any original
document so produced. Each party hereto stipulates that, to the extent
permitted by Applicable Law, any such reproduction shall be as admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original shall be in existence and whether or not such
reproduction was made by Agent or such other Credit Party in the regular course
of business), and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
Section 18.20 TERM OF AGREEMENT. This Agreement shall remain in effect
from the Agreement Date through the Termination Date and thereafter until all
Secured Obligations shall
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have been irrevocably paid and satisfied in full. No termination of this
agreement shall affect the rights and obligations of the parties hereto
arising prior to such termination.
SECTION 18.21 PRO-RATA PARTICIPATION.
(a) Each Lender agrees that
(i) if it or any of its Affiliates shall exercise any right of
counterclaim, set-off, banker's lien or similar right, or if under any
applicable bankruptcy, insolvency or other similar law it receives a
secured claim the security for which is a debt owed by it to Borrower,
it shall apportion the amount thereof, on a pro rata basis, between
(A) amounts at the time owed to it by Borrower under this Agreement,
and (B) amounts otherwise owed to it by Borrower, and
(ii) if, as a result of the exercise of a right or the receipt of
a secured claim and the apportionment thereof described in CLAUSE (i)
of this SECTION 18.21(a) or otherwise, it shall receive payment of a
proportion of the aggregate amount of principal and interest due with
respect to the Secured Obligations owed to it under this Agreement
greater than the proportion of such amounts then received by any other
Lender, such Lender shall purchase a participation (which it shall be
deemed to have purchased simultaneously upon the receipt of such
payment) in the Secured Obligations then held by the other Lenders so
that all such recoveries of principal and interest with respect to all
Secured Obligations owed to each Lender shall be pro rata on the basis
of its respective amount of the Secured Obligations owed to all
Lenders, provided that if all or part of such proportionately greater
payment received by such purchasing Lender is thereafter recovered by
or on behalf of Borrower from such Lender, such purchase shall be
rescinded and the purchase price paid for such participation shall be
returned to such lender to the extent of such recovery, but without
interest.
(b) Each Lender which receives such a secured claim shall exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this SECTION 18.21 to share in the
benefits of any recovery on such secured claim.
(c) Borrower expressly consents to the foregoing arrangements and
agrees that any holder of a participation in any Secured Obligation so
purchased or otherwise acquired may exercise any and all rights of banker's
lien, set-off or counterclaim with respect to any and all monies owing by
Borrower to such holder as fully as if such holder were a holder of such
Secured Obligation in the amount of the participation held by such holder.
Section 18.22 INTEREST LIMITATION. In no contingency or event whatsoever
shall the amount of interest under the Loan Documents paid by Borrower, received
by the Lenders, agreed to be paid by Borrower, or requested or demanded to be
paid by the Lenders, exceed the maximum rate. In the event any such sums paid
to Lender by Borrower would exceed the Maximum Rate,
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Lender shall automatically apply such excess to any unpaid amount of the
Secured Obligations or, if the amount of such excess exceeds said unpaid
amount, such excess shall be paid to Borrower. All sums paid, or agreed to
be paid, by Borrower which are or hereafter may be construed to be
compensation for the use, forbearance or detention of money shall be
amortized, prorated, spread and allocated in respect of the Secured
Obligations throughout the full term of this agreement until the Secured
Obligations are paid in full. Notwithstanding any provisions contained in
the Loan Documents, or in any Notes or other related documents executed
pursuant hereto, the Lenders shall never be entitled to receive, collect or
apply as interest any amount in excess of the Maximum Rate and, in the event
any Lender ever receives, collects or applies any amount in respect of
Borrower that otherwise would be in excess of the Maximum Rate, such amount
shall automatically be deemed to be applied in reduction of the unpaid
principal balance of the Secured Obligations and, if such principal balance
is paid in full, any remaining excess shall forthwith be paid to Borrower.
In determining whether or not the interest paid or payable under any specific
contingency exceeds the Maximum Rate, Borrower and Lender shall, to the
maximum extent permitted under Applicable Law, (i) characterize any
non-principal payment as a standby fee, commitment fee, prepayment charge,
delinquency charge or reimbursement for a third-party expense rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and
(iii) amortize, prorate, allocate and spread in equal parts throughout the
entire period during which the Secured Obligations were outstanding the total
amount of interest at any time contracted for, charged or received. Nothing
herein contained shall be construed or so operate as to require Borrower to
pay any interest, fees, costs or charges greater than is permitted by
applicable law. Subject to the foregoing, Borrower hereby agrees that the
actual effective rate of interest from time to time existing with respect to
loans made by the Lenders to Borrower, including all amounts agreed to by
Borrower or charged or received by the Lenders, which may be deemed to be
interest under Applicable Law, shall be deemed to be a rate which is agreed
to and stipulated by Borrower and the Lenders in accordance with applicable
law.
Section 18.23 CONFIDENTIALITY. Each Credit Party agrees to keep
confidential any information furnished or made available to it by Borrower
pursuant to this Agreement that is marked confidential; PROVIDED that nothing
herein shall prevent any Credit Party from disclosing such information (a) to
any other Credit Party or any Affiliate of any Credit Party, or any officer,
director, employee, agent or advisor of any Credit Party or Affiliate of any
Credit Party, (b) to any other person if reasonably incidental to the
administration of the credit facilities provided herein, (c) as required by any
Applicable Law, (d) upon the order, request or demand of any Governmental
Authority, (e) that is or becomes available to the public or that is or becomes
available to any Credit Party other than as a result of a disclosure by any
Credit Party prohibited by this Agreement, (f) in connection with any litigation
to which such Credit Party or any of its Affiliates may be a party, (g) to the
extent necessary in connection with the exercise of any remedy under this
Agreement or any other Loan Document, and (h) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.
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THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers in several counterparts all as of the
day and year first written above.
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BORROWER:
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
---------------------------------------
Name: Geoffrey A. Whynot
--------------------------------
Title: Vice President and Chief
Financial Officer
--------------------------------
AGENT:
NATIONSBANK OF TEXAS, N.A.
By: /s/ Anne E. Carbone
---------------------------------------
Anne E. Carbone
Senior Vice President
Address: 901 Main Street, 6th Floor
Dallas, TexaS 75202
Attn: Business Credit/RegionaL
Manager: URGENT
Facsimile No.: (214) 508-0480
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LENDERS:
Commitment NATIONSBANK OF TEXAS, N.A.,
Amount: $62,000,000.00 as a Lender and as L/C Issuer
By: /s/ Anne E. Carbone
---------------------------------------
Anne E. Carbone
Senior Vice President
Address for Notices:
:
901 Main Street, 6th Floor
Dallas, Texas 75202
Attn: Business Credit/Regional
Manager: URGENT
Facsimile No.: (214) 508-0480
Applicable Lending Office for Base Rate
Loans:
901 Main Street, 6th Floor
Dallas, Texas 75202
Attn: Business Credit/Regional
Manager: URGENT
Facsimile No.: (214) 508-0480
Applicable Lending Office for Eurodollar
Loans:
901 Main Street, 6th Floor
Dallas, Texas 75202
Attn: Business Credit/Regional
Manager: URGENT
Facsimile No.: (214) 508-0480
139
<PAGE>
Commitment _____________________________________
Amount: $_______________
By:__________________________________
Name:___________________________
Title:__________________________
Address for Notices: ________________
________________
Attn:__________________
Facsimile No.:_________
Applicable Lending Office for Base Rate
Loans:
________________________________
________________________________
________________________________
Applicable Lending Office for Eurodollar
Loans:
________________________________
________________________________
________________________________
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<PAGE>
Commitment _____________________________________
Amount: $_______________
By:__________________________________
Name:___________________________
Title:__________________________
Address for Notices: ________________
________________
Attn:__________________
Facsimile No.:_________
Applicable Lending Office for Base Rate
Loans:
________________________________
________________________________
________________________________
Applicable Lending Office for Eurodollar
Loans:
________________________________
________________________________
________________________________
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NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
- --------------------------------------------------------------------------------
GUARANTY AGREEMENT
(Kerr Acquisition Corporation)
This Guaranty Agreement ("GUARANTY"), is executed effective and delivered
as of August 26, 1997, by KERR ACQUISITION CORPORATION, a Delaware corporation
whose principal place of business is located at 50 Fremont Street, Suite 3700,
San Francisco, California 94105, to and for the benefit of NATIONSBANK OF TEXAS,
N.A., a national banking association, in its capacity as Agent (as defined
herein) for and on behalf of the Credit Parties (as defined herein), whose
principal place of business is located in Dallas County, Texas, as follows:
DEFINITIONS:
"AGENT" means NationsBank of Texas, N.A., a national banking association,
as agent pursuant to the Loan and Security Agreement, whose principal place
of business is located at 901 Main Street, Dallas, Texas 75202, or such
successor agent as may be appointed pursuant to the Loan and Security
Agreement.
"BORROWER" means Kerr Group, Inc., a Delaware corporation, with its
principal place of business located at 500 New Holland Avenue, Lancaster,
Pennsylvania 17602-2104 and its successors and permitted assigns.
"GUARANTEED OBLIGATIONS" means (i) all indebtedness, obligations and
liabilities at any time, from time to time, included within the "Secured
Obligations" (as defined in the Loan and Security Agreement, which
definition is incorporated herein by reference), including, without
limitation, all unpaid principal and accrued interest on the Loans as
evidenced by each and all of the Notes and the Letter of Credit Obligations
(all of such Notes and Letter of Credit Obligations whether now existing or
hereafter arising), and all other fees, costs, expenses (including, without
limitation, reasonable attorneys' fees and expenses and other legal costs)
and other monetary obligations of Borrower under the Loan Documents, now
existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several or
joint and several, and (ii) all renewals, extensions, modifications,
rearrangements and increases of the indebtedness, liabilities and
obligations described in clauses (i) and (ii) above. The "Guaranteed
Obligations" include, without limitation, all indebtedness, obligations and
liabilities of the type or nature described above in accordance with the
Loan Documents, at any time owing by any predecessor or successor of
Borrower, specifically including, without limitation, Borrower as survivor
of the Merger.
"GUARANTOR" means Kerr Acquisition Corporation, a Delaware corporation,
with its principal place of business located at 50 Fremont Street, Suite
3700, San Francisco, California 94105.
<PAGE>
"LENDER" shall have the meaning prescribed for such term by the Loan and
Security Agreement, which definition is incorporated herein by reference
and, as of the effective date hereof, includes NationsBank and its
successors and permitted assigns, and also includes any other Person who
hereafter becomes a "Lender" as defined in and provided by the Loan and
Security Agreement.
"LOAN AND SECURITY AGREEMENT" means the certain Loan and Security Agreement
of even date herewith among Agent, the Lenders from time to time party
thereto, L/C Issuer (as defined therein) and Borrower, as such agreement
may be renewed, extended, modified, amended or restated from time to time.
"LOAN DOCUMENTS" means the "Loan Documents" as defined by the Loan and
Security Agreement.
"NATIONSBANK" means NationsBank of Texas, N.A., a national banking
association, in its individual corporate capacity as a Lender, whose
principal place of business is located at 901 Main Street, Dallas, Texas
75202.
Unless otherwise defined above, terms defined in the Loan and Security
Agreement, wherever used herein, shall have the same meanings in this
Guaranty as are set forth in the Loan and Security Agreement. Guarantor
expressly acknowledges that it has read and is familiar with all such
incorporated definitions and that incorporation of same herein shall be
deemed to have the same effect and enforceability as though each of such
incorporated definitions is set forth herein at length.
RECITALS:
A. Borrower, Agent, L/C Issuer and NationsBank have executed and entered
into the Loan and Security Agreement, which provides for Loans by the Lenders to
Borrower and for the issuance of Letters of Credit by L/C Issuer on the terms
and conditions prescribed therein.
B. This Guaranty is required by the Loan and Security Agreement and
Guarantor's execution and delivery hereof is a condition (among other
conditions) to Loans and Letters of Credit under the Loan and Security
Agreement.
C. Guarantor has determined that (i) it will directly and indirectly
benefit from the availability of financing to Borrower thereunder and under the
other transactions evidenced by and contemplated in the Loan Documents, (ii) it
will benefit, directly and indirectly, from executing and delivering this
Guaranty, and (iii) it is in Guarantor's best interest, and within its corporate
purpose, to execute and deliver and, if called upon, to perform this Guaranty.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor hereby agrees as follows:
1. GUARANTY OF GUARANTEED OBLIGATIONS. This Guaranty is executed by
Guarantor pursuant to the Loan and Security Agreement and is for the benefit of
Agent and the other Credit Parties. As an inducement to the Lenders to make
Loans and extend and continue to extend credit and other financial
accommodations to Borrower under the Loan Documents,
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and to L/C Issuer to provide Letters of Credit for the account of Borrower,
Guarantor, for value received, does hereby unconditionally, irrevocably and
absolutely guarantee the prompt and full payment and performance of the
Guaranteed Obligations when due or declared to be due and at all times
thereafter.
2. NATURE OF GUARANTY. This Guaranty is and shall be an absolute,
unconditional, irrevocable and continuing unlimited guaranty of payment, and not
solely of collection. Guarantor guarantees that the Guaranteed Obligations will
be paid strictly in accordance with the terms of the Loan and Security
Agreement, the Notes and the other Loan Documents, without setoff or
counterclaim, and regardless of any Applicable Law now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of the Credit Parties
with respect thereto. The Guaranteed Obligations may be increased, reduced or
paid in full at any time and from time to time without affecting the liability
or obligation of Guarantor under this Guaranty with respect to all Guaranteed
Obligations, whenever incurred or arising. All Guaranteed Obligations now or
hereafter arising shall be conclusively presumed to have been made or acquired
in acceptance hereof. Guarantor shall be liable, jointly and severally, with
Borrower and any other Person now or hereafter obligated in respect of the
Guaranteed Obligations, or any portion thereof. It is the intention of
Guarantor and Agent that Guarantor's liabilities and obligations hereunder shall
not be discharged except by Guarantor's full and complete payment and
performance of such liabilities and obligations and then only to the extent of
such payment and performance (to the extent not otherwise satisfied by Borrower
or any other Person now or hereafter obligated in respect of the Guaranteed
Obligations).
3. REPRESENTATIONS AND WARRANTIES. In connection with this Guaranty,
Guarantor hereby represents and warrants to Lender that:
(a) Guarantor owns not less than 51.0% of Borrower's Capital Stock on
an as converted and fully diluted basis; Guarantor has received and will
receive a direct and indirect material benefit from the transactions
evidenced by and contemplated in the Loan and Security Agreement and the
other Loan Documents; this Guaranty is given by Guarantor in furtherance of
the direct and indirect business interests and corporate purposes of
Guarantor, and is necessary to the conduct, promotion and attainment of the
businesses of Borrower and Guarantor; and, the value of the consideration
received and to be received by Guarantor is reasonably worth at least as
much as the liability and obligation of Guarantor hereunder.
(b) Guarantor (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its
incorporation, (ii) is duly qualified and in good standing under the laws
of each jurisdiction in which the failure to so qualify has a reasonable
likelihood of having a Materially Adverse Effect, (iii) has all requisite
corporate power and authority to own its properties, to lease the property
it operates under lease and to conduct its business as now or currently
proposed to be conducted, (iv) is in compliance with its Certificate of
Incorporation and bylaws, (v) is in compliance with all other requirements
of Applicable Law except for such noncompliance as in the aggregate would
not have a Materially Adverse Effect, and (vi) has all Governmental
Approvals necessary for the ownership, operation and conduct of its
business.
3
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(c) The execution, delivery and performance by Guarantor of this
Guaranty and any other Loan Document to which it is a party: (i) are
within its corporate power; (ii) have been duly authorized by all
necessary corporate action, including, without limitation, the consent of
its board of directors or stockholders where required; and (iii) do not
and will not (A) contravene its Certificate of Incorporation or bylaws or
other comparable governing documents, (B) violate any Applicable Law
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System), or any order or decree of any
Governmental Authority except to the extent that any such violation could
not reasonably be expected to have a Materially Adverse Effect, (C)
conflict with or result in the breach of, or constitute a default under,
or result in or permit the termination or acceleration of, any material
contract, agreement or instrument to which Guarantor is a party or which
may be applicable to Guarantor or any of its assets, (D) result in the
creation or imposition of any Lien upon any of its property other than
those in favor of Agent for the benefit of the Credit Parties and Liens
permitted by the Loan and Security Agreement, or (E) require the consent
of, authorization by, approval of, notice to, or filing or registration
with, any Governmental Authority or any other Person, except to the
extent that the failure to obtain such consent or approval could not
reasonably be expected to have a Materially Adverse Effect.
(d) All acts and conditions required to be performed and satisfied
prior to the creation and issuance of this Guaranty, and to constitute
this Guaranty as the legal, valid and binding obligation of Guarantor in
accordance with its terms, have been performed and satisfied in due and
strict compliance with Applicable Law. This Guaranty has been duly
executed and delivered by Guarantor and is the legal, valid and binding
obligation of Guarantor enforceable against it in accordance with its
terms, subject to Applicable Law regarding insolvency (only insofar as
any such Applicable Law relates to the bankruptcy, insolvency or similar
event of Guarantor).
(e) There are no pending or, to the knowledge of Guarantor,
threatened actions, investigations or proceedings to which Guarantor or
any of its Subsidiaries (excluding Borrower) is or could reasonably be
expected to become a party or, to Guarantor's knowledge, affecting
Guarantor or any of its Subsidiaries (excluding Borrower) before any
Governmental Authority with respect to which there is a reasonable
likelihood of an adverse determination and that, if adversely determined,
is reasonably likely to have a Material Adverse Effect. The performance
by Guarantor under this Guaranty and under any other Loan Document to
which it is a party is not restrained or enjoined (either temporarily,
preliminarily or permanently) and no material adverse conditions have
been imposed by any Governmental Authority upon any of the foregoing
transactions.
(f) Guarantor is currently informed of the financial condition of
Borrower and any and all other Persons obligated in respect of the
Guaranteed Obligations and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Guaranteed Obligations. Guarantor has read and understands the terms and
conditions of the Loan Documents. Guarantor is familiar with, and has
independently reviewed the books and records regarding, the financial
condition of Borrower and is familiar with the value of any and all
property intended to be security
4
<PAGE>
for the payment of all or any part of the Guaranteed Obligations; PROVIDED,
HOWEVER, Guarantor is not relying on such financial condition or the
existence or value of any such security as an inducement to enter into this
Guaranty. Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower. Guarantor has not been induced to enter into this Guaranty on
the basis of a contemplation, belief, understanding or agreement that any
Person other than Guarantor will be liable to pay the Guaranteed
Obligations. Neither Agent, nor any other Credit Party, has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty.
4. COVENANTS. Throughout the term of and in any event until payment and
performance in full of the Guaranteed Obligations (unless otherwise allowed by
prior written consent of Agent):
(a) Guarantor will keep itself informed of the financial condition of
Borrower and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Guaranteed Obligations, without
reliance upon any Credit Party.
(b) Guarantor will not engage in any business, activity or operations
other than owning and holding the Capital Stock of Borrower and acting as
Guarantor in respect of the Guaranteed Obligations, and activities directly
related to the foregoing.
(c) Guarantor will not merge or consolidate with or into any Person;
PROVIDED, that Guarantor shall be permitted to merge with and into
Borrower, with Borrower being the surviving corporation, pursuant to the
terms of the Acquisition Documents.
5. OBLIGATIONS NOT IMPAIRED. Guarantor agrees that its obligations
hereunder shall not be released, diminished, impaired, reduced or affected by
the occurrence of any one or more of the following events: (i) lack of
corporate power of Borrower, Guarantor or any other Loan Party of all or any
part of the Guaranteed Obligations, (ii) any receivership, insolvency,
bankruptcy or other proceedings affecting Borrower, Guarantor or any other Loan
Party of all or any part of the Guaranteed Obligations, or any of their
respective property; (iii) the partial or total release or discharge of Borrower
or any other Loan Party of all or any part of the Guaranteed Obligations, or any
other Person from the performance of any obligation contained in any instrument
or agreement evidencing, governing or securing all or any part of the Guaranteed
Obligations, whether occurring by reason of law or otherwise; (iv) any change in
the time, manner or place of payment of, or in any other term of, or any
increase in the amount of, all the Guaranteed Obligations, or any portion
thereof, or any other amendment or waiver of any term of, or any consent to
departure from any requirement of, any of the Loan Documents; (v) the taking or
accepting of any collateral security for all or any part of the Guaranteed
Obligations or this Guaranty; (vi) the taking or accepting of any other guaranty
for all or any part of the Guaranteed Obligations; (vii) any failure to acquire,
perfect or continue any Lien on Collateral securing all or any part of the
Guaranteed Obligations or this Guaranty; (viii) any exchange, release or
subordination of any Lien on any Collateral, or any release, amendment, waiver
or subordination of any term of any guaranty of the Guaranteed Obligations or
any other impairment of any collateral security or guaranty now or hereafter
securing all or any part of the Guaranteed Obligations; (ix) any failure to
dispose of any collateral security at
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any time securing all or any part of the Guaranteed Obligations or this Guaranty
in a commercially reasonable manner or as otherwise may be required by
Applicable Law; (x) any merger, reorganization, consolidation or dissolution of
Borrower or Guarantor, any sale, lease or transfer of any or all of the assets
of Borrower or Guarantor, or any change in name, business, organization,
location, composition, structure or organization of Borrower or any change in
the shareholders of Borrower or Guarantor (whether by accession, secession,
death, dissolution, transfer of assets or otherwise; (xi) any invalidity or
unenforceability of or defect or deficiency in any of the Loan Documents;
(xii) avoidance or subordination of the Guaranteed Obligations, or any portion
thereof, (xiii) the unenforceability of all or any part of the Guaranteed
Obligations against Borrower by reason of the fact that the interest contracted
for, charged or received in respect of the Guaranteed Obligations exceeds the
amount permitted by Applicable Law; (xiv) any waiver, consent, extension,
forbearance or granting of any indulgence by the Credit Parties with respect to
the Guaranteed Obligations or any provision of any of the Loan Documents; (xv)
any delay in or lack of enforcement of any remedies under the Loan Documents;
(xvi) the act of creating all or any part of the Guaranteed Obligations is ULTRA
VIRES, or the officers or other representatives creating all or any part of the
Guaranteed Obligations acted in excess of their authority; (xvii) any election
of remedies by any of the Credit Parties; (xviii) any of the Loan Documents were
forged, (xix) the election by any of the Credit Parties in any proceeding under
the United States Bankruptcy Code of the application of Section 1111(b)(2)
thereof; (xx) any borrowing or grant of a security interest by Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (xxi) the
disallowance in bankruptcy of all or any portion of the claims of any of the
Credit Parties for payment of any of the Guaranteed Obligations;
(xxii) withdrawal from, or termination of, any ownership interest in Guarantor
or Borrower, or (xxiii) any other circumstance which might otherwise constitute
a legal or equitable discharge or defense available to Borrower or Guarantor
(other than that the Guaranteed Obligations shall have been indefeasibly paid
and performed in full).
6. CONSENT AND WAIVER.
(a) Guarantor hereby waives: (i) notice of acceptance of this
Guaranty; (ii) notice of any Loans, Letters of Credit or other financial
accommodations made or extended under the Loan Documents or the creation or
existence of any Guaranteed Obligations; (iii) notice of the amount of the
Guaranteed Obligations, SUBJECT, HOWEVER, to Guarantor's right to make
inquiry of Agent to ascertain the amount thereof at any reasonable time;
(iv) notice of any adverse change in the financial condition of Borrower or
any other Person or of any other fact that might increase or otherwise
change Guarantor's risk with respect to the Guaranteed Obligations,
Borrower or any other Person under this Guaranty; (v) notice of presentment
for payment, demand, protest and notice thereof, notice of intent to
accelerate, notice of acceleration, notice of dishonor, diligence or
promptness in enforcement and indulgences of every kind as to any
promissory notes or other instruments among the Loan Documents; (vi) notice
of any of the events or circumstances enumerated in PARAGRAPH 5 hereof, and
all other notices and demands to which Guarantor might otherwise be
entitled (except if such notice is specifically required to be given to
Guarantor hereunder or under any of the Loan Documents to which Guarantor
is a party), (vii) any requirement that any of the Credit Parties protect,
secure, perfect or insure any Lien on any Collateral or other property
subject thereto or exhaust any right or take any action against Borrower or
any other
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Person or any Collateral, (viii) the benefit of any statute of
limitation applicable to enforcement of the Guaranteed Obligations, or
any portion thereof, or of any Liens in the Collateral; (ix) all rights
by which Guarantor might be entitled to require suit on an accrued right
of action in respect of any of the Guaranteed Obligations or require suit
against Borrower or any other guarantor, whether arising pursuant to
Section 34.02 of the Texas Business and Commerce Code, as amended,
Section 17.001 of the Texas Civil Practice and Remedies Code, as amended,
Rule 31 of the Texas Rules of Civil Procedure, as amended, or otherwise
or (x) any other defense of Borrower or any other guarantor (other than
that the Guaranteed Obligations shall have been indefeasibly paid and
performed in full).
(b) Guarantor hereby waives and agrees not to assert against any
Credit Party: (i) any defense, setoff, counterclaim or claim of any kind
or nature available to Borrower or any other guarantor against any Credit
Party, arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity or enforceability of the Guaranteed
Obligations or any security therefor; (ii) to the extent allowed by
Applicable Law, any right or defense arising by reason of any claim or
defense based upon an election of remedies by any Credit Party under any
Applicable Law.
(c) Agent shall have the right to seek recourse against Guarantor
to the fullest extent provided for herein, and no election by Agent to
proceed in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of Agent's right to proceed in
any other form of action or proceeding or against other parties unless
Agent has expressly waived such right in writing. Without limiting the
foregoing, no action or proceeding by any Credit Party under any document
or instrument evidencing the Guaranteed Obligations shall serve to
diminish the liability of Guarantor under this Guaranty except to the
extent that the Credit Parties finally and unconditionally shall have
realized indefeasible payment in full of the Guaranteed Obligations.
(d) Guarantor waives, and agrees that its liability hereunder shall
not be affected by, any neglect, delay, omission, failure or refusal of
any Credit Party to (i) exercise or properly or diligently exercise any
right or remedy with respect to any or all of the Guaranteed Obligations
or the collection thereof or any Collateral or any other security for or
guaranty of the Guaranteed Obligations, or any portion thereof, (ii) take
or prosecute, or properly or diligently take or prosecute, any action for
the collection of any or all of the Guaranteed Obligations against
Borrower, Guarantor or any other guarantor or other Person of any or all
of the Guaranteed Obligations, (iii) foreclose or prosecute, or properly
or diligently foreclose or prosecute, any action in connection with any
agreement, document or instrument or arrangement evidencing, securing or
otherwise affecting all or any part of the Guaranteed Obligations, or
(iv) mitigate damages or take any other action to reduce, collect or
enforce the Guaranteed Obligations;
(e) Agent may at any time, without the consent of or notice to
Guarantor (but otherwise subject to any requirement for consent of any or
all of the Lenders as prescribed by the Loan and Security Agreement),
without incurring responsibility to Guarantor and without impairing,
releasing, reducing or affecting the obligations of
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Guarantor hereunder: (i) change the manner, place or terms of payment of
all or any part of the Guaranteed Obligations, or renew, extend, modify,
rearrange, refinance, refund or alter all or any part of the Guaranteed
Obligations; (ii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any manner and in any order any
Collateral and any Lien securing all or any part of the Guaranteed
Obligations or this Guaranty or setoff against all or any part of the
Guaranteed Obligations; (iii) neglect, delay, omit, fail or refuse to
take or prosecute any action for the collection of all or any part of the
Guaranteed Obligations or this Guaranty or to take or prosecute any
action in connection with any of the Loan Documents; (iv) exercise or
refrain from exercising any rights against Borrower or others, or
otherwise act or refrain from acting; (v) settle or compromise all or any
part of the Guaranteed Obligations and subordinate the payment of all or
any part of the Guaranteed Obligations to the payment of any obligations,
indebtedness or liabilities which may be due or become due to the Credit
Parties or others; (vi) apply any deposit balance, fund, payment,
collections through process of law or otherwise or other property of
Borrower to the satisfaction and liquidation of the indebtedness or
obligations of Borrower to the Credit Parties, if any, not guaranteed
under this Guaranty; (vii) release all or any one or more parties to any
one or more of the Loan Documents or grant other indulgences to Borrower
or any other guarantor in respect thereof; (viii) amend or modify in any
manner and at any time (or from time to time) any of the Loan Documents;
or (ix) partially or fully release or substitute any guarantor, or
enforce, exchange, release or waive any security for the Guaranteed
Obligations, or any portion thereof, (x) bring suit against any and all
Persons liable or obligated in respect of the Guaranteed Obligations,
collectively together, jointly and severally or separately, and apply any
amounts obtained by Agent in such manner as Agent may elect, subject to
the Loan Documents, and (xi) apply any sums paid to the Credit Parties by
Guarantor, Borrower or others to the Guaranteed Obligations as provided
by the Loan Documents.
(f) Should Agent or any other Credit Party seek to enforce the
obligations of Guarantor hereunder by action in any court or otherwise,
Guarantor waives any requirement, substantive or procedural, that (i)
rights or remedies be enforced first against Borrower, any other
guarantor or any other Person liable for all or any part of the
Guaranteed Obligations, including, without limitation, that a judgment
first be rendered against Borrower or any other Person, or that Borrower
or any other Person should be joined in such cause, or (ii) enforcement
shall first be made against any Collateral or other property which shall
ever have been given to secure all or any part of the Guaranteed
Obligations or this Guaranty. Such waiver shall be without prejudice to
Agent's right, at its option, to proceed against Borrower or any other
person or entity, whether by separate action or by joinder.
(g) If, in connection with the exercise of any of its rights and
remedies, Agent or any other Credit Party shall forfeit any of its rights
or remedies, including, without limitation, its right to enter a
deficiency judgment against Borrower or any other Person, whether because
of any Applicable Law pertaining to "election of remedies," disposition
of collateral or the like, Guarantor hereby consents to such action by
such Credit Party and waives any claim based upon such action. Any
action which results in the denial or impairment of any such right to
seek a deficiency judgment against Borrower shall not
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impair the obligation of Guarantor to pay the full amount of the
Guaranteed Obligations or any other obligation of Guarantor contained
herein.
(h) Guarantor agrees that if, after the occurrence and during the
continuance of a Default or Event of Default, Agent, for the benefit of
the Credit Parties, is prevented by Applicable Law from exercising its
right to accelerate the maturity of all or any portion of the Guaranteed
Obligations, to collect interest thereon or to enforce or exercise any
other right or remedy with respect thereto, or Agent is prevented from
taking any action to realize on the Collateral, Guarantor agrees to pay
to Agent, for the account of the Credit Parties, upon demand therefor,
the amount that would otherwise have been due and payable had such rights
and remedies been permitted to be exercised by the Credit Parties, as the
case may be.
(i) Guarantor hereby assumes sole responsibility for keeping itself
informed of the financial condition of Borrower and of each other
guarantor of all or any part of the Guaranteed Obligations, and of all
other circumstances bearing upon the risk of nonpayment of the
Obligations or any part thereof. Guarantor hereby agrees that neither
Agent nor any other Credit Party shall have any obligation or duty to
advise Guarantor of information known to any of them regarding such
condition or any such circumstance. In the event that Agent or any other
Credit Party in its sole discretion undertakes at any time or from time
to time to provide any such information to Guarantor, such Person shall
be under no obligation (i) to undertake any investigation not a part of
its regular business routine, (ii) to disclose any information which,
pursuant to accepted or reasonable banking or commercial finance
practices, it wishes to maintain confidential, or (iii) to make any other
or future disclosures of such information or any other information to
such Guarantor.
(j) Guarantor consents and agrees that neither Agent nor any of the
other Credit Parties shall be under any obligation to marshal any assets
in favor of Guarantor or otherwise in connection with obtaining payment
of any or all of the Guaranteed Obligations from any Person or source.
(k) In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or
omission of Agent or any other Credit Party, respectively, and their
respective directors, officers, employees, representatives or agents in
connection with administration of the Guaranteed Obligations, except for
willful misconduct and gross negligence.
7. RELEASE, SUBSTITUTION OF COLLATERAL. Guarantor agrees that Agent may,
at any time and from time to time in its discretion and with or without valuable
consideration, allow substitution or withdrawal of Collateral or other security
and release Collateral or other security without impairing or diminishing the
liabilities or obligations of Guarantor hereunder. Guarantor further agrees
that, if Borrower or any other Person executes in favor of Agent or any other
Credit Party any security agreement, collateral agreement, mortgage, deed of
trust, collateral assignment or other security instrument, the exercise of any
right or remedy thereby conferred shall be wholly discretionary with such Credit
Party and that the exercise or failure to exercise
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any such right or remedy shall in no way impair or diminish the obligation of
Guarantor hereunder. Guarantor further agrees that the Credit Parties shall not
be liable for any failure to use diligence or care in the collection of the
Guaranteed Obligations, in the creation or perfection of any lien, security
interest or assignment intended as security, or in preserving the liability of
any Person liable or obligated on the Guaranteed Obligations.
8. DEFAULT. Upon the occurrence and during the continuation of a Default
or Event of Default, Guarantor shall, on demand by Agent and without further
notice of dishonor and without notice of any kind to Borrower, Guarantor or any
other Person whether contemporaneously with, or previous or subsequent to, such
demand, promptly pay to Agent, for the benefit of the Credit Parties, in
immediately available funds, the full unpaid amount of the Guaranteed
Obligations, or such lesser amount, if any, as may be specifically demanded by
Agent from time to time, at Agent's office located in Dallas County, Texas or at
such other place as Agent may specify to Guarantor in writing. If acceleration
of the time for payment of any amount payable by Borrower under or with respect
to any of the Guaranteed Obligations is stayed or otherwise delayed upon the
insolvency, bankruptcy or reorganization of Borrower, all such amounts otherwise
subject to acceleration under the terms of the Guaranteed Obligations shall
nonetheless be payable by Guarantor hereunder promptly on demand by Agent, and
Guarantor expressly and unconditionally agrees to make such payment in full.
9. NO WAIVER, REMEDIES.
(a) No failure on the part of Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. In
no event shall any waiver of the provisions of this Guaranty be effective
unless the same be in writing and signed by an officer of Agent, and then
only in the specific instance and for the purpose given. The remedies
herein provided are cumulative and not exclusive of any remedies provided
by Applicable Law or any of the other Loan Documents.
(b) Failure by Agent or any other Credit Party at any time or times
hereafter to require strict performance by Borrower, Guarantor or any other
Person of any of the requirements contained in any of the Loan Documents
now or at any time, from time to time, hereafter executed and delivered by
Borrower, Guarantor or any other Person shall not waive, affect or diminish
the right to demand strict performance thereof, and such right shall not be
deemed to have been modified or waived by any course of conduct or
knowledge of Agent or any other Credit Party, or any agent, officer or
employee thereof, respectively.
(c) No waiver of any Default or Event of Default or any other breach,
default or requirement shall operate as a waiver of any other Default or
Event of Default or the same Default or Event of Default on a future
occasion, and no action permitted hereunder shall in way affect or impair
any of the rights of Agent or the other Credit Parties or the obligations
of Guarantor under this Guaranty or under any of the other Loan Documents.
Any determination by a court of competent jurisdiction of the amount of any
principal and/or interest or other amount constituting any of the
Obligations shall
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be conclusive and binding on Guarantor irrespective of whether Guarantor
was a party to the suit or action in which such determination was made.
10. NOTICE OF SALE. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any Collateral or
other property securing all or any part of the Guaranteed Obligations or this
Guaranty, it is agreed that at least ten (10) Business Days notice of the time
and place of any public sale, or the time after which any private sale or other
disposition may be made of any such Collateral or other property, shall be
deemed to be reasonable notice in conformity with such requirements; PROVIDED,
HOWEVER, that notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
11. PAYMENT BY GUARANTOR. Whenever Guarantor pays any sum which is or may
become due under this Guaranty, written notice must be delivered to Agent
contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Agent
receives such notice in the manner otherwise prescribed for notices hereunder.
In the absence of such notice in compliance with the provisions hereof, any sum
received by Agent or any other Credit Party on account of the Guaranteed
Obligations shall be conclusively deemed paid by Borrower.
12. AGENT. Agent shall have all of the rights, powers and benefits, for
itself and on behalf of the other Credit Parties, as are prescribed by the Loan
Documents. Guarantor's performance of this Guaranty is for the benefit of Agent
and the other Credit Parties according to their respective interests as provided
in the Loan and Security Agreement.
13. CUMULATIVE REMEDIES; NO ELECTION. If Guarantor is or becomes liable
or obligated for the Guaranteed Obligations, by endorsement or otherwise, other
than under this Guaranty, such liability or obligation shall not be in any
manner impaired or affected hereby, and the rights and remedies of Agent
hereunder shall be cumulative of any and all other rights and remedies that
Agent or any other Credit Party may ever have against Guarantor. The exercise
by Agent or any other Credit Party of any right or remedy hereunder or under any
other agreement, document or instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
Without in any way limiting the generality of the foregoing, it is specifically
understood and agreed that this Guaranty is given by Guarantor as an additional
guaranty to any and all other guaranties or security heretofore, concurrently
herewith or hereafter executed and/or delivered by Guarantor to or in favor of
Agent or any other Credit Party relating to the Guaranteed Obligations, and
nothing herein shall ever be deemed to in any way negate or replace any such
other guaranties or security; PROVIDED, HOWEVER, that Agent shall have all of
its rights and remedies under this Guaranty irrespective of anything to the
contrary contained in any such other guaranties or security. This Guaranty may
be enforced from time to time as often as occasion therefor may arise as may be
determined by Agent, and it is agreed and understood that it shall not be
necessary for Agent, in order to enforce payment by Guarantor, first to exercise
any rights or remedies against Borrower, the Collateral or any other Person
under the Loan Documents or Applicable Law, or to resort to any other sources or
means of obtaining payment of the Guaranteed Obligations.
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14. LIMITATION OF LIABILITY. Notwithstanding the other provisions of this
Guaranty, Guarantor's liability under this Guaranty shall be limited to a
maximum aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law in each case after giving effect
to all other liabilities of Guarantor, contingent or otherwise, that are
relevant under such laws, and after giving effect to the value, as assets (as
determined under the applicable provisions of such laws) of any rights of
Guarantor to subrogation or contribution from Borrower or any other Person
pursuant to Applicable Law or any agreement providing for an equitable
allocation among Guarantor, Borrower and any other Person of their respective
obligations thereunder.
15. BINDING EFFECT. This Guaranty is for the benefit of Agent (for the
benefit of the Credit Parties) and its successors and assigns, and in the event
of an assignment by Agent or any other Credit Party, or their respective
successors or assigns, of the Guaranteed Obligations, or any part thereof, the
rights and benefits hereunder, to the extent applicable to the indebtedness,
liabilities and obligations so assigned, shall be deemed transferred with such
indebtedness, liabilities and obligations without necessity of further express
action. This Guaranty is binding upon Guarantor, and its successors and
assigns.
16. WAIVER OF SUBROGATION, CONTRIBUTION AND OTHER RIGHTS. UPON PAYMENT BY
GUARANTOR OF ANY SUMS IN RESPECT OF THE GUARANTEED OBLIGATIONS HEREUNDER
(INCLUDING, WITHOUT LIMITATION, ANY AMOUNTS ADVANCED TO BORROWER BY GUARANTOR),
ALL RIGHTS OF GUARANTOR AGAINST BORROWER ARISING AS A RESULT THEREFROM BY WAY OF
RIGHT OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION, INDEMNIFICATION
AND/OR OTHERWISE SHALL IN ALL RESPECTS BE SUBORDINATE AND JUNIOR IN RIGHT OF
PAYMENT AND ENFORCEMENT TO THE PRIOR INDEFEASIBLE PAYMENT AND ENFORCEMENT IN
FULL OF THE GUARANTEED OBLIGATIONS. GUARANTOR SHALL NOT HAVE, AND HEREBY
WAIVES, ANY RIGHTS OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION,
INDEMNIFICATION AND/OR OTHERWISE AGAINST OR FROM BORROWER UNLESS AND UNTIL ALL
OF THE GUARANTEED OBLIGATIONS HAVE BEEN PAID AND PERFORMED IN FULL. IN ADDITION
TO THE FOREGOING, GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL CLAIMS OR
OTHER RIGHTS IT MAY NOW HAVE OR HEREAFTER ACQUIRE AGAINST AGENT, ANY OTHER
CREDIT PARTY, BORROWER OR ANY OTHER PERSON UNDER CHAPTER 34 OF THE TEXAS
BUSINESS AND COMMERCE CODE, UNDER RULES 31 AND 163 OF THE TEXAS RULES OF CIVIL
PROCEDURE, UNDER SECTION 17.001 OF THE TEXAS CIVIL PRACTICE AND REMEDIES CODE
AND UNDER ANY OTHER STATUTE OF ANY STATE OR OTHER JURISDICTION REQUIRING
RECOURSE AGAINST THE PRIMARY OBLIGOR OR IMPOSING OTHER REQUIREMENTS AS A
CONDITION TO RECOURSE AGAINST A GUARANTOR IF AND TO THE EXTENT THAT THE SAME MAY
BE APPLICABLE TO THIS GUARANTY.
17. SUBORDINATION OF INDEBTEDNESS AND LIENS. The payment of any and all
principal of and interest on all indebtedness of Borrower, whether direct,
indirect, fixed, contingent,
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liquidated, unliquidated, joint, several, or joint and several, now or hereafter
existing, due or to become due to Guarantor (herein called the "SUBORDINATED
DEBT"), shall in all respects be subordinate and junior in right of payment and
enforcement to the prior payment and enforcement in full of the Guaranteed
Obligations as provided in this paragraph. Except as may be expressly permitted
by the Loan and Security Agreement, no payment shall be made on or with respect
to the Subordinated Debt (whether owed to Guarantor or any Affiliate of
Guarantor) unless and until the Guaranteed Obligations shall have been paid and
performed in full. In the event that Guarantor or any Affiliate of Guarantor
shall receive any payment on account of the Subordinated Debt in violation of
this paragraph, Guarantor will hold, or cause to be held (as the case may be),
any amount so received in trust for the benefit of Agent, for the benefit of the
Credit Parties, and will forthwith deliver, or cause to be delivered (as the
case may be), such payment to Agent, in the form received, to be applied to the
Guaranteed Obligations. All Liens, if any, at any time securing payment of all
or any part of the Subordinated Debt (herein called the "SUBORDINATED LIENS")
shall be and remain inferior and subordinate to the Liens securing payment of
all or any part of the Obligations or the Guaranteed Obligations, regardless of
whether such Subordinated Liens presently exist or are hereafter created or when
such Subordinated Liens were created, perfected, filed or recorded (PROVIDED,
that the foregoing shall not be interpreted or deemed to allow the existence of
any such Liens to the extent otherwise prohibited by the Loan Documents).
Guarantor shall not exercise or enforce any creditors' rights or remedies that
it may have against Borrower or foreclose, repossess, sequester or otherwise
institute any action or proceeding (whether judicial or otherwise, including,
without limitation, the commencement of, or joinder in, any bankruptcy,
insolvency, reorganization, liquidation, receivership or other debtor relief
law) to enforce any Subordinated Lien on any assets of Borrower or any other
Person unless and until the Guaranteed Obligations shall have been paid and
performed in full. The terms and provisions of this paragraph are given by
Guarantor as additional rights and benefits to any and all other subordination
agreements heretofore, concurrently herewith or hereafter executed by Guarantor
to or in favor of Agent or any other Credit Party, and nothing in this Guaranty
shall ever be deemed to in any way negate or replace any other such previous,
concurrent or subsequent subordination agreements. All promissory notes,
ledgers and other evidences of the Subordinated Debt, and all mortgages, deed of
trusts, security agreements, assignments and other security documents, if any,
at any time evidencing the Subordinated Liens, shall contain a specific written
notice that the indebtedness and Liens evidenced thereby are subordinated as
provided in this paragraph.
18. RIGHT OF SETOFF. Guarantor hereby grants to Agent and each other
Credit Party a right of setoff upon any and all monies, securities or other
property of Guarantor, and the proceeds therefrom, now or hereafter held or
received by or in transit to Agent or any such other Credit Party from or for
the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Guarantor, and any and all claims of
Guarantor against Agent or any such other Credit Party at any time existing.
The right of setoff granted pursuant to this paragraph shall be cumulative of
and in addition to Agent's or any such other Credit Party's common law right of
setoff.
19. FURTHER ASSURANCES. Upon the request of Agent, Guarantor will, at any
time and from time to time, duly execute and deliver to Agent any and all such
further agreements,
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documents and instruments, and supply such additional information, as may be
necessary or advisable, in the opinion of Agent, to obtain the full benefits of
this Guaranty.
20. INVALID PROVISIONS. If any provision of this Guaranty is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Guaranty shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Guaranty a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable. No provision herein or in any other Loan Document
evidencing the Guaranteed Obligations shall require the payment or permit the
collection of interest in excess of the maximum permitted by Applicable Law.
21. MODIFICATION IN WRITING. No modification, consent, amendment or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor herefrom, shall be effective unless the same shall be in writing and
signed by a duly authorized officer of Agent and then shall be effective only in
the specific instance and for the specific purpose for which given.
22. NO WAIVER, ETC. No notice to or demand on, or consent by, Guarantor
in any case shall, of itself, entitle Guarantor to any other or further notice
or demand, or right to grant or refuse consent, in similar or other
circumstances. No delay or omission by Agent in exercising any right or remedy
hereunder shall impair any such right or remedy or be construed as a waiver
thereof or any acquiescence therein, and no single or partial exercise of any
such right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy hereunder.
23. CUMULATIVE RIGHTS. All rights and remedies of Agent hereunder are
cumulative of each other and of every other right or remedy which Agent or any
other Credit Party may otherwise have at law or in equity or under any other
contract or document, and the exercise of one or more rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of other rights or
remedies.
24. EXPENSES. Guarantor agrees to pay on demand by Agent all costs and
expenses incurred by Agent in connection with the negotiation, preparation,
execution and performance of the terms and provisions of this Guaranty and any
and all amendments, modifications, renewals, restatements and/or supplements
hereto from time to time, including, without limitation, the reasonable fees and
expenses of legal counsel to Agent. If Guarantor should breach or fail to
perform any provision of this Guaranty, Guarantor agrees to pay to Agent all
costs and expenses incurred by Agent in the enforcement of this Guaranty from
time to time, including, without limitation, the reasonable fees and expenses of
all legal counsel to Agent.
25. APPLICABLE LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
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26. NO ORAL AGREEMENTS. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT
BETWEEN GUARANTOR AND AGENT RELATING TO THE SUBJECT MATTER OF THIS GUARANTY AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
GUARANTOR AND AGENT. THIS GUARANTY SUPERSEDES ALL PRIOR (IF ANY) ORAL
AGREEMENTS, ARRANGEMENTS OR UNDERSTANDINGS RELATING TO THE SUBJECT MATTER OF
THIS GUARANTY.
27. NOTICES. Unless otherwise specifically provided in this Guaranty, all
notices or other communications required or permitted to be given under this
Guaranty shall be given, if to Agent, as specified in the Loan and Security
Agreement, or if to Guarantor, as specified in the Loan and Security Agreement
but otherwise to Guarantor's address specified in the introductory paragraph
hereof.
28. CHOICE OF FORUM; SERVICE OF PROCESS AND JURISDICTION. Any suit, action
or proceeding against Guarantor or Agent with respect to this Guaranty shall be
brought, served and maintained in the state or federal courts located in the
State of Texas or otherwise as specified in the Loan and Security Agreement.
29. SURVIVAL. All representations, warranties, covenants and agreements
of Guarantor in this Guaranty shall survive the execution of this Guaranty.
30. COUNTERPARTS. This Guaranty may be executed in any number of
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute one and the same Guaranty.
31. INTEREST LIMITATION. Notwithstanding anything to the contrary
contained or referred to in this Guaranty, in no contingency or event whatsoever
shall the amount of interest under the Loan Documents, including, without
limitation, this Guaranty, paid by any Person, received by the Lenders, agreed
to be paid by any Person, or requested or demanded to be paid by the Lenders,
exceed the Maximum Rate. In the event any such sums paid to Lender would exceed
the Maximum Rate, Lender shall automatically apply such excess to any unpaid
amount of the Guaranteed Obligations or, if the amount of such excess exceeds
said unpaid amount, such excess shall be paid to Borrower. All sums paid, or
agreed to be paid, which are or hereafter may be construed to be compensation
for the use, forbearance or detention of money shall be amortized, prorated,
spread and allocated in respect of the Guaranteed Obligations throughout the
full term of the Loan and Security Agreement until the Guaranteed Obligations
are paid in full. Notwithstanding any provisions contained in the Loan
Documents, or in any Notes or other related documents executed pursuant thereto,
the Lenders shall never be entitled to receive, collect or apply as interest any
amount in excess of the Maximum Rate and, in the event any Lender ever receives,
collects or applies any amount in respect of Borrower that otherwise would be in
excess of the Maximum Rate, such amount shall automatically be deemed to be
applied in reduction of the unpaid principal balance of the Guaranteed
Obligations and, if such principal balance is paid in full, any remaining excess
shall forthwith be paid to Borrower. In determining whether or not the interest
paid or payable under any specific contingency exceeds the Maximum Rate,
Borrower and Lender shall, to the maximum extent permitted under
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Applicable Law, (i) characterize any non-principal payment as a standby fee,
commitment fee, prepayment charge, delinquency charge or reimbursement for a
third-party expense rather than as interest, (ii) exclude voluntary prepayments
and the effect thereof, and (iii) amortize, prorate, allocate and spread in
equal parts throughout the entire period during which the Guaranteed Obligations
were outstanding the total amount of interest at any time contracted for,
charged or received. Nothing herein contained shall be construed or so operate
as to require payment of any interest, fees, costs or charges greater than is
permitted by Applicable Law.
32. LITIGATION; WAIVER OF TRIAL BY JURY. GUARANTOR HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST GUARANTOR ARISING OUT OF THIS GUARANTY OR ANY OF THE OTHER LOAN
DOCUMENTS OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE
WHATSOEVER BETWEEN GUARANTOR AND AGENT OR ANY LENDER OF ANY KIND OR NATURE.
GUARANTOR ACKNOWLEDGES THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND
UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY AND WITH
THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING. GUARANTOR HEREBY AGREES THAT
THE FEDERAL COURT OF THE NORTHERN DISTRICT OF TEXAS OR, AT THE OPTION OF AGENT
OR ANY LENDER, ANY COURT IN WHICH AGENT OR SUCH LENDER SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN GUARANTOR AND AGENT OR SUCH LENDER, PERTAINING
DIRECTLY OR INDIRECTLY TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS OR TO ANY
MATTER ARISING THEREFROM. GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS.
WITHOUT LIMITING THE APPLICABILITY OF ANY LAW PROVIDING FOR SERVICE OF PROCESS
UPON A STATUTORY AGENT AND NOTIFICATION THEREOF BY MAIL, GUARANTOR HEREBY WAIVES
(TO THE FULLEST EXTENT ALLOWED BY LAW) PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS ISSUED THEREIN AND AGREES (TO THE FULLEST
EXTENT ALLOWED BY LAW) THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
GUARANTOR AT THE ADDRESS OF GUARANTOR SET FORTH IN THE INTRODUCTORY PARAGRAPH OF
THIS GUARANTY. SHOULD GUARANTOR FAIL TO APPEAR OR ANSWER ANY SUMMONS,
COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30) DAYS AFTER THE MAILING
THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS
OR PAPERS. THE NONEXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS PARAGRAPH SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM
OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY
APPROPRIATE JURISDICTION.
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33. IRREVOCABLE NATURE OF GUARANTY. This Guaranty may not be revoked by
Guarantor; PROVIDED, HOWEVER, that in the event it shall be judicially
determined that Guarantor shall have any right, by Applicable Law
notwithstanding its express agreement herein to the contrary, to revoke this
Guaranty, Guarantor may deliver to Agent written notice of Guarantor's intention
not to be liable hereunder for any Guaranteed Obligations arising, created or
incurred after Agent's receipt of such notice, whereupon such notice shall be
effective to the extent (but only to the extent) provided hereinbelow as to
Guarantor from and after (but not before) the time when such notice is actually
delivered to and received by and receipted for in writing by Agent (the
"EFFECTIVE REVOCATION TIME"); PROVIDED FURTHER, HOWEVER, that such notice shall
not be effective as to, and shall not in any way restrict, limit, impair,
release or otherwise affect the indebtedness, liabilities or obligations of
Guarantor under this Guaranty with respect to (a) any Guaranteed Obligations
consisting of indebtedness, liabilities or obligations under the Loan and
Security Agreement, the Notes or any other Loan Document, whether incurred
before or after the Effective Revocation Time (including, without limitation,
any loans, advances or extensions of credit at any time made or created under
the Loan and Security Agreement, whether or not agreed, committed or
contemplated to be made by the Lenders and whether or not discretionary with the
Lenders), (b) any Guaranteed Obligations arising, created or incurred prior to
the Effective Revocation Time, (c) any renewals, extensions or modifications of
the indebtedness, liabilities or obligations referred to in clauses (a) and (b)
preceding, whether occurring before or after the Effective Revocation Time, or
(d) any interest or costs of collection with respect to any of the indebtedness,
liabilities or obligations referred to in clauses (a), (b) or (c) preceding.
Guarantor acknowledges that any such revocation or attempted revocation by
Guarantor, whether or not valid under Applicable Law, shall in any event
constitute an Event of Default under the Loan Documents.
34. HEADINGS. Guarantor agrees that the paragraph headings in this
Guaranty are for convenience of identification only and do not limit any of the
provisions of this Guaranty.
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IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the
effective date specified in the introductory paragraph of this Guaranty.
GUARANTOR:
Kerr Acquisition Corporation,
a Delaware corporation
By: /s/ Gregory P. Spivy
----------------------------------------
Name: Gregory P. Spivy
--------------------------------------
Title: Vice President
-------------------------------------
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NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
- --------------------------------------------------------------------------------
GUARANTY AGREEMENT
(Fremont Acquisition Company, LLC)
This Guaranty Agreement ("GUARANTY"), is executed effective and delivered
as of August 26, 1997, by FREMONT ACQUISITION COMPANY, LLC, a Delaware limited
liability company whose principal place of business is located at 50 Fremont
Street, Suite 3700, San Francisco, California 94105, to and for the benefit of
NATIONSBANK OF TEXAS, N.A., a national banking association, in its capacity as
Agent (as defined herein) for and on behalf of the Credit Parties (as defined
herein), whose principal place of business is located in Dallas County, Texas,
as follows:
DEFINITIONS:
"AGENT" means NationsBank of Texas, N.A., a national banking association,
as agent pursuant to the Loan and Security Agreement, whose principal place
of business is located at 901 Main Street, Dallas, Texas 75202, or such
successor agent as may be appointed pursuant to the Loan and Security
Agreement.
"BORROWER" means Kerr Group, Inc., a Delaware corporation, with its
principal place of business located at 500 New Holland Avenue, Lancaster,
Pennsylvania 17602-2104 and its successors and permitted assigns.
"GUARANTEED OBLIGATIONS" means (i) all indebtedness, obligations and
liabilities at any time, from time to time, included within the "Secured
Obligations" (as defined in the Loan and Security Agreement, which
definition is incorporated herein by reference), including, without
limitation, all unpaid principal and accrued interest on the Loans as
evidenced by each and all of the Notes and the Letter of Credit Obligations
(all of such Notes and Letter of Credit Obligations whether now existing or
hereafter arising), and all other fees, costs, expenses (including, without
limitation, reasonable attorneys' fees and expenses and other legal costs)
and other monetary obligations of Borrower under the Loan Documents, now
existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several or
joint and several, and (ii) all renewals, extensions, modifications,
rearrangements and increases of the indebtedness, liabilities and
obligations described in CLAUSES (i) and (ii) above. The "Guaranteed
Obligations" include, without limitation, all indebtedness, obligations and
liabilities of the type or nature described above in accordance with the
Loan Documents, at any time owing by any predecessor or successor of
Borrower, specifically including, without limitation, Borrower as survivor
of the Merger.
"GUARANTOR" means Fremont Acquisition Company, LLC, a Delaware limited
liability company, with its principal place of business located at 50
Fremont Street, Suite 3700, San Francisco, California 94105.
<PAGE>
"LENDER" shall have the meaning prescribed for such term by the Loan and
Security Agreement, which definition is incorporated herein by reference
and, as of the effective date hereof, includes NationsBank and its
successors and permitted assigns, and also includes any other Person who
hereafter becomes a "Lender" as defined in and provided by the Loan and
Security Agreement.
"LOAN AND SECURITY AGREEMENT" means the certain Loan and Security Agreement
of even date herewith among Agent, the Lenders from time to time party
thereto, L/C Issuer (as defined therein) and Borrower, as such agreement
may be renewed, extended, modified, amended or restated from time to time.
"LOAN DOCUMENTS" means the "Loan Documents" as defined by the Loan and
Security Agreement.
"NATIONSBANK" means NationsBank of Texas, N.A., a national banking
association, in its individual corporate capacity as a Lender, whose
principal place of business is located at 901 Main Street, Dallas, Texas
75202.
Unless otherwise defined above, terms defined in the Loan and Security
Agreement, wherever used herein, shall have the same meanings in this
Guaranty as are set forth in the Loan and Security Agreement. Guarantor
expressly acknowledges that it has read and is familiar with all such
incorporated definitions and that incorporation of same herein shall be
deemed to have the same effect and enforceability as though each of such
incorporated definitions is set forth herein at length.
RECITALS:
A. Borrower, Agent, L/C Issuer and NationsBank have executed and entered
into the Loan and Security Agreement, which provides for Loans by the Lenders to
Borrower and for the issuance of Letters of Credit by L/C Issuer on the terms
and conditions prescribed therein.
B. This Guaranty is required by the Loan and Security Agreement and
Guarantor's execution and delivery hereof is a condition (among other
conditions) to Loans and Letters of Credit under the Loan and Security
Agreement.
C. Guarantor has determined that (i) it will directly and indirectly
benefit from the availability of financing to Borrower thereunder and under the
other transactions evidenced by and contemplated in the Loan Documents, (ii) it
will benefit, directly and indirectly, from executing and delivering this
Guaranty, and (iii) it is in Guarantor's best interest, and within its corporate
purpose, to execute and deliver and, if called upon, to perform this Guaranty.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor hereby agrees as follows:
AGREEMENT:
GUARANTY OF GUARANTEED OBLIGATIONS. This Guaranty is executed by
Guarantor pursuant to the Loan and Security Agreement and is for the benefit of
Agent and the other Credit Parties. As an inducement to the Lenders to make
Loans and extend and continue to extend credit and other financial
accommodations to Borrower under the Loan Documents, and to L/C
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Issuer to provide Letters of Credit for the account of Borrower, Guarantor, for
value received, does hereby unconditionally, irrevocably and absolutely
guarantee the prompt and full payment and performance of the Guaranteed
Obligations when due or declared to be due and at all times thereafter.
2. NATURE OF GUARANTY. This Guaranty is and shall be an absolute,
unconditional, irrevocable and continuing unlimited guaranty of payment, and not
solely of collection. Guarantor guarantees that the Guaranteed Obligations will
be paid strictly in accordance with the terms of the Loan and Security
Agreement, the Notes and the other Loan Documents, without setoff or
counterclaim, and regardless of any Applicable Law now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of the Credit Parties
with respect thereto. The Guaranteed Obligations may be increased, reduced or
paid in full at any time and from time to time without affecting the liability
or obligation of Guarantor under this Guaranty with respect to all Guaranteed
Obligations, whenever incurred or arising. All Guaranteed Obligations now or
hereafter arising shall be conclusively presumed to have been made or acquired
in acceptance hereof. Guarantor shall be liable, jointly and severally, with
Borrower and any other Person now or hereafter obligated in respect of the
Guaranteed Obligations, or any portion thereof. It is the intention of
Guarantor and Agent that Guarantor's liabilities and obligations hereunder shall
not be discharged except by Guarantor's full and complete payment and
performance of such liabilities and obligations and then only to the extent of
such payment and performance (to the extent not otherwise satisfied by Borrower
or any other Person now or hereafter obligated in respect of the Guaranteed
Obligations).
3. REPRESENTATIONS AND WARRANTIES. In connection with this Guaranty,
Guarantor hereby represents and warrants to Lender that:
(a) Guarantor owns 100% of the issued and outstanding Capital Stock
of Kerr Acquisition Corporation, a Delaware corporation, which owns not
less than 51.0% of Borrower's Capital Stock on an as converted and fully
diluted basis; Guarantor has received and will receive a direct and
indirect material benefit from the transactions evidenced by and
contemplated in the Loan and Security Agreement and the other Loan
Documents; this Guaranty is given by Guarantor in furtherance of the direct
and indirect business interests and corporate purposes of Guarantor, and is
necessary to the conduct, promotion and attainment of the businesses of
Borrower and Guarantor; and, the value of the consideration received and to
be received by Guarantor is reasonably worth at least as much as the
liability and obligation of Guarantor hereunder.
(b) Guarantor (i) is a limited liability company duly formed, validly
existing and in good standing under the laws of the state of its formation,
(ii) is duly qualified and in good standing under the laws of each
jurisdiction in which the failure to so qualify has a reasonable likelihood
of having a Materially Adverse Effect, (iii) has all requisite power and
authority to own its properties, to lease the property it operates under
lease and to conduct its business as now or currently proposed to be
conducted, (iv) is in compliance with its Certificate of Formation and
Operating Agreement, (v) is in compliance with all other requirements of
Applicable Law except for such noncompliance as in the aggregate would not
have a Materially Adverse Effect, and (vi) has all
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Governmental Approvals necessary for the ownership, operation and conduct
of its business.
(c) The execution, delivery and performance by Guarantor of this
Guaranty and any other Loan Document to which it is a party: (i) are
within its power; (ii) have been duly authorized by all necessary action,
including, without limitation, the consent of members where required; and
(iii) do not and will not (A) contravene its Certificate of Formation or
Operating Agreement or other comparable governing documents, (B) violate
any Applicable Law (including, without limitation, Regulations G, T, U and
X of the Board of Governors of the Federal Reserve System), or any order or
decree of any Governmental Authority except to the extent that any such
violation could not reasonably be expected to have a Materially Adverse
Effect, (C) conflict with or result in the breach of, or constitute a
default under, or result in or permit the termination or acceleration of,
any material contract, agreement or instrument to which Guarantor is a
party or which may be applicable to Guarantor or any of its assets, (D)
result in the creation or imposition of any Lien upon any of its property
other than those in favor of Agent for the benefit of the Credit Parties
and Liens permitted by the Loan and Security Agreement, or (E) require the
consent of, authorization by, approval of, notice to, or filing or
registration with, any Governmental Authority or any other Person, except
to the extent that the failure to obtain such consent or approval could not
reasonably be expected to have a Materially Adverse Effect.
(d) All acts and conditions required to be performed and satisfied
prior to the creation and issuance of this Guaranty, and to constitute this
Guaranty as the legal, valid and binding obligation of Guarantor in
accordance with its terms, have been performed and satisfied in due and
strict compliance with Applicable Law. This Guaranty has been duly
executed and delivered by Guarantor and is the legal, valid and binding
obligation of Guarantor enforceable against it in accordance with its
terms, subject to Applicable Law regarding insolvency (only insofar as any
such Applicable Law relates to the bankruptcy, insolvency or similar event
of Guarantor).
(e) There are no pending or, to the knowledge of Guarantor,
threatened actions, investigations or proceedings to which Guarantor or any
of its Subsidiaries (excluding Borrower) is or could reasonably be expected
to become a party or, to Guarantor's knowledge, affecting Guarantor or any
of its Subsidiaries (excluding Borrower) before any Governmental Authority
with respect to which there is a reasonable likelihood of an adverse
determination and that, if adversely determined, is reasonably likely to
have a Material Adverse Effect. The performance by Guarantor under this
Guaranty and under any other Loan Document to which it is a party is not
restrained or enjoined (either temporarily, preliminarily or permanently)
and no material adverse conditions have been imposed by any Governmental
Authority upon any of the foregoing transactions.
(f) Guarantor is currently informed of the financial condition of
Borrower and any and all other Persons obligated in respect of the
Guaranteed Obligations and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Guaranteed Obligations. Guarantor has read and understands the
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<PAGE>
terms and conditions of the Loan Documents. Guarantor is familiar with,
and has independently reviewed the books and records regarding, the
financial condition of Borrower and is familiar with the value of any and
all property intended to be security for the payment of all or any part of
the Guaranteed Obligations; PROVIDED, HOWEVER, Guarantor is not relying on
such financial condition or the existence or value of any such security as
an inducement to enter into this Guaranty. Guarantor has adequate means to
obtain from Borrower on a continuing basis information concerning the
financial condition of Borrower. Guarantor has not been induced to enter
into this Guaranty on the basis of a contemplation, belief, understanding
or agreement that any Person other than Guarantor will be liable to pay the
Guaranteed Obligations. Neither Agent, nor any other Credit Party, has
made any representation, warranty or statement to Guarantor in order to
induce Guarantor to execute this Guaranty.
4. COVENANTS. Throughout the term of and in any event until payment and
performance in full of the Guaranteed Obligations (unless otherwise allowed by
prior written consent of Agent):
(a) Guarantor will keep itself informed of the financial condition of
Borrower and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Guaranteed Obligations, without
reliance upon any Credit Party.
(b) Guarantor will not engage in any business, activity or operations
other than owning and holding the Capital Stock of Kerr Acquisition
Corporation or Borrower and acting as Guarantor in respect of the
Guaranteed Obligations, and activities directly related to the foregoing.
(c) Guarantor will not merge or consolidate with or into any Person.
5. OBLIGATIONS NOT IMPAIRED. Guarantor agrees that its obligations
hereunder shall not be released, diminished, impaired, reduced or affected by
the occurrence of any one or more of the following events: (i) lack of
corporate power of Borrower, Guarantor or any other Loan Party of all or any
part of the Guaranteed Obligations, (ii) any receivership, insolvency,
bankruptcy or other proceedings affecting Borrower, Guarantor or any other
Loan Party of all or any part of the Guaranteed Obligations, or any of their
respective property; (iii) the partial or total release or discharge of
Borrower or any other Loan Party of all or any part of the Guaranteed
Obligations, or any other Person from the performance of any obligation
contained in any instrument or agreement evidencing, governing or securing
all or any part of the Guaranteed Obligations, whether occurring by reason of
law or otherwise; (iv) any change in the time, manner or place of payment of,
or in any other term of, or any increase in the amount of, all the Guaranteed
Obligations, or any portion thereof, or any other amendment or waiver of any
term of, or any consent to departure from any requirement of, any of the Loan
Documents; (v) the taking or accepting of any collateral security for all or
any part of the Guaranteed Obligations or this Guaranty; (vi) the taking or
accepting of any other guaranty for all or any part of the Guaranteed
Obligations; (vii) any failure to acquire, perfect or continue any Lien on
Collateral securing all or any part of the Guaranteed Obligations or this
Guaranty; (viii) any exchange, release or subordination of any Lien on any
Collateral, or any release, amendment, waiver or subordination of any term of
any guaranty of the Guaranteed Obligations
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<PAGE>
or any other impairment of any collateral security or guaranty now or
hereafter securing all or any part of the Guaranteed Obligations; (ix) any
failure to dispose of any collateral security at any time securing all or any
part of the Guaranteed Obligations or this Guaranty in a commercially
reasonable manner or as otherwise may be required by Applicable Law; (x) any
merger, reorganization, consolidation or dissolution of Borrower or
Guarantor, any sale, lease or transfer of any or all of the assets of
Borrower or Guarantor, or any change in name, business, organization,
location, composition, structure or organization of Borrower or any change in
the shareholders of Borrower or Guarantor (whether by accession, secession,
death, dissolution, transfer of assets or otherwise; (xi) any invalidity or
unenforceability of or defect or deficiency in any of the Loan Documents;
(xii) avoidance or subordination of the Guaranteed Obligations, or any
portion thereof, (xiii) the unenforceability of all or any part of the
Guaranteed Obligations against Borrower by reason of the fact that the
interest contracted for, charged or received in respect of the Guaranteed
Obligations exceeds the amount permitted by Applicable Law; (xiv) any waiver,
consent, extension, forbearance or granting of any indulgence by the Credit
Parties with respect to the Guaranteed Obligations or any provision of any of
the Loan Documents; (xv) any delay in or lack of enforcement of any remedies
under the Loan Documents; (xvi) the act of creating all or any part of the
Guaranteed Obligations is ULTRA VIRES, or the officers or other
representatives creating all or any part of the Guaranteed Obligations acted
in excess of their authority; (xvii) any election of remedies by any of the
Credit Parties; (xviii) any of the Loan Documents were forged, (xix) the
election by any of the Credit Parties in any proceeding under the United
States Bankruptcy Code of the application of Section 1111(b)(2) thereof; (xx)
any borrowing or grant of a security interest by Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (xxi) the
disallowance in bankruptcy of all or any portion of the claims of any of the
Credit Parties for payment of any of the Guaranteed Obligations; (xxii)
withdrawal from, or termination of, any ownership interest in Guarantor or
Borrower, or (xxiii) any other circumstance which might otherwise constitute
a legal or equitable discharge or defense available to Borrower or Guarantor
(other than that the Guaranteed Obligations shall have been indefeasibly paid
and performed in full).
6. CONSENT AND WAIVER.
(a) Guarantor hereby waives: (i) notice of acceptance of this
Guaranty; (ii) notice of any Loans, Letters of Credit or other financial
accommodations made or extended under the Loan Documents or the creation or
existence of any Guaranteed Obligations; (iii) notice of the amount of the
Guaranteed Obligations, SUBJECT, HOWEVER, to Guarantor's right to make
inquiry of Agent to ascertain the amount thereof at any reasonable time;
(iv) notice of any adverse change in the financial condition of Borrower or
any other Person or of any other fact that might increase or otherwise
change Guarantor's risk with respect to the Guaranteed Obligations,
Borrower or any other Person under this Guaranty; (v) notice of presentment
for payment, demand, protest and notice thereof, notice of intent to
accelerate, notice of acceleration, notice of dishonor, diligence or
promptness in enforcement and indulgences of every kind as to any
promissory notes or other instruments among the Loan Documents; (vi) notice
of any of the events or circumstances enumerated in PARAGRAPH 5 hereof, and
all other notices and demands to which Guarantor might otherwise be
entitled (except if such notice is specifically required to be given to
Guarantor hereunder or under any of the Loan Documents to which Guarantor
is a party), (vii) any requirement that any of the Credit
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Parties protect, secure, perfect or insure any Lien on any Collateral or
other property subject thereto or exhaust any right or take any action
against Borrower or any other Person or any Collateral, (viii) the
benefit of any statute of limitation applicable to enforcement of the
Guaranteed Obligations, or any portion thereof, or of any Liens in the
Collateral; (ix) all rights by which Guarantor might be entitled to
require suit on an accrued right of action in respect of any of the
Guaranteed Obligations or require suit against Borrower or any other
guarantor, whether arising pursuant to Section 34.02 of the Texas
Business and Commerce Code, as amended, Section 17.001 of the Texas Civil
Practice and Remedies Code, as amended, Rule 31 of the Texas Rules of
Civil Procedure, as amended, or otherwise or (x) any other defense of
Borrower or any other guarantor (other than that the Guaranteed
Obligations shall have been indefeasibly paid and performed in full).
(b) Guarantor hereby waives and agrees not to assert against any
Credit Party: (i) any defense, setoff, counterclaim or claim of any kind
or nature available to Borrower or any other guarantor against any Credit
Party, arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity or enforceability of the Guaranteed
Obligations or any security therefor; (ii) to the extent allowed by
Applicable Law, any right or defense arising by reason of any claim or
defense based upon an election of remedies by any Credit Party under any
Applicable Law.
(c) Agent shall have the right to seek recourse against Guarantor to
the fullest extent provided for herein, and no election by Agent to
proceed in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of Agent's right to proceed in
any other form of action or proceeding or against other parties unless
Agent has expressly waived such right in writing. Without limiting the
foregoing, no action or proceeding by any Credit Party under any document
or instrument evidencing the Guaranteed Obligations shall serve to
diminish the liability of Guarantor under this Guaranty except to the
extent that the Credit Parties finally and unconditionally shall have
realized indefeasible payment in full of the Guaranteed Obligations.
(d) Guarantor waives, and agrees that its liability hereunder shall
not be affected by, any neglect, delay, omission, failure or refusal of
any Credit Party to (i) exercise or properly or diligently exercise any
right or remedy with respect to any or all of the Guaranteed Obligations
or the collection thereof or any Collateral or any other security for or
guaranty of the Guaranteed Obligations, or any portion thereof, (ii) take
or prosecute, or properly or diligently take or prosecute, any action for
the collection of any or all of the Guaranteed Obligations against
Borrower, Guarantor or any other guarantor or other Person of any or all
of the Guaranteed Obligations, (iii) foreclose or prosecute, or properly
or diligently foreclose or prosecute, any action in connection with any
agreement, document or instrument or arrangement evidencing, securing or
otherwise affecting all or any part of the Guaranteed Obligations, or
(iv) mitigate damages or take any other action to reduce, collect or
enforce the Guaranteed Obligations;
(e) Agent may at any time, without the consent of or notice to
Guarantor (but otherwise subject to any requirement for consent of any or
all of the Lenders as
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prescribed by the Loan and Security Agreement), without incurring
responsibility to Guarantor and without impairing, releasing, reducing or
affecting the obligations of Guarantor hereunder: (i) change the manner,
place or terms of payment of all or any part of the Guaranteed
Obligations, or renew, extend, modify, rearrange, refinance, refund or
alter all or any part of the Guaranteed Obligations; (ii) sell, exchange,
release, surrender, subordinate, realize upon or otherwise deal with in
any manner and in any order any Collateral and any Lien securing all or
any part of the Guaranteed Obligations or this Guaranty or setoff against
all or any part of the Guaranteed Obligations; (iii) neglect, delay,
omit, fail or refuse to take or prosecute any action for the collection
of all or any part of the Guaranteed Obligations or this Guaranty or to
take or prosecute any action in connection with any of the Loan
Documents; (iv) exercise or refrain from exercising any rights against
Borrower or others, or otherwise act or refrain from acting; (v) settle
or compromise all or any part of the Guaranteed Obligations and
subordinate the payment of all or any part of the Guaranteed Obligations
to the payment of any obligations, indebtedness or liabilities which may
be due or become due to the Credit Parties or others; (vi) apply any
deposit balance, fund, payment, collections through process of law or
otherwise or other property of Borrower to the satisfaction and
liquidation of the indebtedness or obligations of Borrower to the Credit
Parties, if any, not guaranteed under this Guaranty; (vii) release all or
any one or more parties to any one or more of the Loan Documents or grant
other indulgences to Borrower or any other guarantor in respect thereof;
(viii) amend or modify in any manner and at any time (or from time to
time) any of the Loan Documents; or (ix) partially or fully release or
substitute any guarantor, or enforce, exchange, release or waive any
security for the Guaranteed Obligations, or any portion thereof, (x)
bring suit against any and all Persons liable or obligated in respect of
the Guaranteed Obligations, collectively together, jointly and severally
or separately, and apply any amounts obtained by Agent in such manner as
Agent may elect, subject to the Loan Documents, and (xi) apply any sums
paid to the Credit Parties by Guarantor, Borrower or others to the
Guaranteed Obligations as provided by the Loan Documents.
(f) Should Agent or any other Credit Party seek to enforce the
obligations of Guarantor hereunder by action in any court or otherwise,
Guarantor waives any requirement, substantive or procedural, that (i)
rights or remedies be enforced first against Borrower, any other
guarantor or any other Person liable for all or any part of the
Guaranteed Obligations, including, without limitation, that a judgment
first be rendered against Borrower or any other Person, or that Borrower
or any other Person should be joined in such cause, or (ii) enforcement
shall first be made against any Collateral or other property which shall
ever have been given to secure all or any part of the Guaranteed
Obligations or this Guaranty. Such waiver shall be without prejudice to
Agent's right, at its option, to proceed against Borrower or any other
person or entity, whether by separate action or by joinder.
(g) If, in connection with the exercise of any of its rights and
remedies, Agent or any other Credit Party shall forfeit any of its rights
or remedies, including, without limitation, its right to enter a
deficiency judgment against Borrower or any other Person, whether because
of any Applicable Law pertaining to "election of remedies," disposition
of collateral or the like, Guarantor hereby consents to such action by
such Credit Party
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and waives any claim based upon such action. Any action which results in
the denial or impairment of any such right to seek a deficiency judgment
against Borrower shall not impair the obligation of Guarantor to pay the
full amount of the Guaranteed Obligations or any other obligation of
Guarantor contained herein.
(h) Guarantor agrees that if, after the occurrence and during the
continuance of a Default or Event of Default, Agent, for the benefit of the
Credit Parties, is prevented by Applicable Law from exercising its right to
accelerate the maturity of all or any portion of the Guaranteed
Obligations, to collect interest thereon or to enforce or exercise any
other right or remedy with respect thereto, or Agent is prevented from
taking any action to realize on the Collateral, Guarantor agrees to pay to
Agent, for the account of the Credit Parties, upon demand therefor, the
amount that would otherwise have been due and payable had such rights and
remedies been permitted to be exercised by the Credit Parties, as the case
may be.
(i) Guarantor hereby assumes sole responsibility for keeping itself
informed of the financial condition of Borrower and of each other guarantor
of all or any part of the Guaranteed Obligations, and of all other
circumstances bearing upon the risk of nonpayment of the Obligations or any
part thereof. Guarantor hereby agrees that neither Agent nor any other
Credit Party shall have any obligation or duty to advise Guarantor of
information known to any of them regarding such condition or any such
circumstance. In the event that Agent or any other Credit Party in its
sole discretion undertakes at any time or from time to time to provide any
such information to Guarantor, such Person shall be under no obligation (i)
to undertake any investigation not a part of its regular business routine,
(ii) to disclose any information which, pursuant to accepted or reasonable
banking or commercial finance practices, it wishes to maintain
confidential, or (iii) to make any other or future disclosures of such
information or any other information to such Guarantor.
(j) Guarantor consents and agrees that neither Agent nor any of the
other Credit Parties shall be under any obligation to marshal any assets in
favor of Guarantor or otherwise in connection with obtaining payment of any
or all of the Guaranteed Obligations from any Person or source.
(k) In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission
of Agent or any other Credit Party, respectively, and their respective
directors, officers, employees, representatives or agents in connection
with administration of the Guaranteed Obligations, except for willful
misconduct and gross negligence.
7. RELEASE, SUBSTITUTION OF COLLATERAL. Guarantor agrees that Agent may,
at any time and from time to time in its discretion and with or without valuable
consideration, allow substitution or withdrawal of Collateral or other security
and release Collateral or other security without impairing or diminishing the
liabilities or obligations of Guarantor hereunder. Guarantor further agrees
that, if Borrower or any other Person executes in favor of Agent or any other
Credit Party any security agreement, collateral agreement, mortgage, deed of
trust, collateral
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assignment or other security instrument, the exercise of any right or remedy
thereby conferred shall be wholly discretionary with such Credit Party and that
the exercise or failure to exercise any such right or remedy shall in no way
impair or diminish the obligation of Guarantor hereunder. Guarantor further
agrees that the Credit Parties shall not be liable for any failure to use
diligence or care in the collection of the Guaranteed Obligations, in the
creation or perfection of any lien, security interest or assignment intended as
security, or in preserving the liability of any Person liable or obligated on
the Guaranteed Obligations.
8. DEFAULT. Upon the occurrence and during the continuation of a Default
or Event of Default, Guarantor shall, on demand by Agent and without further
notice of dishonor and without notice of any kind to Borrower, Guarantor or any
other Person whether contemporaneously with, or previous or subsequent to, such
demand, promptly pay to Agent, for the benefit of the Credit Parties, in
immediately available funds, the full unpaid amount of the Guaranteed
Obligations, or such lesser amount, if any, as may be specifically demanded by
Agent from time to time, at Agent's office located in Dallas County, Texas or at
such other place as Agent may specify to Guarantor in writing. If acceleration
of the time for payment of any amount payable by Borrower under or with respect
to any of the Guaranteed Obligations is stayed or otherwise delayed upon the
insolvency, bankruptcy or reorganization of Borrower, all such amounts otherwise
subject to acceleration under the terms of the Guaranteed Obligations shall
nonetheless be payable by Guarantor hereunder promptly on demand by Agent, and
Guarantor expressly and unconditionally agrees to make such payment in full.
9. NO WAIVER, REMEDIES.
(a) No failure on the part of Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. In
no event shall any waiver of the provisions of this Guaranty be effective
unless the same be in writing and signed by an officer of Agent, and then
only in the specific instance and for the purpose given. The remedies
herein provided are cumulative and not exclusive of any remedies provided
by Applicable Law or any of the other Loan Documents.
(b) Failure by Agent or any other Credit Party at any time or times
hereafter to require strict performance by Borrower, Guarantor or any other
Person of any of the requirements contained in any of the Loan Documents
now or at any time, from time to time, hereafter executed and delivered by
Borrower, Guarantor or any other Person shall not waive, affect or diminish
the right to demand strict performance thereof, and such right shall not be
deemed to have been modified or waived by any course of conduct or
knowledge of Agent or any other Credit Party, or any agent, officer or
employee thereof, respectively.
(c) No waiver of any Default or Event of Default or any other breach,
default or requirement shall operate as a waiver of any other Default or
Event of Default or the same Default or Event of Default on a future
occasion, and no action permitted hereunder shall in way affect or impair
any of the rights of Agent or the other Credit Parties or the obligations
of Guarantor under this Guaranty or under any of the other
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Loan Documents. Any determination by a court of competent jurisdiction of
the amount of any principal and/or interest or other amount constituting
any of the Obligations shall be conclusive and binding on Guarantor
irrespective of whether Guarantor was a party to the suit or action in
which such determination was made.
10. NOTICE OF SALE. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any Collateral or
other property securing all or any part of the Guaranteed Obligations or this
Guaranty, it is agreed that at least ten (10) Business Days notice of the time
and place of any public sale, or the time after which any private sale or other
disposition may be made of any such Collateral or other property, shall be
deemed to be reasonable notice in conformity with such requirements; PROVIDED,
HOWEVER, that notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
11. PAYMENT BY GUARANTOR. Whenever Guarantor pays any sum which is or may
become due under this Guaranty, written notice must be delivered to Agent
contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Agent
receives such notice in the manner otherwise prescribed for notices hereunder.
In the absence of such notice in compliance with the provisions hereof, any sum
received by Agent or any other Credit Party on account of the Guaranteed
Obligations shall be conclusively deemed paid by Borrower.
12. AGENT. Agent shall have all of the rights, powers and benefits, for
itself and on behalf of the other Credit Parties, as are prescribed by the Loan
Documents. Guarantor's performance of this Guaranty is for the benefit of Agent
and the other Credit Parties according to their respective interests as provided
in the Loan and Security Agreement.
13. CUMULATIVE REMEDIES; NO ELECTION. If Guarantor is or becomes liable
or obligated for the Guaranteed Obligations, by endorsement or otherwise, other
than under this Guaranty, such liability or obligation shall not be in any
manner impaired or affected hereby, and the rights and remedies of Agent
hereunder shall be cumulative of any and all other rights and remedies that
Agent or any other Credit Party may ever have against Guarantor. The exercise
by Agent or any other Credit Party of any right or remedy hereunder or under any
other agreement, document or instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
Without in any way limiting the generality of the foregoing, it is specifically
understood and agreed that this Guaranty is given by Guarantor as an additional
guaranty to any and all other guaranties or security heretofore, concurrently
herewith or hereafter executed and/or delivered by Guarantor to or in favor of
Agent or any other Credit Party relating to the Guaranteed Obligations, and
nothing herein shall ever be deemed to in any way negate or replace any such
other guaranties or security; PROVIDED, HOWEVER, that Agent shall have all of
its rights and remedies under this Guaranty irrespective of anything to the
contrary contained in any such other guaranties or security. This Guaranty may
be enforced from time to time as often as occasion therefor may arise as may be
determined by Agent, and it is agreed and understood that it shall not be
necessary for Agent, in order to enforce payment by Guarantor, first to exercise
any rights or remedies against Borrower, the Collateral or any other Person
under the Loan Documents or Applicable Law, or to resort to any other sources or
means of obtaining payment of the Guaranteed Obligations.
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14. LIMITATION OF LIABILITY. Notwithstanding the other provisions of this
Guaranty, Guarantor's liability under this Guaranty shall be limited to a
maximum aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law in each case after giving effect
to all other liabilities of Guarantor, contingent or otherwise, that are
relevant under such laws, and after giving effect to the value, as assets (as
determined under the applicable provisions of such laws) of any rights of
Guarantor to subrogation or contribution from Borrower or any other Person
pursuant to Applicable Law or any agreement providing for an equitable
allocation among Guarantor, Borrower and any other Person of their respective
obligations thereunder.
15. BINDING EFFECT. This Guaranty is for the benefit of Agent (for the
benefit of the Credit Parties) and its successors and assigns, and in the event
of an assignment by Agent or any other Credit Party, or their respective
successors or assigns, of the Guaranteed Obligations, or any part thereof, the
rights and benefits hereunder, to the extent applicable to the indebtedness,
liabilities and obligations so assigned, shall be deemed transferred with such
indebtedness, liabilities and obligations without necessity of further express
action. This Guaranty is binding upon Guarantor, and its successors and
assigns.
16. WAIVER OF SUBROGATION, CONTRIBUTION AND OTHER RIGHTS. UPON PAYMENT BY
GUARANTOR OF ANY SUMS IN RESPECT OF THE GUARANTEED OBLIGATIONS HEREUNDER
(INCLUDING, WITHOUT LIMITATION, ANY AMOUNTS ADVANCED TO BORROWER BY GUARANTOR),
ALL RIGHTS OF GUARANTOR AGAINST BORROWER ARISING AS A RESULT THEREFROM BY WAY OF
RIGHT OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION, INDEMNIFICATION
AND/OR OTHERWISE SHALL IN ALL RESPECTS BE SUBORDINATE AND JUNIOR IN RIGHT OF
PAYMENT AND ENFORCEMENT TO THE PRIOR INDEFEASIBLE PAYMENT AND ENFORCEMENT IN
FULL OF THE GUARANTEED OBLIGATIONS. GUARANTOR SHALL NOT HAVE, AND HEREBY
WAIVES, ANY RIGHTS OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION,
INDEMNIFICATION AND/OR OTHERWISE AGAINST OR FROM BORROWER UNLESS AND UNTIL ALL
OF THE GUARANTEED OBLIGATIONS HAVE BEEN PAID AND PERFORMED IN FULL. IN ADDITION
TO THE FOREGOING, GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL CLAIMS OR
OTHER RIGHTS IT MAY NOW HAVE OR HEREAFTER ACQUIRE AGAINST AGENT, ANY OTHER
CREDIT PARTY, BORROWER OR ANY OTHER PERSON UNDER CHAPTER 34 OF THE TEXAS
BUSINESS AND COMMERCE CODE, UNDER RULES 31 AND 163 OF THE TEXAS RULES OF CIVIL
PROCEDURE, UNDER SECTION 17.001 OF THE TEXAS CIVIL PRACTICE AND REMEDIES CODE
AND UNDER ANY OTHER STATUTE OF ANY STATE OR OTHER JURISDICTION REQUIRING
RECOURSE AGAINST THE PRIMARY OBLIGOR OR IMPOSING OTHER REQUIREMENTS AS A
CONDITION TO RECOURSE AGAINST A GUARANTOR IF AND TO THE EXTENT THAT THE SAME MAY
BE APPLICABLE TO THIS GUARANTY.
17. SUBORDINATION OF INDEBTEDNESS AND LIENS. The payment of any and all
principal of and interest on all indebtedness of Borrower, whether direct,
indirect, fixed, contingent,
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liquidated, unliquidated, joint, several, or joint and several, now or hereafter
existing, due or to become due to Guarantor (herein called the "SUBORDINATED
DEBT"), shall in all respects be subordinate and junior in right of payment and
enforcement to the prior payment and enforcement in full of the Guaranteed
Obligations as provided in this paragraph. Except as may be expressly permitted
by the Loan and Security Agreement, no payment shall be made on or with respect
to the Subordinated Debt (whether owed to Guarantor or any Affiliate of
Guarantor) unless and until the Guaranteed Obligations shall have been paid and
performed in full. In the event that Guarantor or any Affiliate of Guarantor
shall receive any payment on account of the Subordinated Debt in violation of
this paragraph, Guarantor will hold, or cause to be held (as the case may be),
any amount so received in trust for the benefit of Agent, for the benefit of the
Credit Parties, and will forthwith deliver, or cause to be delivered (as the
case may be), such payment to Agent, in the form received, to be applied to the
Guaranteed Obligations. All Liens, if any, at any time securing payment of all
or any part of the Subordinated Debt (herein called the "SUBORDINATED LIENS")
shall be and remain inferior and subordinate to the Liens securing payment of
all or any part of the Obligations or the Guaranteed Obligations, regardless of
whether such Subordinated Liens presently exist or are hereafter created or when
such Subordinated Liens were created, perfected, filed or recorded (PROVIDED,
that the foregoing shall not be interpreted or deemed to allow the existence of
any such Liens to the extent otherwise prohibited by the Loan Documents).
Guarantor shall not exercise or enforce any creditors' rights or remedies that
it may have against Borrower or foreclose, repossess, sequester or otherwise
institute any action or proceeding (whether judicial or otherwise, including,
without limitation, the commencement of, or joinder in, any bankruptcy,
insolvency, reorganization, liquidation, receivership or other debtor relief
law) to enforce any Subordinated Lien on any assets of Borrower or any other
Person unless and until the Guaranteed Obligations shall have been paid and
performed in full. The terms and provisions of this paragraph are given by
Guarantor as additional rights and benefits to any and all other subordination
agreements heretofore, concurrently herewith or hereafter executed by Guarantor
to or in favor of Agent or any other Credit Party, and nothing in this Guaranty
shall ever be deemed to in any way negate or replace any other such previous,
concurrent or subsequent subordination agreements. All promissory notes,
ledgers and other evidences of the Subordinated Debt, and all mortgages, deed of
trusts, security agreements, assignments and other security documents, if any,
at any time evidencing the Subordinated Liens, shall contain a specific written
notice that the indebtedness and Liens evidenced thereby are subordinated as
provided in this paragraph.
18. RIGHT OF SETOFF. Guarantor hereby grants to Agent and each other
Credit Party a right of setoff upon any and all monies, securities or other
property of Guarantor, and the proceeds therefrom, now or hereafter held or
received by or in transit to Agent or any such other Credit Party from or for
the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Guarantor, and any and all claims of
Guarantor against Agent or any such other Credit Party at any time existing.
The right of setoff granted pursuant to this paragraph shall be cumulative of
and in addition to Agent's or any such other Credit Party's common law right of
setoff.
19. FURTHER ASSURANCES. Upon the request of Agent, Guarantor will, at any
time and from time to time, duly execute and deliver to Agent any and all such
further agreements,
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documents and instruments, and supply such additional information, as may be
necessary or advisable, in the opinion of Agent, to obtain the full benefits of
this Guaranty.
20. INVALID PROVISIONS. If any provision of this Guaranty is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Guaranty shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Guaranty a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable. No provision herein or in any other Loan Document
evidencing the Guaranteed Obligations shall require the payment or permit the
collection of interest in excess of the maximum permitted by Applicable Law.
21. MODIFICATION IN WRITING. No modification, consent, amendment or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor herefrom, shall be effective unless the same shall be in writing and
signed by a duly authorized officer of Agent and then shall be effective only in
the specific instance and for the specific purpose for which given.
22. NO WAIVER, ETC. No notice to or demand on, or consent by, Guarantor
in any case shall, of itself, entitle Guarantor to any other or further notice
or demand, or right to grant or refuse consent, in similar or other
circumstances. No delay or omission by Agent in exercising any right or remedy
hereunder shall impair any such right or remedy or be construed as a waiver
thereof or any acquiescence therein, and no single or partial exercise of any
such right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy hereunder.
23. CUMULATIVE RIGHTS. All rights and remedies of Agent hereunder are
cumulative of each other and of every other right or remedy which Agent or any
other Credit Party may otherwise have at law or in equity or under any other
contract or document, and the exercise of one or more rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of other rights or
remedies.
24. EXPENSES. Guarantor agrees to pay on demand by Agent all costs and
expenses incurred by Agent in connection with the negotiation, preparation,
execution and performance of the terms and provisions of this Guaranty and any
and all amendments, modifications, renewals, restatements and/or supplements
hereto from time to time, including, without limitation, the reasonable fees and
expenses of legal counsel to Agent. If Guarantor should breach or fail to
perform any provision of this Guaranty, Guarantor agrees to pay to Agent all
costs and expenses incurred by Agent in the enforcement of this Guaranty from
time to time, including, without limitation, the reasonable fees and expenses of
all legal counsel to Agent.
25. APPLICABLE LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
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26. NO ORAL AGREEMENTS. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT
BETWEEN GUARANTOR AND AGENT RELATING TO THE SUBJECT MATTER OF THIS GUARANTY AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
GUARANTOR AND AGENT. THIS GUARANTY SUPERSEDES ALL PRIOR (IF ANY) ORAL
AGREEMENTS, ARRANGEMENTS OR UNDERSTANDINGS RELATING TO THE SUBJECT MATTER OF
THIS GUARANTY.
27. NOTICES. Unless otherwise specifically provided in this Guaranty, all
notices or other communications required or permitted to be given under this
Guaranty shall be given, if to Agent, as specified in the Loan and Security
Agreement, or if to Guarantor, as specified in the Loan and Security Agreement
but otherwise to Guarantor's address specified in the introductory paragraph
hereof.
28. CHOICE OF FORUM; SERVICE OF PROCESS AND JURISDICTION. Any suit, action
or proceeding against Guarantor or Agent with respect to this Guaranty shall be
brought, served and maintained in the state or federal courts located in the
State of Texas or otherwise as specified in the Loan and Security Agreement.
29. SURVIVAL. All representations, warranties, covenants and agreements
of Guarantor in this Guaranty shall survive the execution of this Guaranty.
30. COUNTERPARTS. This Guaranty may be executed in any number of
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute one and the same Guaranty.
31. INTEREST LIMITATION. Notwithstanding anything to the contrary
contained or referred to in this Guaranty, in no contingency or event whatsoever
shall the amount of interest under the Loan Documents, including, without
limitation, this Guaranty, paid by any Person, received by the Lenders, agreed
to be paid by any Person, or requested or demanded to be paid by the Lenders,
exceed the Maximum Rate. In the event any such sums paid to Lender would exceed
the Maximum Rate, Lender shall automatically apply such excess to any unpaid
amount of the Guaranteed Obligations or, if the amount of such excess exceeds
said unpaid amount, such excess shall be paid to Borrower. All sums paid, or
agreed to be paid, which are or hereafter may be construed to be compensation
for the use, forbearance or detention of money shall be amortized, prorated,
spread and allocated in respect of the Guaranteed Obligations throughout the
full term of the Loan and Security Agreement until the Guaranteed Obligations
are paid in full. Notwithstanding any provisions contained in the Loan
Documents, or in any Notes or other related documents executed pursuant thereto,
the Lenders shall never be entitled to receive, collect or apply as interest any
amount in excess of the Maximum Rate and, in the event any Lender ever receives,
collects or applies any amount in respect of Borrower that otherwise would be in
excess of the Maximum Rate, such amount shall automatically be deemed to be
applied in reduction of the unpaid principal balance of the Guaranteed
Obligations and, if such principal balance is paid in full, any remaining excess
shall forthwith be paid to Borrower. In determining whether or not the interest
paid or payable under any specific contingency exceeds the Maximum Rate,
Borrower and Lender shall, to the maximum extent permitted under
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Applicable Law, (i) characterize any non-principal payment as a standby fee,
commitment fee, prepayment charge, delinquency charge or reimbursement for a
third-party expense rather than as interest, (ii) exclude voluntary prepayments
and the effect thereof, and (iii) amortize, prorate, allocate and spread in
equal parts throughout the entire period during which the Guaranteed Obligations
were outstanding the total amount of interest at any time contracted for,
charged or received. Nothing herein contained shall be construed or so operate
as to require payment of any interest, fees, costs or charges greater than is
permitted by Applicable Law.
32. LITIGATION; WAIVER OF TRIAL BY JURY. GUARANTOR HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST GUARANTOR ARISING OUT OF THIS GUARANTY OR ANY OF THE OTHER LOAN
DOCUMENTS OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE
WHATSOEVER BETWEEN GUARANTOR AND AGENT OR ANY LENDER OF ANY KIND OR NATURE.
GUARANTOR ACKNOWLEDGES THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND
UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY AND WITH
THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING. GUARANTOR HEREBY AGREES THAT
THE FEDERAL COURT OF THE NORTHERN DISTRICT OF TEXAS OR, AT THE OPTION OF AGENT
OR ANY LENDER, ANY COURT IN WHICH AGENT OR SUCH LENDER SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN GUARANTOR AND AGENT OR SUCH LENDER, PERTAINING
DIRECTLY OR INDIRECTLY TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS OR TO ANY
MATTER ARISING THEREFROM. GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS.
WITHOUT LIMITING THE APPLICABILITY OF ANY LAW PROVIDING FOR SERVICE OF PROCESS
UPON A STATUTORY AGENT AND NOTIFICATION THEREOF BY MAIL, GUARANTOR HEREBY WAIVES
(TO THE FULLEST EXTENT ALLOWED BY LAW) PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS ISSUED THEREIN AND AGREES (TO THE FULLEST
EXTENT ALLOWED BY LAW) THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
GUARANTOR AT THE ADDRESS OF GUARANTOR SET FORTH IN THE INTRODUCTORY PARAGRAPH OF
THIS GUARANTY. SHOULD GUARANTOR FAIL TO APPEAR OR ANSWER ANY SUMMONS,
COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30) DAYS AFTER THE MAILING
THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS
OR PAPERS. THE NONEXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS PARAGRAPH SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM
OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY
APPROPRIATE JURISDICTION.
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<PAGE>
33. IRREVOCABLE NATURE OF GUARANTY. This Guaranty may not be revoked by
Guarantor; PROVIDED, HOWEVER, that in the event it shall be judicially
determined that Guarantor shall have any right, by Applicable Law
notwithstanding its express agreement herein to the contrary, to revoke this
Guaranty, Guarantor may deliver to Agent written notice of Guarantor's intention
not to be liable hereunder for any Guaranteed Obligations arising, created or
incurred after Agent's receipt of such notice, whereupon such notice shall be
effective to the extent (but only to the extent) provided hereinbelow as to
Guarantor from and after (but not before) the time when such notice is actually
delivered to and received by and receipted for in writing by Agent (the
"EFFECTIVE REVOCATION TIME"); PROVIDED FURTHER, HOWEVER, that such notice shall
not be effective as to, and shall not in any way restrict, limit, impair,
release or otherwise affect the indebtedness, liabilities or obligations of
Guarantor under this Guaranty with respect to (a) any Guaranteed Obligations
consisting of indebtedness, liabilities or obligations under the Loan and
Security Agreement, the Notes or any other Loan Document, whether incurred
before or after the Effective Revocation Time (including, without limitation,
any loans, advances or extensions of credit at any time made or created under
the Loan and Security Agreement, whether or not agreed, committed or
contemplated to be made by the Lenders and whether or not discretionary with the
Lenders), (b) any Guaranteed Obligations arising, created or incurred prior to
the Effective Revocation Time, (c) any renewals, extensions or modifications of
the indebtedness, liabilities or obligations referred to in CLAUSES (a) and (b)
preceding, whether occurring before or after the Effective Revocation Time, or
(d) any interest or costs of collection with respect to any of the indebtedness,
liabilities or obligations referred to in CLAUSES (a), (b) or (c) preceding.
Guarantor acknowledges that any such revocation or attempted revocation by
Guarantor, whether or not valid under Applicable Law, shall in any event
constitute an Event of Default under the Loan Documents.
34. HEADINGS. Guarantor agrees that the paragraph headings in this
Guaranty are for convenience of identification only and do not limit any of the
provisions of this Guaranty.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the
effective date specified in the introductory paragraph of this Guaranty.
GUARANTOR:
FREMONT ACQUISITION COMPANY, LLC,
a Delaware limited liability company
By: /s/ Gregory P. Spivy
----------------------------------------
Name: Gregory P. Spivy
--------------------------------------
Title: Vice President
-------------------------------------
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