<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 1995
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from - to -
-------------------- ------------------------
Commission File Number 1-6071
RYMER FOODS INC.
Incorporated in the State of Delaware IRS Employer Identification
No. 36-1343930
4600 South Packers Avenue
Suite 400
Chicago, Illinois 60609
312/927-7777
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
------- -------
Registrant had 10,750,366 shares of common stock outstanding as of June 12,
1995.
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This report consists of 17 pages.
--
1.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
April 29, October 29,
1995 1994
------------ ------------
(in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 2,492
Receivables, net 13,878 11,847
Inventories 25,296 16,951
Other 683 724
------- -------
TOTAL CURRENT ASSETS 39,857 32,014
PROPERTY, PLANT AND EQUIPMENT:
Buildings and improvements 1,195 1,195
Machinery and equipment 6,527 6,173
------- -------
7,722 7,368
Less accumulated depreciation and amortization 5,690 5,399
------- -------
2,032 1,969
OTHER:
Goodwill, net of accumulated amortization of
$35,970,000 in 1995 and $35,386,000 in 1994 20,960 21,544
Assets held for sale 1,600 1,600
Other 959 1,365
------- -------
$ 65,408 $ 58,492
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt:
Banks $ - $ 5,844
Senior Notes - 2,250
Other 265 26
Accounts payable 2,854 2,953
Accrued liabilities 3,423 4,961
------- -------
TOTAL CURRENT LIABILITIES 6,542 16,034
LONG-TERM DEBT:
Banks 18,729 -
Senior Notes 18,133 18,133
Other, including amounts to related parties 477 710
------- -------
Total long-term debt 37,339 18,843
OTHER NON-CURRENT LIABILITIES 790 1,151
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
Common stock, $1 par - 20,000,000 shares
authorized; 10,748,601 shares outstanding
in 1995 and 10,741,451 shares outstanding
in 1994 after deducting treasury shares of
230,516 in 1995 and 237,666 in 1994 10,749 10,741
Additional paid-in capital 44,358 44,344
Retained deficit (33,976) (32,239)
Notes receivable from sale of common shares
to related parties (394) (382)
------- -------
TOTAL STOCKHOLDERS' EQUITY 20,737 22,464
------- -------
$ 65,408 $ 58,492
------- -------
------- -------
</TABLE>
See accompanying notes.
2.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------ -------------------------
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
--------- --------- --------- ----------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Net sales $36,224 $39,269 $ 72,105 $ 76,791
Cost of sales 33,079 34,626 66,123 68,530
------ ------ ------- -------
Gross profit 3,145 4,643 5,982 8,261
Selling, general and
administrative expenses 3,218 2,996 5,854 5,672
------ ------ ------ ------
Operating income (73) 1,647 128 2,589
Interest expense 1,161 1,038 2,172 2,054
Other income (126) (143) (307) (295)
Income (loss) from continuing
operations before income taxes (1,108) 752 (1,737) 830
Provision for income taxes - 22 - 24
------ ------ ------ ------
Income (loss) from continuing operations (1,108) 730 (1,737) 806
Income (loss) from discontinued
operations, net of income taxes - - - (466)
Gain on dispositions of discontinued
operations, net of income taxes - - - 4,474
------ ------ ------ ------
Net income (loss) $(1,108) $ 730 $(1,737) $ 4,814
------ ------ ------ ------
------ ------ ------ ------
Per common share data:
Primary:
Income (loss) from continuing operations $ (.10) $ .07 $ (.16) $ .08
------ ------ ------ ------
------ ------ ------ ------
Net income (loss) $ (.10) $ .07 $ (.16) $ .45
------ ------ ------ ------
------ ------ ------ ------
Fully diluted:
Income (loss) from continuing operations $ (.10) $ .07 $ (.16) $ .08
------ ------ ------ ------
------ ------ ------ ------
Net income (loss) $ (.10) $ .07 $ (.16) $ .45
------ ------ ------ ------
------ ------ ------ ------
Average shares outstanding
Primary 10,895,000 10,544,000 10,975,000 10,603,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted 10,895,000 10,544,000 10,975,000 10,603,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
3.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
--------------------------------
April 29, 1995 April 30, 1994
-------------- --------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Income (loss) from continuing operations $ (1,737) $ 806
Non-cash adjustments to income (loss):
Depreciation and amortization 305 354
Amortization of other assets 893 924
Other non-cash expense (income) (15) 29
Provision for bad debts 584 161
Net increase to accounts receivable (2,615) (1,131)
Net increase to inventories (8,344) (4,652)
Net decrease to other current and long-term assets 137 274
Net (decrease) increase to accounts payable and accrued expenses (1,461) 95
-------- --------
Net cash flows from operating activities of
continuing operations (12,283) (3,140)
Net cash flows from operating activities of
discontinued operations (515) (876)
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES (12,778) (4,016)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of Rymer Chicken assets - 24,323
Proceeds from the sale of Mendelson stock - 750
Capital expenditures (368) (380)
Other (9) (8)
Net cash flows from investing activities of discontinued operations - (628)
-------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES (377) 24,057
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under line-of-credit facilities 12,886 (14,466)
Principal payments on debt (2,270) (5,601)
Proceeds from borrowings 25 23
Proceeds from issuance of common stock 22 3
-------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES 10,663 (20,041)
Net change in cash and cash equivalents (2,492) -
Cash and cash equivalents balance at beginning of year 2,492 -
-------- --------
Cash and cash equivalents balance at end of second quarter $ - $ -
-------- --------
-------- --------
Supplemental cash flow information:
Interest paid $ 1,887 $ 1,884
-------- --------
-------- --------
Income taxes paid, net of refunds $ 632 $ 10
-------- --------
-------- --------
</TABLE>
See accompanying notes.
4.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations, and cash flows
in conformity with generally accepted accounting principles. The Company
operates on a fiscal year which ends on the last Saturday in October.
References in the following notes to years and quarters are references to
fiscal years and fiscal quarters. For further information refer to the
Consolidated Financial Statements and footnotes thereto included in Rymer
Foods Inc.'s (the Company's or Rymer's) Annual Report on Form 10-K for the
fiscal year ended October 29, 1994.
Certain reclassifications have been made to the 1994 consolidated financial
statements to conform to the 1995 presentation.
In management's opinion, the condensed consolidated financial statements
include all normal recurring adjustments which the Company considers
necessary for a fair presentation of the results for the period. Operating
results for the fiscal period presented are not necessarily indicative of
the results that may be expected for the entire fiscal year.
2. RECEIVABLES
Receivables are net of allowances for doubtful accounts of $1,323,000 at
April 29, 1995 and $731,000 at October 29, 1994.
3. INVENTORIES
Inventories are stated principally at the lower of first-in, first-out cost
or market. The composition of inventories at April 29, 1995 and October
29, 1994 was:
<TABLE>
<CAPTION>
April 29, 1995 October 29, 1994
-------------- ----------------
(in thousands)
<S> <C> <C>
Raw materials $14,721 $ 5,339
Work in process 42 -
Finished goods 10,533 11,612
------ ------
Total $25,296 $16,951
------ ------
------ ------
</TABLE>
4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
The accompanying condensed consolidated financial statements reflect the
operations of the Company's chicken subsidiary as discontinued operations
for accounting purposes.
RYMER CHICKEN - VAN BUREN
In July 1993, the management of the Company designed a plan to sell the Van
Buren, Arkansas chicken processing operation. On December 10, 1993,
substantially all of the assets of Rymer Chicken were sold (the Sale of
Rymer Chicken) to Simmons Poultry Farms, Inc., Siloam Springs, Arkansas
(Simmons) pursuant to an Asset Purchase Agreement, dated as of November 19,
1993, among the Company, Rymer Chicken, Simmons and Simmons Industries,
Inc., an affiliate of Simmons, as amended (the Asset Purchase Agreement).
The purchase price was $24 million (subject to certain adjustments) plus
the assumption of substantially all of Rymer Chicken's obligations and
liabilities other than its obligations under its senior bank facility. The
Asset Purchase Agreement was approved by the Company's stockholders on
December 6, 1993.
Upon consummation of the Asset Purchase Agreement, the Company received
proceeds of $24.3 million and recorded a gain before income taxes of $4.0
million in the first quarter of 1994. The calculation of such gain
5.
<PAGE>
reflects all actual expenses and estimated future expenses associated with
the Sale of Rymer Chicken. Such gain is net of the writeoff of $5.4
million of goodwill related to Rymer Chicken.
RYMER CHICKEN - PLANT CITY
During 1992, the Company decided to place its idle Plant City chicken
facility and equipment for sale because chicken sales volume was not
expected to increase significantly in the near future.
The Company is actively pursuing the sale of the Plant City, Florida
property at an amount in excess of its net book value of $1.6 million.
Reserves established in 1992 and 1993 are considered adequate to maintain
the idle facility for at least two years.
The Company incurred costs related to operation of the idle facility of
approximately $33,508 during the first half of 1995 and $77,000 during the
first half of 1994 which were charged to the reserve established for such
losses during fiscal 1992 and 1993.
SALE OF MURRY'S STOCK
In July 1989, the Company received voting and non-voting shares of common
stock in The Mendelson Holding Company, Ltd. (Mendelson Holding)
representing approximately a 12.5% interest in Mendelson Holding as partial
consideration for the sale of an indirect, wholly-owned subsidiary,
Murry's, Inc. (Murry's).
On November 17, 1993 (the Mendelson Closing Date), the Company sold its
stock in Mendelson Holding to Murry's for $750,000 in cash. The Company
used these proceeds to pay down debt and recorded a gain on the sale before
income taxes of $670,000 during the first quarter of 1994. In connection
with the sale, Murry's and Mendelson Holding, on the one hand, and the
Company, on the other, released all claims against each other (stipulating
to the dismissal of a pending lawsuit brought by Mendelson Holding against
the Company in Delaware Chancery Court). In addition, Murry's engaged the
Company as a consultant for three years for fees aggregating $800,000.
Consulting fees for 1994 totalling $250,000 were paid to the Company by
Murry's on the Mendelson Closing Date and fees of $300,000 were paid to the
Company during the first quarter of 1995. For the periods ended April 29,
1995 and April 30, 1994, the Company recorded consulting income of $150,000
and $125,000, respectively, from Murry's. The remaining $150,000 received
from Murry's during the 1995 first quarter is classified as an accrued
liability on the balance sheet at April 29, 1995 and will be recorded by
the Company as consulting income over the remainder of 1995.
The following summarizes the results of the various discontinued operations
reflected in the accompanying Condensed Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
------------------------
4/29/95 4/30/94
------- -------
(in thousands)
<S> <C> <C>
SALES:
Rymer Chicken $ - $ 9,468
------ ------
------ ------
LOSS FROM DISCONTINUED OPERATIONS:
Rymer Chicken $ - $ (492)
Credit equivalent to benefit for income tax - 26
------ ------
Loss from discontinued operations,
net of income taxes $ - $ (466)
------ ------
------ ------
GAIN ON DISPOSITIONS OF DISCONTINUED OPERATIONS:
Rymer Chicken $ - $ 4,017
Murry's - 670
------ ------
Total gain on dispositions of discontinued
operations before income taxes - 4,687
Provision for income taxes - 213
------ ------
Gain on dispositions of discontinued
operations, net of income taxes $ - $ 4,474
------ ------
------ ------
</TABLE>
6.
<PAGE>
Income (loss) from discontinued operations includes an allocation of
interest expense on debt not attributable to specific operations of the
Company which amounted to approximately $185,000 for the first quarter of
1994. The allocation was based on the proportion of net assets for sale to
total net assets of the Company. This treatment is in accordance with
current accounting pronouncements regarding allocation of interest to
discontinued operations.
In addition, the above discontinued operations also include a charge for
interest expense which specifically related to the operations of the
discontinued segment.
5. INCOME TAXES
In 1995, no provision for income taxes was recorded due to the loss from
operations. The 1994 provision for income taxes amounted to $.2 million.
The components of the net deferred tax asset recorded in the accompanying
balance sheets as of April 29, 1995 and October 29, 1994 are as follows:
<TABLE>
<CAPTION>
Non-Current
Deferred Tax Asset
------------------
(in thousands)
<S> <C>
Deferred tax asset $15,701
Valuation allowance 15,701
------
Net deferred tax asset $ -
------
------
</TABLE>
The Company did not record any change in its deferred tax asset during the
first half of 1995 because estimated taxable income is not expected to
result in any significant change to the deferred tax asset. The following
table accounts for the difference between the actual tax provision
attributable to income before income taxes and the amounts obtained by
applying the statutory U.S. Federal income tax rate of 34% to the loss from
continuing operations before income taxes.
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
April 29, 1995
----------------------
(in thousands)
<S> <C>
Loss from continuing operations
before income taxes $ (1,737)
-------
-------
Total credit equivalent to benefit for
income taxes computed by applying
the U.S. statutory rate (34%) $ (591)
Increases in taxes due to:
Goodwill amortization ($584,000 x 34%) 199
Other differences, net 392
-------
Actual tax provision $ -
-------
-------
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company has agreements with certain of its customers to sell
merchandise over the next year for specified prices. The Company's
aggregate commitment under sales agreements was approximately $12.6 million
and $14.0 million at April 29, 1995 and October 29, 1994, respectively.
The Company also has agreements with certain of its suppliers to purchase
raw materials. The agreements extend for up to one year and provide the
price and quantity of materials to be supplied. The Company had purchase
commitments of approximately $4.1 million and $15.8 million at April 29,
1995 and October 29, 1994, respectively.
On January 27, 1995, Country Fed Meat Company, Inc. (CFM) initiated a
lawsuit against Rymer Foods Inc. d/b/a/ Rymer Meat Inc. (Rymer) in the
Superior Court of Fayette County, Georgia, essentially alleging that Rymer
was in breach of contract to supply certain meat products to CFM. In March
1995, this case was
7.
<PAGE>
removed to the United States District Court for Georgia. The complaint
seeks damages in an as yet undetermined amount.
On February 21, 1995, Rymer Meat Inc. sued CFM in the United States
District Court for the Northern District of Illinois, seeking damages in
the amount of $1,716,360 for meat products sold to CFM from April 1994
through January 1995, but not paid for. At the same time, Rymer
International Seafood Inc. also sued CFM in the same court, but in a
separate action, seeking damages of $242,775 for seafood products sold to
CFM during January and February of 1995, but not paid for.
In the opinion of Rymer's management, Rymer is not in default under any
agreement with CFM, and, if the negotiations described below do not result
in a settlement of these lawsuits, Rymer intends to contest CFM's complaint
in federal court in Georgia and to vigorously pursue the lawsuits brought
by Rymer Meat and Rymer Seafood (together, the Rymer Entities) in federal
court in Illinois.
The Rymer Entities are continuing their negotiations with CFM to settle all
outstanding lawsuits between them. Although such negotiations have been
productive to date and management is hopeful of a near-term arrangement,
there can be no assurance that a settlement will occur. Rymer's management
believes that its existing allowance for doubtful accounts contains
sufficient reserves to resolve the matters in dispute, without additional
charges to earnings. The Rymer Entities do not expect to continue a supply
relationship with CFM in the future. CFM had been one of Rymer's major
customers, and during its 1994 fiscal year accounted for approximately 8%
of its sales. During the first two quarters of 1995, CFM accounted for
approximately 4% of the sales of the Rymer Entities.
8.
<PAGE>
Notes to Financial Statements (unaudited) -- cont'd.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
ASSUMING PRIMARY DILUTION
--------------------------------------------------------
Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------------- --------------------------
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 10,748 10,503 10,746 10,503
2 Net additional shares outstanding
assuming exercise of stock options 147 51 229 100
-------- -------- -------- --------
3 Average number of common shares
outstanding 10,895 10,554 10,975 10,603
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS
4 Income (loss) from continuing
operations $ (1,108) $ 730 $ (1,737) $ 806
-------- -------- -------- --------
-------- -------- -------- --------
5 Net income (loss) $ (1,108) $ 730 $ (1,737) $ 4,814
-------- -------- -------- --------
-------- -------- -------- --------
PER SHARE AMOUNTS
Income (loss) from continuing
operations (line 4 / line 3) $ (.10) $ .07 $ (.16) $ .08
-------- -------- -------- --------
-------- -------- -------- --------
Net income (loss)
(line 5 / line 3) $ (.10) $ .07 $ (.16) $ .45
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
NOTE 1 - Earnings (loss) per share for all periods were calculated by the
Treasury Stock Method.
9.
<PAGE>
to Financial Statements (unaudited) -- cont'd.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
ASSUMING FULL DILUTION
------------------------------------------------------------------
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------------- --------------------------
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Average shares outstanding 10,748 10,503 10,746 10,503
2 Net additional shares outstanding
assuming exercise of stock options 147 51 229 100
-------- -------- -------- ---------
3 Average number of common shares
outstanding 10,895 10,554 10,975 10,603
-------- -------- -------- ---------
-------- -------- -------- ---------
EARNINGS
4 Income (loss) from continuing
operations $ (1,108) $ 730 $ (1,737) $ 806
-------- -------- -------- ---------
-------- -------- -------- ---------
5 Net income (loss) $ (1,108) $ 730 $ (1,737) $ 4,814
-------- -------- -------- ---------
-------- -------- -------- ---------
PER SHARE AMOUNTS
Income (loss) from continuing
operations (line 4 / line 3) $ (.10) $ .07 $ (.16) $ .08
-------- -------- -------- ---------
-------- -------- -------- ---------
Net income (loss)
(line 5 / line 3) $ (.10) $ .07 $ (.16) $ .45
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
NOTE 1 - Earnings (loss) per share for all periods were calculated by the
Treasury Stock Method.
10.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's consolidated results from operations are generated by its
Processing segment and by its Seafood Importing and Distributing segment. The
Processing segment consists of the Meat processing operation. The Seafood
operation comprises the Seafood Importing and Distributing segment.
SECOND QUARTER OF 1995 VERSUS SECOND QUARTER OF 1994
Consolidated sales for the second quarter of 1995 of $36.2 million decreased
from the first quarter of 1994 by $3 million or 7.8%. Sales for the Meat
operation decreased by 28% while sales for the Seafood operation increased by
36%. On a consolidated basis, lower unit sales accounted for the majority of
the sales decrease which was partially offset by the effect of a 7.8% increase
in average selling prices.
The Meat operation experienced a sales decrease of approximately $7.5 million
due to a 23% decrease in sales volume along with lower selling prices and a
lower priced mix of products sold. Sales volume for the Meat operation declined
primarily due to termination of sales to a major customer during the second
quarter of 1995.
The Seafood operation experienced an increase in sales of $4.4 million primarily
due to a 24% increase in unit sales along with a 9.5% increase in selling
prices. Selling prices continued to rise during the second quarter primarily
due to a supply shortage in most shrimp producing countries and due to the
weakness of the U.S. Dollar as compared to certain foreign currencies,
particularly the Japanese Yen. Unit sales increased primarily due to increased
supplies as the Company began importing from Equador.
As compared to the first quarter of 1994, consolidated cost of sales decreased
by $1.5 million or 4.5% while total gross profit decreased by $1.5 million. As
a percentage of sales, the consolidated gross margin decreased to 8.7% compared
to 11.8% a year ago.
Gross profit for the Meat operation decreased by $1.7 million compared to 1994
primarily due to decreased unit sales and lower selling prices along with mix
changes in sales to national restaurant chain accounts.
Gross profit for the Seafood operation increased by $0.2 million or 26% as
compared to the second quarter of 1994. Lower cost inventory purchased during
the first quarter was sold at higher market prices during the second quarter
resulting in improved gross profit.
Selling, general and administrative expenses increased in total by $0.2 million
or 7.4% compared to 1994. Administrative expenses increased by $0.3 million
primarily resulting from increased bad debt and legal expenses which were
partially offset by lower salary expense. Selling expenses decreased by $0.1
million primarily due to a decrease in expenses related to the Company's retail
products sold in grocery and wholesale club stores.
At the end of the first quarter of 1995, certain issues between the Company and
one of its largest customers, Country Fed Meat Company, Inc. (CFM), resulted in
certain lawsuits being filed, as described more fully in Note 6 to the condensed
consolidated financial statements. The Rymer Entities are continuing their
negotiations with CFM to settle all outstanding lawsuits between them. Although
such negotiations have been productive to date and management is hopeful of a
near-term arrangement, there can be no assurance that a settlement will occur.
Rymer's management believes that its existing allowance for doubtful accounts
contains sufficient reserves to resolve the matters in dispute, without
additional charges to earnings. The Rymer Entities do not expect to continue a
supply relationship with CFM in the future. CFM had been one of Rymer's major
customers, and during its 1994 fiscal year accounted for approximately 8% of its
sales. During the first two quarters of 1995, CFM accounted for approximately
4% of the sales of the Rymer Entities.
11.
<PAGE>
INTEREST EXPENSE
Interest expense increased by $123,000 or 11.8% compared to a year ago primarily
due to a significant increase in average borrowings along with a higher prime
interest rate.
OTHER INCOME
The Company earned other income of $126,000 and $143,000 during the second
quarters of 1995 and 1994, respectively. Other income in both years is
comprised primarily of consulting fees. In connection with the Sale of Rymer
Chicken, the Company entered into a consulting agreement with Simmons. The
Company recorded income of $48,000 and $76,000 under this agreement in the
second quarters of 1995 and 1994, respectively. In connection with the sale of
Murry's stock, the Company entered into a three year consulting agreement with
Murry's, Inc. The Company earned income of $75,000 and $62,000 related to this
agreement during the second quarters of 1995 and 1994, respectively.
INCOME TAXES
In 1995 no provision for income taxes was recorded due to the Company's loss.
The 1994 provision for income taxes amounted to $0.2 million. The Company has
operating loss carryforwards for tax reporting purposes which are available to
reduce Federal taxable income. Accordingly, the income tax provision for the
second quarter of 1994 of $22,000 represents the expected Federal alternative
minimum tax liability related to income earned during the quarter.
Effective with the first quarter of 1994, the Company adopted the provisions of
SFAS 109. (See Note 5 to the consolidated financial statements.)
FIRST HALF OF 1995 VERSUS FIRST HALF OF 1994
Consolidated sales for the first half of 1995 of $72.1 million decreased from
the first half of 1994 by $4.7 million or 6.1%. Sales for the Meat operation
decreased by 16.4% while sales for the Seafood operation increased by 14.5%. On
a consolidated basis, lower unit sales accounted for the majority of the sales
decrease which was partially offset by higher selling prices due primarily to
changes in the sales mix.
The Meat operation experienced a sales decrease of approximately $8.6 million
due to decreased sales volume due to termination of sales to a major customer
during the second quarter of 1995 along with lower selling prices and a lower
priced mix of products sold.
The Seafood operation experienced an increase in sales of $3.9 million primarily
due to a 2.8% increase in unit sales along with the effect of a 12% increase in
selling prices. Selling prices increased due to a supply shortage in most
shrimp producing countries and due to the weakness of the U.S. Dollar as
compared to certain foreign currencies, particularly the Japanese Yen. Unit
sales increased primarily due to increased supplies as the Company began
importing from Equador during the second quarter of 1995.
As compared to the first quarter of 1994, consolidated cost of sales decreased
by $2.4 million or 3.5% while total gross profit decreased by $2.3 million. As
a percentage of sales, the consolidated gross margin decreased to 8.3% compared
to 10.8% a year ago.
Gross profit for the Meat operation decreased by $2.5 million compared to 1994
primarily due to decreased unit sales and lower selling prices for home delivery
sales along with mix changes in sales to national restaurant chain accounts.
Gross profit for the Seafood operation increased by $0.2 million or 13% compared
to the first half of 1994. Lower cost inventory purchased during the first
quarter was sold at higher market prices during the second quarter resulting in
improved gross profit.
12.
<PAGE>
Selling, general and administrative expenses increased in total by $182,000 or
3.2% compared to 1994. Administrative expenses increased by $.5 million
primarily resulting from increased bad debt and legal expenses which were
partially offset by lower salary expense. Selling expenses decreased by $.3
million primarily due to a decrease in expenses related to the Company's retail
products sold in grocery and wholesale club stores.
INTEREST EXPENSE
Interest expense increased by $118,000 or 5.7% compared to a year ago due to
increased average borrowings along with a higher prime interest rate.
DISCONTINUED OPERATIONS
The Company sold its Van Buren, Arkansas chicken processing operations (Rymer
Chicken) during the first quarter of 1994 at a gain of $4 million before income
taxes. During the first quarter of 1994, the Company also sold stock (which it
had received in connection with the sale of its Murry's, Inc. subsidiary in
1989) at a gain of $0.7 million before income taxes. The Company recorded a
provision for income taxes related to these dispositions of $0.2 million which
resulted in a net gain on dispositions of discontinued operations of $4.5
million after income taxes.
The Company incurred losses related to its discontinued chicken processing
operations during the first quarter of 1994 of $0.5 million. The 1994 loss
reflects operating results through the sale date of December 10, 1993.
The Company is actively pursuing the sale of its Plant City, Florida property at
an amount in excess of its net book value of $1.6 million.
OTHER INCOME
The Company earned other income of $307,000 and $295,000 during the first two
quarters of 1995 and 1994, respectively. Other income in both years is
comprised primarily of consulting fees. In connection with the Sale of Rymer
Chicken, the Company entered into a consulting agreement with Simmons. The
Company recorded income of $145,000 and $153,000 under this agreement in the
first two quarters of 1995 and 1994, respectively. In connection with the sale
of Murry's stock, the Company entered into a three year consulting agreement
with Murry's, Inc. The Company earned income of $150,000 and $125,000 related
to this agreement during the first two quarters of 1995 and 1994, respectively.
INCOME TAXES
In 1995 no provision for income taxes was recorded due to the Company's loss.
The 1994 provision for income taxes amounted to $0.2 million which related
primarily to the gain arising from the Sale of Rymer Chicken in the first
quarter.
Effective with the first quarter of 1994, the Company adopted the provisions of
SFAS 109. (See Note 5 to the consolidated financial statements.)
The Company has operating loss carryforwards for tax reporting purposes which
are available to reduce Federal taxable income. Accordingly, the income tax
provision for the first half of 1994 of $189,000 represents the expected Federal
alternative minimum tax liability related to income earned during the quarter.
Of this amount, $2,000 related to income from continuing operations and $187,000
related primarily to the gain on the Sale of Rymer Chicken.
LIQUIDITY AND CAPITAL RESOURCES
The Company makes sales primarily on a seven to thirty day balance due basis.
Purchases from suppliers have payment terms generally ranging from wire transfer
to fourteen days including the use of letters of credit for purchases of
imported seafood.
13.
<PAGE>
The Company's cash management techniques involve the use of zero balance
disbursement accounts. Check clearings are covered by advances from the
Company's credit lines. Thus, in the absence of excess funds classified as cash
equivalents, the Company's cash balances are credit balance accounts
representing outstanding checks. The Company classified such credit balances as
accounts payable in the consolidated financial statements as of April 29, 1995.
At October 29, 1994, there was no loan outstanding under the Company's primary
credit line with BA Business Credit, Inc. (BABC) and the Company had a balance
of cash and cash equivalents of $2.5 million. The Company had a bank loan
outstanding at October 29, 1994 of $5.8 million under its line of credit at
LaSalle National Bank (LaSalle) for Rymer International Seafood. The Company's
excess funds were not used to reduce this loan due to restrictions under the
Company's bank agreements.
The Company's net working capital at April 29, 1995 was $33.3 million compared
to $16.0 million at October 29, 1994. Cash decreased by $2.5 million and
accounts receivable increased by $2 million while inventories increased by $8.3
million, other current assets decreased by $41,000, and current liabilities
decreased by $9.5 million.
Inventories of Rymer Meat increased by $9.3 million while inventories of Rymer
Seafood decreased by $1 million. Meat inventories increased primarily due to
seasonal factors. The Meat operation purchased inventories needed to fulfill
future sales commitments primarily during the fourth quarter of 1994 and the
first quarter of 1995 while market conditions were favorable. Seafood
inventories declined primarily due to decreases in inventories related to supply
contracts with certain customers. As certain contracts have not yet been
finalized, inventories have not been replenished to fulfill such sales
commitments.
Accounts receivable increased for the Seafood operation by $2.1 million
primarily due to higher sales volume and seasonal sales fluctuations.
Receivables for the Meat operation increased by $0.1 million as compared to
October 29, 1994.
Current liabilities decreased primarily due to a decrease of $5.8 million in
current maturities of amounts outstanding under bank lines of credit and by a
decrease in current maturities of Senior Notes of $2,250,000. The Company
redeemed these notes in December 1994 using funds available under bank lines of
credit. The Company's bank debt was classified as current at October 29, 1994
due to the maturity of credit agreements with BABC and LaSalle on April 7, 1995.
On April 7, 1995 the Company replaced its credit facility of $20 million
provided by BA Business Credit, Inc. (BABC) and $12.5 million provided by
LaSalle with a $25 million credit facility provided by LaSalle. The credit line
facility, with an initial term of two years, has lower interest rates and
reduced lending restrictions as compared to the former facilities. The LaSalle
credit facility has an annual interest rate of 1/2% over Prime as compared to an
annual rate of 2% over Prime on the former BABC facility and 1% over Prime on
the former LaSalle facility.
Availability under this facility is expected by management to provide sufficient
resources to meet the Company's working capital needs through the next year. In
future years, the Company expects to utilize cash flows from operations to
retire the Senior Notes which mature on December 15, 2000 and to meet other
long-term capital requirements.
Accounts payable decreased by $0.1 million as compared to October 29, 1994.
Credit balance accounts representing outstanding checks which were classified as
accounts payable at April 29, 1995 were classified as a reduction to cash
balances at October 29, 1994. After considering the effect of the different
classification of credit balances in cash at April 29, 1995 versus October 29,
1994, accounts payable for Rymer Seafood remained approximately equal to October
29, 1994 while Rymer Meat accounts payable decreased by $1.7 million, primarily
due to the timing of inventory purchases due to seasonal factors. Accrued
liabilities decreased by $1.5 million primarily due to reductions in accrued
payroll and related benefits and accrued income taxes.
At April 29, 1995, the Company had $25 million in total credit lines available,
$4.8 million of which was unused. At October 29, 1994, the Company had $20.1
million in total credit lines available, $12.5 million of which was unused.
Unused availability under credit lines reflects a reduction for letters of
credit outstanding of approximately $1.5 million and $1.7 million at April 29,
1995 and October 29, 1994, respectively.
14.
<PAGE>
Under its Senior Note Indenture, the Company made a mandatory redemption of its
senior notes of $2,250,000 on December 29, 1994.
The Company has agreements with certain of its customers to sell merchandise
over the next year for specified prices. The Company's aggregate commitments
under sales agreements were approximately $12.6 million and $14.0 million at
April 29, 1995 and October 29, 1994, respectively. The Company also has
agreements with certain of its suppliers to purchase raw materials. The
agreements extend for up to one year and provide the price and quantity of
materials to be supplied. The Company had purchase commitments of approximately
$4.1 million and $15.8 million as of April 29, 1995 and October 29, 1994,
respectively.
At October 29, 1994, the Company had an operating loss carryforward for tax
reporting purposes of approximately $33 million. See Note 8 to the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended October 29, 1994 for expiration dates of the carryforwards. The
utilization of operating loss carryforwards is expected to enhance future cash
flow by reducing cash outlays which would otherwise be required for income tax
payments.
The Company anticipates spending a total of approximately $600,000 for capital
expenditures in 1995. The expenditures are primarily for planned improvements
at the Meat operation. There are no specific commitments outstanding related to
these planned expenditures.
SEASONALITY
The quarterly results of the Company are affected by seasonal factors. Sales
are usually lower in the fall and winter.
IMPACT OF INFLATION
Raw materials are subject to fluctuations in price. However, the Company does
not expect such fluctuations to materially impact its competitive position.
15.
<PAGE>
RYMER FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed:
10.1 Loan and Security Agreement dated as of April 7, 1995 among Rymer
Meat Inc., Rymer International Seafood Inc., Rymer Foods Inc.,
and LaSalle National Bank (filed herewith).
11 Computations of earnings per share are included in the Notes to
Condensed Consolidated Financial Statements included in Item 1
of this Form 10-Q.
(b) Reports on Form 8-K:
None
16.
<PAGE>
RYMER FOODS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYMER FOODS INC.
(Registrant)
By /s/ Ludwig A. Streck
--------------------------------------------
Ludwig A. Streck, Senior Vice President and
Chief Financial Officer
Date: June 12, 1995
17.
<PAGE>
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
DATED: APRIL 7, 1995
$25,000,000
AMONG
RYMER MEAT INC.
AND
RYMER INTERNATIONAL SEAFOOD INC.
AS BORROWERS,
RYMER FOODS INC.
AS GUARANTOR,
THE LENDERS NAMED HEREIN
AS LENDERS,
AND
LASALLE NATIONAL BANK
AS AGENT and LENDER
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. GENERAL DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . 16
1.3 Other Terms. . . . . . . . . . . . . . . . . . . . . . . 17
1.4 Certain Matters of Construction. . . . . . . . . . . . . 17
SECTION 2. CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . 17
2.1 Revolving Credit Loans . . . . . . . . . . . . . . . . . 17
2.2 Manner of Borrowing Revolving Credit Loans . . . . . . . 19
2.3 Letters of Credit. . . . . . . . . . . . . . . . . . . . 20
2.4 All Loans to Constitute One Obligation . . . . . . . . . 21
2.5 Loan Account . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT . . . . . . . . . . . 21
3.1 Interest, Fees and Charges . . . . . . . . . . . . . . . 21
3.2 Letter of Credit Fees. . . . . . . . . . . . . . . . . . 23
3.3 Term of Agreement. . . . . . . . . . . . . . . . . . . . 23
3.4 Termination. . . . . . . . . . . . . . . . . . . . . . . 23
3.5 Payments . . . . . . . . . . . . . . . . . . . . . . . . 25
3.6 Application of Payments and Collections. . . . . . . . . 25
3.7 Sharing of Payments, Etc.. . . . . . . . . . . . . . . . 26
3.8 Statements of Account. . . . . . . . . . . . . . . . . . 27
SECTION 4. COLLATERAL: GENERAL TERMS. . . . . . . . . . . . . . . . 27
4.1 Security Interest in Collateral. . . . . . . . . . . . . 27
4.2 Lien on Realty Hereafter Acquired. . . . . . . . . . . . 28
4.3 Representations, Warranties and Covenants -- Collateral. 28
4.4 Lien Perfection. . . . . . . . . . . . . . . . . . . . . 29
4.5 Location of Collateral . . . . . . . . . . . . . . . . . 29
4.6 Insurance of Collateral. . . . . . . . . . . . . . . . . 30
4.7 Protection of Collateral . . . . . . . . . . . . . . . . 30
<PAGE>
SECTION 5. PROVISIONS RELATING TO ACCOUNTS. . . . . . . . . . . . . 31
5.1 Representations, Warranties and Covenants. . . . . . . . 31
5.2 Borrowing Base Certificates, Assignments, Records and
Schedules of Accounts. . . . . . . . . . . . . . . . . . 32
5.3 Administration of Accounts . . . . . . . . . . . . . . . 33
5.4 Collection of Accounts . . . . . . . . . . . . . . . . . 33
5.5 Notice Regarding Disputed Accounts . . . . . . . . . . . 34
SECTION 6. PROVISIONS RELATING TO INVENTORY . . . . . . . . . . . . 34
6.1 Representations, Warranties and Covenants. . . . . . . . 34
6.2 Inventory Reports. . . . . . . . . . . . . . . . . . . . 35
6.3 Returns of Inventory . . . . . . . . . . . . . . . . . . 35
SECTION 7. PROVISIONS RELATING TO EQUIPMENT . . . . . . . . . . . . 36
7.1 Representations, Warranties and Covenants. . . . . . . . 36
7.2 Evidence of Ownership of Equipment . . . . . . . . . . . 36
7.3 Records and Schedules of Equipment . . . . . . . . . . . 36
SECTION 8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 36
8.1 General Representations and Warranties . . . . . . . . . 36
8.2 Reaffirmation. . . . . . . . . . . . . . . . . . . . . . 42
8.3 Survival of Representations and Warranties . . . . . . . 42
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS. . . . . . . . . . . 42
9.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . 42
9.2 Negative Covenants . . . . . . . . . . . . . . . . . . . 47
9.3 Specific Financial Covenants . . . . . . . . . . . . . . 53
SECTION 10. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 56
10.1 Documentation. . . . . . . . . . . . . . . . . . . . . . 56
10.2 Other Conditions . . . . . . . . . . . . . . . . . . . . 58
SECTION 11. EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON
DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 59
11.1 Events of Default. . . . . . . . . . . . . . . . . . . . 59
11.2 Acceleration of the Obligations. . . . . . . . . . . . . 62
ii
<PAGE>
11.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 62
11.4 Remedies Cumulative; No Waiver . . . . . . . . . . . . . 64
SECTION 12. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . 64
12.1 Authorization and Action . . . . . . . . . . . . . . . . 64
12.2 Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . 64
12.3 LaSalle and Affiliates . . . . . . . . . . . . . . . . . 65
12.4 Lender Credit Decision . . . . . . . . . . . . . . . . . 65
12.5 Indemnification. . . . . . . . . . . . . . . . . . . . . 65
12.6 Successor Agent. . . . . . . . . . . . . . . . . . . . . 66
SECTION 13. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 66
13.1 Power of Attorney. . . . . . . . . . . . . . . . . . . . 66
13.2 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 67
13.3 Complete Agreement; Modification of Agreement; Sale
of Interest. . . . . . . . . . . . . . . . . . . . . . . 67
13.4 Reimbursement of Expenses. . . . . . . . . . . . . . . . 70
13.5 Indulgences Not Waivers. . . . . . . . . . . . . . . . . 70
13.6 Severability . . . . . . . . . . . . . . . . . . . . . . 71
13.7 Successors and Assigns . . . . . . . . . . . . . . . . . 71
13.8 Cumulative Effect; Conflict of Terms . . . . . . . . . . 71
13.9 Execution in Counterparts. . . . . . . . . . . . . . . . 71
13.10 Notice . . . . . . . . . . . . . . . . . . . . . . . . . 71
13.11 Agent's or Required Lenders' Consent . . . . . . . . . . 73
13.12 Demand Obligations . . . . . . . . . . . . . . . . . . . 73
13.13 Time of Essence. . . . . . . . . . . . . . . . . . . . . 73
13.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . 73
13.15 Interpretation . . . . . . . . . . . . . . . . . . . . . 73
13.16 GOVERNING LAW; CONSENT TO FORUM. . . . . . . . . . . . . 73
13.17 WAIVERS BY BORROWERS . . . . . . . . . . . . . . . . . . 74
13.18 Publicity. . . . . . . . . . . . . . . . . . . . . . . . 75
13.19 Reimbursement. . . . . . . . . . . . . . . . . . . . . . 75
iii
<PAGE>
EXHIBITS
Exhibit A Form of Revolving Credit Note - Section 1.1
Exhibit B Form of Notice of Revolving Credit Loan - Section 2.1
Exhibit C Borrowers' Business Locations - Section 4.5, 6.1(A), 8.1(W)
and Section 9.2(M)
Exhibit D Form of Borrowing Base Certificate - Section 5.2
Exhibit E Jurisdictions in Which Borrowers are Authorized to do Business -
Section 8.1(A)
Exhibit F Corporate Names and Predecessors - Section 8.1(B) and 9.2(P)
Exhibit G Patents, Trademarks, Copyrights and Licenses - Section 8.1(H)
Exhibit H Capital Structure and Affiliates - Section 8.1(I)
Exhibit I Contracts Restricting Borrowers' Right to Incur Debts - Section
8.1(K)
Exhibit J Litigation - Section 8.1(L)
Exhibit K Pension Plans - Section 8.1(P)
Exhibit L Labor Contracts - Section 8.1(R)
Exhibit M Exceptions to Compliance with Laws - Section 8.1(S)
Exhibit N Surety Obligations - Section 8.1(T)
Exhibit N-1 Adverse Trade Relations - Section 8.1(X)
Exhibit 0 Capitalized Leases - Section 8.1(Y)
Exhibit P Operating Leases - Section 8.1(Y)
Exhibit Q Form of Compliance Certificate - Section 9.1(J)
Exhibit R Permitted Liens - Section 9.2(H)
Exhibit S Landlord or Warehouseman Locations - Section 10.1(C)
Exhibit T Form of Opinion Letter - Section 10.1(I)
Exhibit U Form of Assignment and Acceptance - Section 13.3(b)
iv
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 7th day of April, 1995 by and
among RYMER MEAT INC., an Illinois corporation ("RMI"), having its chief
executive office at 4600 South Packers Avenue, Suite 400, Chicago, Illinois
60609, RYMER INTERNATIONAL SEAFOOD INC., an Illinois corporation ("RISI"),
having its chief executive office at 300 West Washington Street, Suite 1505,
Chicago, Illinois 60606, RYMER FOODS INC., a Delaware corporation ("RFI"),
having its chief executive office at 4600 Packers Avenue, Suite 400, Chicago,
Illinois 60609, but only as guarantor, the LENDERS who are or who may from
time to time become signatories hereto ("Lenders"), and LASALLE NATIONAL
BANK, a national banking association having an office at 120 South LaSalle
Street, Chicago, Illinois 60603 ("LaSalle"), as a Lender and as agent for the
Lenders hereunder (LaSalle, in such capacity, being "Agent"). RISI is a
wholly owned subsidiary of RMI and RMI is a wholly owned subsidiary of RFI.
RMI and RISI are sometimes hereinafter collectively referred to as
"Borrowers" and individually as a "Borrower".
SECTION 1. GENERAL DEFINITIONS
1.1 DEFINED TERMS. When used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
ACCOUNTS - all accounts, contract rights, chattel paper, instruments
and documents, whether now owned or hereafter created or acquired by either
Borrower or in which either Borrower now has or hereafter acquires any
interest.
ACCOUNT DEBTOR - any Person who is or may become obligated under or
in connection with an Account.
AFFILIATE - a Person (other than a Subsidiary and Oppenheimer & Co.,
Inc.): (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, either
Borrower; (ii) which beneficially owns or holds 10% or more of any class of
the Voting Stock of either Borrower; or (iii) 10% or more of the Voting
Stock (or in the case of a Person which is not a corporation, 10% or more
of the equity interest) of which is beneficially owned or held by either
Borrower or a Subsidiary of either Borrower. For purposes hereof,
"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 the ownership of Voting Stock, by contract or otherwise.
AGENT - as defined in the first paragraph of this Agreement.
<PAGE>
AGREEMENT - this Loan and Security Agreement, as modified, amended
or supplemented from time to time.
APPLICABLE PRIME MARGIN - one half of one percent (1/2%), PROVIDED,
HOWEVER, that if, as of the last day of the immediately preceding fiscal
quarter, each of the Interest Rate Reduction Conditions have been
satisfied, then the Applicable Prime Margin shall be one quarter of one
percent (1/4%). Increases or decreases in the Applicable Prime Margin
shall be made on the date on which the Consolidated financial statements
required by Section 9.1(J)(ii) for the immediately preceding fiscal quarter
are delivered by RFI and Borrowers to Agent. Any such increase or decrease
shall be effective, however, the first day of the then current fiscal
quarter. If as a result of an increase in the Applicable Prime Margin,
Borrowers owe Lenders additional interest, such interest shall be
immediately due and payable. If as a result of a decrease in the
Applicable Prime Margin, Borrowers have overpaid interest on the
Obligations, such overpayment shall be credited against the next payment of
interest or principal due on the Obligations or, if the Obligations are
paid in full, then such overpayment shall be promptly refunded to
Borrowers.
APPLICABLE RATE - the Applicable Prime Margin plus the Prime Rate.
AVAILABLE CASH - measured as of any Interest Payment Date (as
defined in the Senior Note Indenture), means the LESSER of (a) the amount,
if any, which when added to the amount of Fixed Obligations (as defined in
the Senior Note Indenture) for the appropriate Measurement Period (as
defined in the Senior Note Indenture) would cause the ratio of (x) Cash
Flow (as defined in the Senior Note Indenture) for such Measurement Period,
to (y) the sum of Fixed Obligations (as defined in the Senior Note
Indenture) plus Available Cash for such Measurement Period to be 1.1 to 1,
or (b) the amount by which the sum of the cash and Permitted Investments of
the Borrowers on a consolidated basis and unutilized borrowing capacity
under this Agreement exceeds $2 million on such Interest Payment Date.
BOARD - the Board of Governors of the Federal Reserve System of the
United States.
BORROWED MONEY - as applied to Indebtedness, means (i) Indebtedness
for borrowed money; (ii) Indebtedness, whether or not in any such case the
same was for borrowed money, (A) which is represented by notes payable or
drafts accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments,
or (C) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial payment
for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of
credit and (v) Indebtedness under any guaranty of obligations that would
constitute Indebtedness for Borrowed Money under clauses (i) through (iv)
hereof.
2
<PAGE>
BORROWERS - as defined in the first paragraph of this Agreement.
BORROWING BASE - as at any date of determination thereof, an amount
equal to (x) the lesser of the amounts calculated pursuant to paragraphs
(a) and (b) below minus (y) the amount calculated pursuant to paragraph (c)
below:
(a) the Maximum Revolving Credit Loan; and
(b) an amount equal to:
(i) the sum of eighty-five percent (85%), or such
other percentage as Agent in the commercially reasonably
exercise of its discretion deems appropriate, of the net amount
of Eligible Accounts outstanding at such date;
PLUS
(ii) an amount equal to the lesser of (x) Twenty
Million Dollars ($20,000,000) or (y) an amount equal to the sum
of (I) sixty percent (60%), or such other percentage as Agent
in the reasonable exercise of its discretion deems appropriate,
of the value of that portion of Eligible Inventory constituting
raw materials, PLUS (II) sixty-five percent (65%) or such other
percentage as Agent, in the reasonable exercise of its
discretion, deems appropriate of the value of that portion of
Eligible Inventory consisting of finished goods, PLUS (III)
sixty-five percent (65%), or such other percentage as Agent, in
the reasonable exercise of its discretion deems appropriate, of
the face amount of all Commercial Letters of Credit;
MINUS (subtract from the lesser of clauses (a) and
(b) above)
(c) an amount equal to the sum of (i) the face amount of all
Letters of Credit issued by Agent outstanding at such date, PLUS
(ii) any amounts which Agent and/or Lenders may then be obligated to
pay for the account of Borrowers under this Agreement.
For purposes hereof, the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates,
discounts (which, if granted outside the ordinary course of business as in
effect on the Closing Date, may, at Agent's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or
3
<PAGE>
payable in connection with such Accounts at such time, all as determined by
Agent in the reasonable exercise of its discretion.
BORROWING BASE CERTIFICATE - as defined in Section 5.2 of this
Agreement.
BUSINESS DAY - shall mean any day that is not a Saturday, a Sunday
or a day on which banks, Agent or any Lender are or is required or
permitted to be closed in the State of Illinois.
CAPITAL EXPENDITURES - expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one year.
CAPITALIZED LEASE OBLIGATION - any monetary obligations under a
lease that is required to be capitalized for financial reporting purposes
in accordance with GAAP and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
CASH AND CASH EQUIVALENTS - at any time, any assets of Borrowers
which are in the form of, or are readily convertible into money, including
without limitation, cash, checks, and other demand negotiable instruments,
deposits with any bank or financial institution (whether as demand deposits
or time deposits, and whether or not evidenced by certificates of deposit),
and readily marketable securities of any type.
CLOSING DATE - the date on which all of the conditions precedent in
Section 10 are satisfied and the initial Revolving Credit Loan is made
hereunder.
CODE - the Uniform Commercial Code as adopted and in force in the
State of Illinois, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property described
in Section 4 hereof, and all other Property and interest in Property that
now or hereafter secure the payment and performance of any of the
Obligations.
COMMERCIAL LETTER OF CREDIT - any Letter of Credit issued by Agent
for the benefit of either or both Borrower(s) in accordance with the terms
hereof in order to support the purchase of Inventory that will constitute
Eligible Inventory upon the consummation of such purchase.
COMMITMENT TERMINATION DATE - the earliest of (i) April 1, 1997,
(ii) the date of termination of the commitment to make further Loans
pursuant to Section 3.3 or 3.4 hereof, and (iii) the date of termination of
the commitment to make further Loans pursuant to Section 11.2 hereof.
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CONSOLIDATED AND CONSOLIDATING - the consolidation and consolidating
in accordance with GAAP of the accounts or other items as to which such
term applies. In respect to RFI and its financial statements, this shall
mean the consolidation and consolidating in accordance with GAAP of the
accounts and other items of RFI and its Subsidiaries, including, without
limitation, RMI and RISI.
CURRENT ASSETS - at any date means all of the current assets of a
Person that would be properly classified as current assets shown on a
balance sheet at such date in accordance with GAAP except that amounts due
from Affiliates and investments in Affiliates shall be excluded therefrom.
CURRENT LIABILITIES - at any date means the amount at which all of
the current liabilities of a Person which would be properly classified as
current liabilities on a balance sheet at such date in accordance with
GAAP; PROVIDED, however that, in respect to RFI and Borrowers, the
Obligations (to the extent reflected on a balance sheet) shall be treated
as a current liability.
DEFAULT - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of
Default.
DEFAULT RATE - as defined in Section 3.1(B) of this Agreement.
DISTRIBUTION - in respect of any corporation means and includes: (i)
the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from net proceeds
of the sale of Securities, or made by the exchange of capital stock or
warrants or options for the Securities.
DOMINION ACCOUNT - a special account of Borrowers established or to
be established at Agent for the benefit of Agent and the ratable benefit of
Lenders pursuant to this Agreement at LaSalle National Bank, and over
which, Agent, for its benefit and the ratable benefit of Lenders, shall
have sole and exclusive access and control for withdrawal purposes.
EBITDA - for any period shall mean RFI's Consolidated earnings for
such period before interest expense, income tax expense, depreciation and
amortization expense and any extraordinary gains or losses for such period.
ELIGIBLE ACCOUNT - an Account arising in the ordinary course of
either Borrower's business from the sale of goods or rendition of services
which Agent, in its reasonable credit judgment, deems to be an Eligible
Account. Without limiting the generality of the foregoing, no Account
shall be an Eligible Account if:
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(i) it arises out of a sale made by either Borrower to a
Subsidiary or an Affiliate of either Borrower or to a Person
controlled by an Affiliate of either Borrower; or
(ii) it is unpaid for more than sixty (60) days in
respect to Accounts after the original due date shown on the
invoice; or
(iii) it arises from service charges or similar charges
or is subject to a debit memo(s), to the extent of any such
service charges or similar charge or debit memo(s); or
(iv) twenty-five percent (25%) or more of the Accounts
from the Account Debtor are not deemed Eligible Accounts
hereunder; or
(v) the total unpaid Accounts of the Account Debtor
exceed twenty percent (20%) of the net amount of all Accounts,
to the extent of such excess except as otherwise consented to
by the Agent in its sole discretion: or
(vi) any covenant, representation or warranty contained
in this Agreement with respect to such Account has been
breached in any material (in respect to the individual Account)
respect; or
(vii) the Account Debtor has disputed liability with
respect to such Account, or the Account Debtor has made any
claim with respect to any other Account due from such Account
Debtor to either Borrower, or the Account otherwise is subject
to any right of set-off by the Account Debtor, but only to the
extent of such contra-account, dispute, claim or asserted right
of set-off; or
(viii) the Account Debtor has commenced a voluntary case
under the federal bankruptcy laws, as now constituted or
hereafter amended, or made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by
a court having jurisdiction in the premises in respect of the
Account Debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or
any other petition or other application for relief under the
federal bankruptcy laws has been filed against the Account
Debtor, or if the Account Debtor has failed, suspended
business, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or
affairs; or
(ix) it arises from a sale to an Account Debtor outside
the United States, unless the sale is on letter of credit,
credit insurance, guaranty or
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acceptance terms, in each case acceptable to Agent in its
reasonable discretion; or
(x) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-
approval, consignment or any other repurchase or return basis;
or
(xi) Agent believes, in its reasonable judgment, that
payment thereof is doubtful or will be delayed by reason of the
Account Debtor's financial condition; or
(xii) the Account Debtor is the United States of America
or any department, agency or instrumentality thereof unless the
applicable Borrower assigns its right to payment of such
Account to Agent, in form and substance satisfactory to Agent,
so as to comply with the Assignment of Claims Act of 1940, as
amended (31 U.S.C. Sub-Section 203 ET SEQ.); or
(xiii) the Account Debtor is located in the State of New
Jersey unless the applicable Borrower has filed a notice of
business activities report with the appropriate officials in
such state for the then current year; or
(xiv) the Account is subject to a lien other than a
Permitted Lien; or
(xv) the goods giving rise to such Account have not been
shipped or delivered to or have been rejected by the Account
Debtor or the services giving rise to such Account have not
been performed by the applicable Borrower; and accepted by the
Account Debtor or the Account otherwise does not represent a
final sale; or
(xvi) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or
(xvii) the applicable Borrower has made any agreement
with the Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the ordinary course
of business for returns, rebates, cash discounts, volume
discounts, performance discounts, co-op advertising discounts,
price concession discounts, service charges or credit discounts
or allowances and which discounts or allowances are reflected
in the calculation of the face value of each invoice related to
such Account or in the Borrowing Certificates, to the extent of
such deduction; or
(xviii) after the issuance of an invoice evidencing an
Account, either Borrower has made an agreement with the Account
Debtor to extend the time of payment thereof; or
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(xix) the Account arises from a retail sale of goods to a
Person who is purchasing same primarily for personal, family or
household purposes.
ELIGIBLE INVENTORY - Inventory of either Borrower which Agent,
in the exercise of its reasonable credit Judgment deemed to be
Eligible Inventory. Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory unless, in
Agent's opinion, it (i) is raw materials or finished goods that is,
in Agent's reasonable judgment, readily marketable in its current
form, (ii) is in good, new and saleable condition, (iii) is not
obsolete or unmerchantable, (iv) meets, in all material respects,
all standards imposed by any governmental agency or authority, (v)
conforms in all material respects to the warranties and
representations set forth in Section 6.1 hereof, (vi) is at all
times subject to Agent's duly perfected, first priority security
interest and no other Lien except a Permitted Lien, and (vii) is
situated at a location in the United States and in compliance with
Section 4.5 hereof and is not in-transit. In addition, Eligible
Inventory shall not include any Inventory constituting (i) untitled
boat Inventory, (ii) capitalized Inventory costs, (iii) Inventory
stored at warehouses or other locations in respect to which Agent
has not received, in form and substance reasonably acceptable to it,
a bailee letter or landlord waiver, (iv) packaging materials,
seasonings and supplies, (v) Inventory delivered to either Borrower
on a consignment basis or on a lease arrangement, (vi) bill and hold
Inventory, (vii) returned or defective Inventory, or (viii) or work-
in-process Inventory. The amount of Eligible Inventory, as of any
date, shall be reduced by the aggregate amount of accounts payable
or accruals of Borrowers to meat suppliers or other similar
suppliers who have or would have on nonpayment, a Lien, under any
applicable federal, state or local laws, on any of Borrowers'
assets.
ENVIRONMENTAL LAWS - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and
consent decrees relating to health, safety and environmental
matters, including, but not limited to, the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Toxic Substances Control
Act, as amended, the Clean Water Act, the River and Harbor Act,
Water Pollution Control Act, the Marine Protection Research and
Sanctuaries Act, the Deep-Water Port Act, the Safe Drinking Water
Act, the SuperFund Amendments and Reauthorization Act of 1986, the
Federal Insecticide, Fungicide and Rodenticide Act, the Mineral
Lands and Leasing Act, the Surface Mining Control and Reclamation
Act, state and federal superlien and environmental clean up programs
and laws, and U.S. Department of Transportation regulations.
EQUIPMENT - all machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description,
whether now owned or hereafter acquired by either Borrower and
wherever located, and all parts, accessories and special tools
therefor and all increases and accessions thereto and substitutions
and replacements therefor.
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ERISA - the Employee Retirement Income Security Act of 1974 as
amended and all final rules and regulations from time to time
promulgated thereunder.
EVENT OF DEFAULT - as defined in Section 11.1 of this
Agreement.
EXCESS REVOLVING CREDIT LOAN AVAILABILITY - as of any date, the
amount, if any, by which the Borrowing Base exceeds the aggregate
outstanding principal balance of the Revolving Credit Loans.
FEDERAL FUNDS RATE - for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on 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 Date next succeeding such day, provided, that
(i) 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 (ii) 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 quoted to the Agent on such day on such
transactions as determined by the Agent.
GAAP - generally accepted accounting principles in the United
States of America.
GENERAL INTANGIBLES - all general intangibles of Borrowers,
whether now owned or hereafter created or acquired by either
Borrower, including, without limitation, all choses in action,
causes of action, corporate or other business records, deposit
accounts, inventions, designs, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, tax refund
claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to either Borrower to
secure payment of any of the Accounts by an Account Debtor, all
rights to indemnification and all other intangible property of every
kind and nature (other than Accounts).
GUARANTY AGREEMENT - that certain Guaranty Agreement of even
date herewith executed by RFI for the benefit of Agent and Lenders,
as the same may be modified, amended or supplemented from time to
time.
HAZARDOUS SUBSTANCE - the meaning given such term in 42 USC
Section 9601(14), 42 USC Section 9601(33) and 42 USC Section 6991(8)
or any state or local counterpart Environmental Law.
INDEBTEDNESS - as applied to a Person means, without
duplication (i) all items which in accordance with GAAP would be
included in determining total liabilities
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as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including,
without limitation, Capitalized Lease Obligations, (ii) all
obligations of other Persons which such Person has guaranteed, (iii)
reimbursement obligations in connection with letters of credit
issued for the benefit of such Person and (iv) in the case of
Borrowers (without duplication), the Obligations.
INTEREST COVERAGE RATIO - with respect to any period, the ratio
of RFI's Consolidated Operating Income for such period to the sum of
RFI's Consolidated interest expense for such period.
INTEREST RATE REDUCTION CONDITIONS - (i) EBITDA for the twelve
month period ending on the last day of the most recently ended
fiscal quarter must equal or exceed Eight Million Dollars
($8,000,000); (ii) the ratio, as of the most recently ended fiscal
quarter, of (x) the sum of RFI's Consolidated Indebtedness plus the
aggregate balance of all outstanding Letters of Credit to (y)
Tangible Net Worth must be less than 2.0 to 1; and (iii) the amount
of Excess Revolving Credit Loan Availability for each day within the
most recently ended fiscal quarter must have equalled or exceeded
Five Million Dollars ($5,000,000).
INVENTORY - all of Borrowers' inventory, whether now owned or
hereafter acquired by either Borrower, including, but not limited
to, all goods intended for sale or lease by either Borrower, or for
display or demonstration; all work in process; all raw materials and
other materials and supplies of every nature and description used or
which might be used in connection with the manufacture, printing,
packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in either Borrower's
business; and all documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter
acquired by either Borrower.
LASALLE - as defined in the first paragraph of this Agreement.
LEGAL REQUIREMENT - any requirement imposed upon any Lender by
any law of the United States of America or the United Kingdom or by
any regulation, order, interpretation, ruling or official directive
(whether or not having the force of law) of the Board, the Bank of
England or any other board, central bank or governmental or
administrative agency, institution or authority of the United States
of America, the United Kingdom or any political subdivision of
either thereof.
LETTER OF CREDIT - a standby or commercial letter of credit at
any time issued by Agent for the account of either Borrower.
LIEN - any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property,
whether such interest is based on the
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common law, statute or contract, and including, but not limited to, the
security interest, security title or lien arising from a security agreement,
mortgage, deed of trust, deed to secure debt, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien", when used in respect to real Property,
shall include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of this
Agreement, Borrowers shall be deemed to be the owner of any Property which
either of them has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
LOAN ACCOUNT - the loan account established on the books of Agent
pursuant to Section 2.5 hereof.
LOAN DOCUMENTS - this Agreement, the Other Agreements and the
Security Documents.
LOANS - all loans and advances made by Lenders pursuant to this
Agreement, including, without limitation, all Revolving Credit Loans and
each payment made by Agent or Lender pursuant to a Letter of Credit.
MAXIMUM REVOLVING CREDIT LOAN - Twenty-Five Million Dollars
($25,000,000).
MULTIEMPLOVER PLAN - has the meaning set forth in Section 4001(a)(3)
of ERISA.
NET WORTH - as of any date of determination thereof, (i) the
Consolidated aggregate amount of all assets of RFI and its Subsidiaries
(including, without limitation, PMI and RISI) as may be properly classified
as such, LESS (ii) the Consolidated aggregate amount of all liabilities of
RFI and its Subsidiaries (including, without limitation, RMI and RISI), all
as determined in accordance with GAAP.
NEW MORTGAGES - as defined in Section 4.2 hereof.
NOTE(S) - the Revolving Credit Notes.
NOTICE OF REVOLVING LOAN REQUEST - as defined in Section 2.1(A)
hereof.
OBLIGATIONS - all Loans and all other advances, letter of credit
reimbursement obligations, and/or any debts, liabilities, obligations,
covenants and duties owing, arising, due or payable from Borrowers to Agent
and/or any Lender of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other
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instrument, arising under this Agreement or any of the other Loan Documents
or under any interest rate protection agreements or products with any Lender
(including those acquired by assignment pursuant to the terms hereof),
whether absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising and however acquired. The term includes,
without limitation, all interest, charges, expenses, fees, attorney's fees
and any other sums chargeable to Borrowers under any of the Loan Documents.
OSHA - the Occupational Safety and Health Act and all rules and
regulations from time to time promulgated thereunder.
OPERATING INCOME - for any period shall mean RFI's Consolidated
income from continuing operations plus interest expense (to the extent
already deducted in calculating income from continuing operations), and
depreciation and amortization expense for such period before taxes or
provisions for taxes.
OTHER AGREEMENTS - any and all agreements, instruments and documents
(other than this Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrowers or either one of them and delivered to Agent
and/or Lenders in respect to the transactions contemplated by this
Agreement, including, without limitation, the Revolving Credit Notes.
PARTICIPATING LENDER - each Person who shall be granted the right by
any Lender to participate in any of the Loans described in this Agreement
and who shall have entered into an Assignment and Acceptance Agreement in
the Form of EXBIBIT U hereto.
PATENT ASSIGNMENT - the Patent and License Security Agreement to be
executed by Borrowers on the Closing Date in favor of Agent, for its benefit
and the ratable benefit of Lenders, and by which Borrowers shall assign to
Agent, for its benefit and the ratable benefit of Lenders, and grant to
Agent, for its benefit and the ratable benefit of Lenders, a security
interest in, as security for the Obligations all of Borrowers' right, title
and interest in and to all of its patents.
PERMITTED INVESTMENTS - the investments described in clauses (i)
through (viii) of the definition of Restricted Investment.
PERMITTED LIENS - any Lien of a kind specified in subparagraphs (i)
through (x) of Section 9.2(H) of this Agreement.
PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money Indebtedness
of Borrowers incurred after the date hereof which is secured by a Purchase
Money Lien and which, when aggregated with the principal amount of all other
such Purchase Money Indebtedness and Capitalized Lease Obligations of
Borrowers at the time out-
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standing, does not exceed Two Hundred Fifty Thousand Dollars ($250,000.00).
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 - an individual, partnership, corporation, joint stock
company, land trust, business trust, or unincorporated organization, or a
government or agency or political subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained for
employees of Borrowers to which Title IV of ERISA applies.
PRIME RATE - a fluctuating interest rate per annum (calculated on the
basis of actual days elapses over a 360 day year) as shall be in effect from
time to time, which rate per annum shall at all times be equal to the higher
of (a) the rate of interest announced publicly by LaSalle in Chicago,
Illinois from time to time as its prime rate for U.S. dollar loans, (which
is not necessarily LaSalle's lowest or most favorable rate of interest at
any one time), such rate to change when and as such announced rate changes
and (b) one-quarter percentage point (1/4%) above the Federal Funds Rate.
PROHIBITED TRANSACTION - any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986.
PROJECTIONS - RFI's forecasted Consolidating and Consolidated (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements,
and (d) capitalization statements, all prepared on a consistent basis with
RFI's historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions.
PROPERTY - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
PURCHASE MONEY INDEBTEDNESS - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within ten (10) days prior to or
after the acquisition of any fixed assets for the purpose of financing all
or any part of the purchase price thereof, and (iii) any renewals,
extensions or refinancings thereof, but not any increases in the principal
amounts thereof outstanding at the time.
PURCHASE MONEY LIEN - a Lien upon fixed assets which secure Purchase
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets the purchase price of which was financed through
the incurrence of the
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Purchase Money Indebtedness secured by such Lien plus any down payment or
initial payment.
RELEASE - as defined in 42 USC Section 9601 (22).
RENTALS - as defined in Section 9.2(W) of this Agreement.
REPORTABLE EVENT - any of the events set forth in Section 4043(b) of
ERISA, as to which the requirement of PBGC notice has not been waived by
regulations.
REQUIRED LENDERS - as of any date, the holders of Notes evidencing at
least fifty-one percent (51%) of the aggregate principal amount of the
Notes.
RESTRICTED INVESTMENT - any investment in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following: (i) investments in
one or more Subsidiaries of either Borrower; (ii) Property to be used in the
ordinary course of business; (iii) current assets arising from the sale of
goods and services in the ordinary course of business of either Borrower and
its Subsidiaries; (iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations guaranteed by the
United States of America, provided that such obligations mature within one
year from the date of acquisition thereof, (v) investments in certificates
of deposit maturing within one year from the date of acquisition issued by a
bank or trust company organized under the laws of the United States or any
state thereof having capital surplus and undivided profits aggregating at
least $500,000,000 (a "Qualified Bank"); (vi) investments in commercial
paper given the highest or second highest rating by a national credit rating
agency and maturing not more than two hundred seventy (270) days from the
date of creation thereof; (vii) money market instruments with maturities
not greater than 90 days at a Qualified Bank; and (viii) loans to employees
which in the aggregate do not exceed $100,000.
REVOLVING CREDIT LOAN - a Loan made by Lenders as provided in Section
2.1 of this Agreement.
REVOLVING CREDIT LOAN UNUSED LINE FEE - shall have the meaning
contained in Section 3.1(C).
REVOLVING CREDIT NOTES - the Revolving Credit Notes to be executed by
Borrowers on or prior to the Closing Date in favor of Lenders to evidence
the Revolving Credit Loans, which shall be in the form of EXHIBIT A attached
hereto.
REVOLVING CREDIT LOAN COMMITMENT - as defined in Section 2.1(A)
hereof.
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REVOLVING CREDIT PERCENTAGE - as defined in Section 2.1(A) hereof.
RFI - Rymer Foods, Inc., a Delaware corporation which owns all of the
issued and outstanding capital stock of RMI.
SECURITY - shall have the same meaning as in Section 2(l) of the
Securities Act of 1933, as amended.
SECURITY DOCUMENTS - each New Mortgage, the Patent Assignment, the
Trademark Assignment and all other instruments and agreements now or at any
time hereafter securing the whole or any part of the Obligations.
SENIOR NOTE INDENTURE - that certain 11% Senior Note Indenture
between RFI and Continental Stock Transfer & Trust Company as Trustee dated
as of April 7, 1993, as amended from time to time.
SENIOR NOTES - those certain 11% Senior Notes due 2000, issued by RFI
under the Senior Note Indenture.
SOLVENT - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all
of its Indebtedness as such Indebtedness matures in the normal course and
(iii) has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage.
STANDBY LETTER OF CREDIT - any Letter of Credit which is not a
Commercial Letter of Credit.
STATUTORY RESERVES - a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency or
supplemental reserves), expressed as a decimal, established by the Board and
any other banking authority to which Agent or any Lender is subject for
Eurocurrency Liabilities (as defined in Regulation D of the Board or any
successor thereto). Such reserve percentages shall include, without
limitation, those imposed under such Regulation D. Statutory Reserves shall
be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
SUBORDINATED DEBT - Indebtedness of either Borrower that is
subordinated to the Obligations, pursuant to terms reasonably satisfactory
to the Required Lenders.
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SUBSIDIARY - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
TANGIBLE NET WORTH - as of any date, Net Worth PLUS (i) the
outstanding principal balance of the Senior Notes MINUS (ii) any surplus
resulting from any write-up of assets subsequent to January 28, 1995; MINUS
(iii) deferred assets, including prepaid insurance and prepaid taxes; MINUS
(iv) the book value of patents, copyrights, trademarks, trade names,
non-compete agreements, franchises and other similar intangibles; MINUS (v)
goodwill including any amounts, however designated on a Consolidated
balance sheet of RFI and/or its Subsidiaries (including, without limitation,
RMI and RISI), representing the excess of the purchase price paid for assets
or stock over the value assigned thereto on the books of such RFI or such
Subsidiary; MINUS (vi) Restricted Investments; MINUS (vii) unamortized debt
discount and expense; MINUS (viii) assets located and notes and receivables
due from obligors outside of the United States of America; and MINUS (ix) to
the extent not included in Clause (vi), Accounts, notes and other
receivables due from Affiliates or employees in excess of $100,000 in the
aggregate.
TAX - any tax, levy, impost, duty, deduction, withholding or charges
of whatever nature required by any Legal Requirement (i) to be paid by any
Lender and/or (ii) to be withheld or deducted from any payment otherwise
required hereby to be made by Borrowers to any Lender; PROVIDED, that the
term "Tax" shall not include any taxes imposed upon the net income of any
Lender.
TERM - as defined in Section 3.3 of this Agreement.
TRADEMARK ASSIGNMENT - the Trademark and License Security Agreement
to be executed by Borrowers on or about the Closing Date in favor of Agent,
for its benefit and the ratable benefit of Lenders, and by which Borrowers
shall assign to Agent for its benefit and the ratable benefit of Lenders,
and grant to Agent, for its benefit and the ratable benefit of Lenders, a
security interest in, as security for the Obligations all of Borrowers'
right, title and interest in and to all of its trademarks.
VOTING STOCK - Securities of any class or classes of a corporation
the holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors (or Persons
performing similar functions).
WORKING CAPITAL - as of any date, RFI's Consolidated Current Assets
MINUS RFI's Consolidated Current Liabilities.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all financial data
pursuant to the Agreement shall be prepared in accordance with such principles.
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1.3 OTHER TERMS. All other terms contained in this Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
1.4 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including, without
limitation, references to any of the Loan Documents, shall include any and all
modifications thereto and any and all extensions or renewals thereof. Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter.
SECTION 2. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders severally agree to make a total credit facility of up to
Twenty-Five Million Dollars ($25,000,000) available upon Borrowers' request
therefor, as follows:
2.1 REVOLVING CREDIT LOANS.
(A) The aggregate amount of the Revolving Credit Loans to be made
by each Lender (such Lender's "Revolving Credit Loan Commitment"), pursuant to
the terms hereof, shall be the amount set below such Lender's name on the
signature pages hereof. The aggregate principal amount of the Revolving Credit
Loan Commitments is Twenty-Five Million Dollars ($25,000,000). The percentage
equal to the quotient of (x) each Lender's Revolving Credit Loan Commitment,
divided by (y) the aggregate of all Revolving Credit Loan Commitments, is that
Lender's "Revolving Credit Percentage". Subject to all of the terms and
conditions of this Agreement, each Lender agrees, for so long as no Default or
Event of Default exists, to make Revolving Credit Loans to Borrowers from time
to time, as requested by Borrowers in accordance with the terms of Section 2.2
hereof, up to a maximum principal amount at any time outstanding equal to the
product of (A) the Borrowing Base at such time, multiplied by (B) such Lender's
Revolving Credit Percentage. It is expressly understood and agreed that Agent
and Lenders may use the Borrowing Base as a maximum ceiling on Revolving Credit
Loans outstanding to Borrower at any time. If the unpaid balance of the
Revolving Credit Loans should exceed the ceiling so determined or any other
limitation set forth in this Agreement, such Revolving Credit Loans shall
nevertheless constitute Obligations that are secured by the Collateral and
entitled to all the benefits thereof. In no event shall Lenders be required to
make a Loan at any time that
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there exists a Default or an Event of Default. Notwithstanding the foregoing
provisions of this Section 2.1(A), Agent shall have the right to establish
reserves in such amounts, and with respect to such matters, as Agent shall, in
the reasonable exercise of its reasonable judgment, deem necessary or
appropriate, against the amount of Revolving Credit Loans which Borrowers may
otherwise request under this Section 2.1(A), including, without limitation, with
respect to (i) price adjustments, damages, unearned discounts, returned products
or other matters for which credit memoranda are issued in the ordinary course of
Borrowers' business; (ii) shrinkage, spoilage and obsolescence of Inventory;
(iii) slow moving Inventory; (iv) other sums chargeable against Borrowers' Loan
Account as Revolving Credit Loans under any section of this Agreement; and (v)
such other matters, events, conditions or contingencies as to which Agent, in
the commercially reasonable exercise of its credit judgment, determines reserves
should be established from time to time hereunder. Each Revolving Credit Loan
shall be made on notice, given not later than 11:00 a.m. (Chicago time) on the
Business Day of the proposed Revolving Credit Loan, by Borrowers to Agent, which
shall give to each Lender prompt written notice thereof. Each such notice to be
given by Borrowers (a "Notice of Revolving Credit Loan") shall be in writing (or
by telephonic communication confirmed by telex. telecopy or other facsimile
transmission on the same day as the telephone request), in substantially the
form of EXHIBIT B attached hereto and incorporated herein, addressed to the
account executive of Agent in charge of Borrowers' account, specifying therein
the requested date and amount of such Revolving Credit Loan. Each Lender shall,
not later than 1:00 p.m. (Chicago time) on each requested date, wire to a bank
designated by Agent the amount of that Lender's Revolving Credit Percentage of
the requested Revolving Credit Loan. Agent shall, before 2:30 P.M. (Chicago
time) on the date of the proposed Revolving Credit Loan, upon fulfillment of the
applicable conditions set forth in Section 8.2 wire to a bank designated by
Borrowers and reasonably acceptable to Agent or credit Borrowers' operating
amount held with the Agent, the amount of such Revolving Credit Loan to the
extent received from the Lenders. The failure of any Lender to make the
Revolving Credit Loan to be made by it shall not relieve any other Lender of its
obligation hereunder to make its Revolving Credit Loan. Neither Agent nor any
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Loan to be made by such other Lender, who shall be liable to
Borrowers for such failure. The foregoing notwithstanding, Agent in its sole
discretion, may from its own funds, make a Revolving Credit Loan on behalf of
any Lender hereto. In such event, the Lender on behalf of whom Agent made the
Revolving Credit Loan shall reimburse Agent for the amount of Revolving Credit
Loan so made on its behalf, on a weekly (or more frequent basis as determined by
Agent, in its sole discretion) basis and the entire amount of interest
attributable to such Revolving Credit Loan for the period from the date on which
said Revolving Credit Loan was made by Agent on such Lender's behalf until Agent
is reimbursed by such Lender, shall be paid to Agent. If such amount is made
available by such Lender to the Agent on a date after the date of such credit
extension, such Lender shall pay to the Agent on demand interest on such amount
at the Federal Funds Rate for the number of days from the date of such credit
extension to the date on which such amount becomes immediately available to the
Agent, together with such other compensatory amounts as may be required to be
paid by such Lender to the Agent pursuant to the Rules
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for Interbank Compensation of the Council on International Banking on the
Clearinghouse Compensation Committee, as the case may be, as in effect from time
to time.
If at any time one or more Lenders refuse or fail to make a requested
Revolving Credit Loan when all conditions to a Revolving Credit Loan have been
satisfied or waived, then Agent may, at its option, but shall have no obligation
whatsoever to, purchase all, but not less than all, of the Revolving Credit
Notes held by the Lender(s) who so fail or refuse, and to assume such Lender's
commitments to make Revolving Credit Loans and each such Lender shall be
obligated to sell and transfer such Revolving Credit Notes to Agent for a price
in cash equal to the principal balance outstanding plus all accrued but unpaid
interest thereon plus all accrued fees due any such Lender under the terms
hereof, and the foregoing provisions of this Section will be applicable to Agent
with respect to the Revolving Credit Notes so purchased by it. Any such
purchase, however, shall not relieve any such Lender from any breach of contract
claims available to Agent and/or Borrowers against such Lender as a result of
its failure to make any such Revolving Credit Loan.
(B) The Revolving Credit Loans shall be evidenced by promissory
notes to be executed and delivered by Borrowers at the time of the initial
Revolving Credit Loan, the form of which is attached hereto and made a part
hereof as EXHIBIT A. Each Revolving Credit Note shall be payable to the order of
Lender and shall represent the obligation of Borrowers to pay the amount of such
Lender's Revolving Credit Loan Commitment or, if less, the aggregate unpaid
principal amount of all Revolving Credit Loans made by such Lender to Borrowers
with interest thereon as prescribed in Section 3.1.
(C) The Revolving Credit Loans shall be used for the satisfaction
of existing Indebtedness for Borrowed Money of Borrowers, for Borrowers' general
operating capital needs and for other general corporate purposes to the extent
not inconsistent with the provisions of this Agreement.
2.2 MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings under the
credit facility established pursuant to Section 2.1 hereof shall be as follows:
(A) A request for a Revolving Credit Loan shall be made, or shall
be deemed to be made, in the following manner: (i) Borrowers may give Agent
notice of their intention to borrow in accordance with the provisions contained
in Section 2.1 hereof; (ii) the becoming due of any amount required to be paid
under this Agreement as interest shall be, at the Agent's discretion, a request
for a Revolving Credit Loan on the due date in the amount required to pay such
interest; and (iii) the becoming due of any other Obligations shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date in the
amount then so due;
(B) Borrowers hereby irrevocably authorize Agent to disburse the
proceeds of each Revolving Credit Loan requested, or deemed to be requested,
pursuant to this Section 2.2 as follows: (i) the proceeds of each Revolving
Credit Loan requested under
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Section 2.2(A)(i) shall be disbursed by Agent in lawful money of the United
States of America in immediately available funds, in the case of the initial
Revolving Credit Loan, in accordance with the terms of the written disbursement
letter from Borrowers, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrowers and Agent from
time to time; and (ii) the proceeds of each Revolving Credit Loan requested
under Section 2.2(A)(ii) or (iii) shall be disbursed by Agent by way of direct
payment of the relevant Obligation.
2.3 LETTERS OF CREDIT. (A) Subject to all of the terms and conditions of
this Agreement, if requested to do so by Borrowers, Agent shall, on behalf of
Lenders, issue its Letters of Credit for the account of Borrowers; PROVIDED that
the aggregate face amount of all Letters of Credit outstanding at any time shall
not exceed Seven Million Dollars ($7,000,000) and no Letter of Credit may have
an expiration date that is later than the earlier of one year after the issuance
date or the last day of the Term, unless Borrowers provide Agent with cash
collateral for said Letter of Credit, in a manner and amount acceptable to
Agent. Any amounts paid by Agent in connection with any Letter of Credit (i)
shall become part of the Obligations (ii) shall be paid from the proceeds of a
Revolving Credit Loan requested pursuant to Section 2.1(A) above, to the extent
Lenders are required to make a Revolving Credit Loans pursuant to the terms
hereof, and (iii) otherwise, shall be payable on demand. In no event shall
Agent, or Lenders be required to issue or cause to be issued Letters of Credit
at any time there exists a Default or an Event of Default.
(B) Immediately upon the issuance of each Letter of Credit by
Agent, each Lender shall be deemed to have automatically, irrevocably and
unconditionally purchased from the Agent an undivided interest and participation
in and to such Letter of Credit, the obligations of Borrowers in respect thereof
and the liability of the Agent thereunder in an amount equal to the amount
available for drawing under such Letter of Credit, multiplied by such Lender's
Revolving Credit Percentage. The Agent will notify each Lender promptly upon
presentation to it of a draw under a Letter of Credit. On or before the Business
Day on which the Agent makes payment under a Letter of Credit, each Lender shall
make payment to the Agent in immediately available funds of an amount equal to
such Lender's pro rata share of the amount of such payment. The obligation of
each Lender to reimburse the Agent under this Section 2.3(B) shall be
unconditional, continuing, irrevocable and absolute. In the event that any
Lender fails to make payment to the Agent of any amount due under this Section
2.3(B), the Agent shall be entitled to receive, retain and apply against such
obligation the principal and interest otherwise payable to such Lender
hereunder until the Agent receives such payment from such Lender or such
obligation is otherwise fully satisfied; PROVIDED, however, that nothing
contained in this sentence shall relieve such Lender of its obligation to
reimburse the Agent for such amount in accordance with this Section 2.3(B).
(C) Borrowers agree to unconditionally, irrevocably and absolutely
pay immediately to the Agent, for the account of the Lenders, the amount drawn
under a Letter of Credit. If Borrowers at any time fails to make such payment,
Borrowers shall be deemed
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to have elected to borrow from the Lenders on such date Revolving Credit Loans
equal in aggregate amount to the amount paid by Agent under such Letter of
Credit.
2.4 ALL LOANS TO CONSTITUTE ONE OBLIGATION. The Loans shall constitute
one general Obligation of Borrowers, and shall be secured by Agent's security
interest in and Lien upon all of the Collateral for Agent's benefit and the
ratable benefit of all Lenders, and by all other security interests, Liens,
claims and encumbrances heretofore, now or at any time or times hereafter
granted by Borrowers to Agent for its benefit and the ratable benefit of
Lenders.
2.5 LOAN ACCOUNT. Agent shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account as credits all payments made
by Borrowers on any Obligations and all proceeds of Collateral which are finally
paid to Agent, for its own or Lenders' benefit, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including all charges and expenses properly chargeable to Borrowers and any
other Obligation.
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
3.1 INTEREST, FEES AND CHARGES.
(A) INTEREST. Interest shall accrue on the Loans outstanding at
the end of each day (computed on the basis of a calendar year of 360 days) at a
fluctuating rate per annum equal to the sum of the Applicable Prime Margin, as
in effect from time to time, PLUS the Prime Rate. After the date hereof, the
foregoing rate of interest shall be increased or decreased, as the case may be,
by an amount equal to any increase or decrease in the Prime Rate, with such
adjustments to be effective as of the opening of business on the day that any
such change in the Prime Rate becomes effective. The Prime Rate in effect on the
date hereof shall be the Prime Rate effective on the opening of business on the
date hereof, but if this Agreement is executed on a day that is not a Business
Day, the Prime Rate in effect on the date hereof shall be the Prime Rate
effective as of the opening of business on the last Business Day immediately
preceding the date hereof.
(B) DEFAULT RATE OF INTEREST. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
all Loans shall bear interest at a rate per annum equal to two percent (2%)
above the interest rate otherwise applicable thereto (the "Default Rate").
(C) REVOLVING CREDIT LOAN UNUSED LINE FEE. Borrowers shall pay to
Agent on behalf of Lenders a fee ("Revolving Credit Loan Unused Line Fee") equal
to one quarter of one percent (1/4%) per annum (calculated daily on the basis of
a 360-day year) of the amount by which Twenty-Five Million Dollars ($25,000,000)
exceeds the sum of the outstanding principal balance of the Revolving Credit
Loans, plus the outstanding balance of Letters of Credit. The Revolving Credit
Loan Unused Line Fee shall be payable
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quarterly in arrears on the first day of each calendar quarter hereafter, and on
the Commitment Termination Date.
(D) CAPITAL ADEQUACY CHARGE. In the event that any Lender or any
Participating Lender shall have determined that the adoption (effected after the
date hereof) of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof or compliance by
any Lender or any Participating Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or governmental authority, does or shall have the effect of reducing the rate of
return on such Lender's or Participating Lender capital as a consequence of its
obligations hereunder to a level below that which such Lender or Participating
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's or such Participating Lender's policies with
respect to capital adequacy) by an amount deemed by such Lender or Participating
Lender, in its reasonable discretion, to be material, then from time to time,
after submission by such Lender or Participating Lender to Borrowers of a
written demand therefor, which demand shall be made within sixty (60) days of
such reduction, Borrowers shall pay to such Lender or Participating Lender such
additional amount or amounts as will compensate such Lender or Participating
Lender for such reduction. A certificate of such Lender or Participating Lender
claiming entitlement to payment as set forth above shall be conclusive in the
absence of manifest error. Such certificate shall set forth the nature of the
occurrence giving rise to such payment, the additional amount or amounts to be
paid to such Lender or Participating Lender, and the method by which such
amounts were determined. In determining such amount, such Lender or
Participating Lender may use any reasonable averaging and attribution methods.
Each Lender, Participating Lender and Agent agrees to allocate any such cost
increase among its similarly situated customers in good faith and on an
equitable basis.
(E) MAXIMUM INTEREST. In no contingency or event whatsoever shall
the aggregate of all amounts deemed interest hereunder or under the Notes and
charged or collected pursuant to the terms of this Agreement or pursuant to the
Notes exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination deem applicable hereto.
In the event that such a court determines that Lenders have charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
applicable law, and Lenders shall promptly refund to Borrowers any interest
received by Lenders in excess of the maximum lawful rate or, if so requested by
Borrowers, shall apply such excess to the principal balance of the Obligations.
It is the intent hereof that Borrowers not pay or contract to pay, and that
Lenders not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Borrowers under
applicable law.
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(F) FIELD AUDIT FEES. Borrowers shall reimburse Agent for any
reasonable expense incurred by representative of Agent in connection with field
audits conducted in accordance with the terms hereof.
(G) APPRAISAL FEES. Borrowers shall reimburse Agent for all
reasonable expenses incurred by Agent in connection with the appraisals of any
personal or real Property of Borrowers, which appraisals may be conducted every
two years within the Term hereof
3.2 LETTER OF CREDIT FEES. (A) As additional consideration for issuing
or causing to be issued, Letters of Credit for Borrowers' account, at either
Borrower's request pursuant to Section 2.2 hereof, Borrowers agree to pay fees
in respect to each Letter of Credit. Said fees shall be payable on the date
which such Letter of Credit is issued and shall be in an amount equal to one
percent (1%) of the amount of each Standby Letter of Credit multiplied by a
fraction, the numerator of which is the number of days in the term of the
applicable Standby Letter of Credit and the denominator of which is 360, or
one-sixth of one percent (1/6%) of the amount of each Commercial Letter of
Credit. In the event a Letter of Credit is renewed or extended a fee calculated
in the manner provided above shall be payable for any such renewal or extended
period. Agent shall deduct from any such fee paid by Borrowers its unreimbursed
cost and expenses incurred in connection with any such Letter of Credit, and
then remit the remainder to Lenders, PRO RATA, in accordance with their
Revolving Credit Loan Percentages.
(B) In addition to the fees payable pursuant to Section 3.2(A)
above, Borrowers shall pay and/or reimburse Agent all fees and charges paid by
Agent on account of any Letter of Credit, and Borrowers shall pay to Agent its
usual and customary charges in respect to the issuance, or renewal, of Letters
of Credit.
3.3 TERM OF AGREEMENT. Subject to Lenders' right to cease making Loans
to Borrowers at any time upon or after the occurrence and during the continuance
of any Default or Event of Default this Agreement shall be in effect for a
period from the date hereof, through and including April 1, 1997 (the "Original
Term"), and this Agreement shall automatically renew itself for one (1) year
periods thereafter (the "Renewal Terms" and together with the Original Term the
"Term"), unless at least ninety (90) days prior to the end of the Original Term,
or if applicable, the then current Renewal Term, either Borrower or Required
Lenders notify the other party that they have elected to terminate this
Agreement in accordance with Section 3.4.
3.4 TERMINATION.
(A) In addition to its termination rights under Section 3.3,
Borrowers may, upon at least ninety (90) days prior written notice to Agent, at
their option, terminate this Agreement. No termination of this Agreement,
whether pursuant to Section 3.3 or 3.4, shall be effective, however, until
Borrowers have paid all of the Obligations in immediately
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available funds and all Letters of Credit issued by Agent have expired or
Borrowers have provided substitute or replacement Letters of Credit, or cash
collateral as provided in Section 3.4(C) below, in amounts satisfactory to
Agent.
(B) All of the Obligations shall be due and payable upon any
termination of this Agreement, including, without limitation, any earned but
unpaid fees. Except as otherwise expressly provided for in this Agreement or the
other Loan Documents, no termination or cancellation (regardless of cause or
procedure) of this Agreement, or any of the other Loan Documents shall in any
way affect or impair the rights, powers or privileges of Borrowers, Agent or
Lenders or the obligations, duties, or liabilities of Borrowers or Agent or
Lenders in any way relating to (i) any transaction or event occurring prior to
such termination or cancellation or (ii) any of the undertakings, agreements,
covenants, warranties or representations of Borrowers, Agent or Lenders
contained in this Agreement, or any of the other Loan Documents. All such
undertakings, agreements, covenants, warranties and representations of
Borrowers, Agent or Lenders shall survive such termination or cancellation and
Agent, for its benefit and the ratable benefit of Lenders, shall retain all of
its rights and remedies under this Agreement and the other Loan Documents
notwithstanding such termination or cancellation, and Agent, for its benefit
and the ratable benefit of Lenders, shall retain its Liens in the Collateral
until Borrowers have paid the Obligations to Agent and Lenders, in full, in
immediately available funds. Notwithstanding the payment in full of the
Obligations, Agent and Lender shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss or damage Agent or
Lender may incur as a result of dishonored checks or other items of payment
received by Agent or any Lender from Borrower or any Account Debtor and applied
to the Obligations, Agent shall, at its option, (i) have received a customary
indemnity and release agreement, executed by Borrower and by any Person whose
loans or other advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Agent and Lenders from any such loss or damage; or
(ii) have retained such monetary reserves and/or Liens on cash collateral for
such period of time as Agent, in its reasonable discretion, may deem necessary
to protect Agent and Lender from any such loss or damage.
(C) With respect to the face amount of all Letters of Credit issued
by Agent outstanding on any proposed date of termination, Borrowers may provide
replacement or substitute Letters of Credit and, if Borrowers do not, Agent or
any Lender may require Borrowers to deposit with Agent funds equal to such face
amount, in order for any such termination to become effective. Any such deposit
or advance shall be held by Agent as a reserve to fund future drawings against
such Letters of Credit. At such time as all Letters of Credit have been drawn
upon or expired, any amounts remaining in such reserve shall be applied against
any outstanding Obligations, or to the extent all Obligations have been
indefeasibly paid in full, returned to Borrowers. Agent shall not have any
obligation to invest such funds deposited with it in an interest bearing account
and interest and earnings thereon, if any, shall be property of Agent.
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(D) It is understood that Borrowers may elect to terminate this
Agreement in its entirety only; no section or lending facility may be terminated
singly.
3.5 PAYMENTS. Except where evidenced by notes or other instruments
issued or made by Borrowers to Lenders specifically containing payment
provisions which are in conflict with this Section 3.5 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of:
(A) Principal, payable on account of Revolving Credit Loans made by
Lenders to Borrowers pursuant to Section 2.1 of this Agreement, shall be payable
by Borrowers to Agent, on behalf of Lenders, immediately upon the earliest of
(i) the receipt by Agent or any Lenders or Borrowers (after the occurrence and
during the continuation of an Event of Default) of any proceeds of any of the
Collateral consisting of Accounts or Inventory, to the extent of said proceeds,
(ii) the occurrence of an Event of Default in consequence of which Required
Lenders elect to accelerate the maturity and payment of the Obligations, and
(iii) termination of this Agreement pursuant to Section 3.3 or Section 3.4
hereof; PROVIDED, HOWEVER, that if the principal balance of Revolving Credit
Loans outstanding at any time shall exceed the Borrowing Base at such time,
Borrowers shall, on demand, 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;
(B) Interest accrued on the Loans, shall be due on the earliest of
(i) the first day of each month (for the immediately preceding month), computed
through the last calendar day of the preceding month, (ii) the occurrence of an
Event of Default in the consequence of which Required Lenders elect to and do
accelerate the maturity and payment of the Obligations or (iii) termination of
this Agreement pursuant to Section 3.3 or Section 3.4 hereof; PROVIDED, HOWEVER,
the Borrowers hereby irrevocably authorize Lenders, in Agent's sole discretion,
to advance to Borrowers and to charge to Borrowers' Loan Account hereunder as a
Revolving Credit Loan, a sum sufficient each month to pay all interest accrued
on the Loans, during the immediately preceding month.
(C) Costs, fees and expenses payable pursuant to this Agreement
shall be payable by Borrowers, on demand, to Agent or to any other Person
designated by Agent in writing; and
(D) The balance of the Obligations requiring the payment of money,
if any, shall be payable by Borrowers to Lenders and/or Agent as and when
provided in this Agreement, the Other Agreements or the Security Documents, or
if no such specific payment provision is so provided, then on demand.
3.6 APPLICATION OF PAYMENTS AND COLLECTIONS. If there has not occurred
an Event of Default which is continuing, all payments and collections shall be
applied against the Obligations, which are due and payable at the time of
payment and/or collections, (i) as provided herein or (ii) if no specific
provision therefor is contained herein, then as directed
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by Borrowers. After the occurrence and during the continuation of an Event of
Default, (i) Borrowers irrevocably waive the right to direct the application
of any and all payments and collections at any time or times thereafter
received by Agent or any Lender from or on behalf of Borrowers, and (ii)
Borrowers do hereby irrevocably agree that Agent or any Lender shall have the
continuing exclusive right to apply and, after the occurrence of an Event of
Default which has not been cured, reapply any and all such payments and
collections received at any time or times thereafter by Agent or any Lender
against the Obligations, in such manner as Agent or Required Lenders may deem
advisable, notwithstanding any entry by Agent or any Lender upon any of its
books and records. Borrowers may prepay Obligations without penalty or
premium, so long as no Event of Default exists. If as the result of
collections of Accounts as authorized by Section 5.4 hereof a credit balance
exists in the Loan Account, such credit balance shall be paid to Borrowers as
long as no Default or Event of Default exists. After the occurrence and
during the continuation of an Event of Default; all payments and collections
shall be applied against the Obligations as follows:
FIRST, to Agent and/or Lenders in an amount sufficient to pay in
full the reasonable expenses of Agent or Lenders in connection with the
enforcement of this Agreement, the Security Documents or the other Loan
Documents or the preservation of the Collateral, including all expenses,
liabilities and advances incurred or made by Agent and/or Lenders in
connection therewith, including, without limitation, reasonable
attorney's fees;
SECOND, to Lenders in an amount equal to the then unpaid
principal of and accrued interest and prepayment premiums, if any, on
the Obligations and to Agent to fund any deposits required to be paid to
Agent in accordance with Section 11.3(F);
THIRD, to Lenders in an amount equal to any other Obligations
which are then unpaid; and
FINALLY, upon payment in full of all of the Obligations, to pay
to Borrowers, or their representatives or if a court of competent
jurisdiction has jurisdiction over Borrowers, as such court may direct,
any surplus then remaining from such payments and collections.
Upon receipt from Borrowers of good funds, Agent will, subject to the
foregoing, promptly thereafter cause to be distributed like funds relating to
the payment of principal, interest or, if applicable, fees ratably to Lenders
based upon each Lender's respective Revolving Loan Percentage.
3.7 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Revolving Credit Loan made by it in
excess of its ratable share of payments on
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account of the Revolving Credit Loan made by all Lenders, such Lender shall
forthwith purchase from each other Lender such participation in the Revolving
Credit Loan as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each other Lender; PROVIDED, HOWEVER, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent
of such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. Borrowers agree that any Lender so
purchasing a participation from another Lender pursuant to this Section 3.7
may, upon demonstrating to the reasonable satisfaction of Borrowers such
participation in the Revolving Credit Loans, to the fullest extent permitted
by law, exercise all its rights of payment (including the right of set-off)
with respect to such participation as fully as if such Lender were the direct
creditor of Borrowers or either one of them in the amount of such
participation.
3.8 STATEMENTS OF ACCOUNT. Agent will account to Borrowers monthly with
a statement of Loans, charges and payments made pursuant to this Agreement, a
copy of which shall be sent to each Lender and such account rendered by Agent
shall be deemed final, binding and conclusive upon Borrowers unless Agent is
notified by Borrowers in writing to the contrary within thirty (30) days after
the date each account is mailed to Borrowers. Such notice shall only be deemed
an objection to those items specifically objected to therein.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1 SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance to Agent and Lenders of the Obligations, Borrowers hereby grant to
Agent, for its benefit and this ratable benefit of Lenders, a continuing
security interest in and Lien upon the following Property of each Borrower,
whether now owned or existing or hereafter created, acquired or arising and
wheresoever located:
(A) Accounts;
(B) Inventory;
(C) Equipment;
(D) General Intangibles;
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(E) All monies and other Property of any kind, now or at any time
or times hereafter, in the possession or under the control of Agent or any
Lender or a bailee of Agent or any Lender;
(F) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), (C), (D) and (E) above,
including, without limitation, proceeds of and unearned premiums with respect to
insurance policies insuring any of the Collateral;
(G) All books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer materials
and records) of Borrowers pertaining to any of (A), (B), (C), (D), (E) or (F)
above.
Notwithstanding the foregoing, Collateral shall not include (1) any licenses
or permits the encumbrance of which would violate any law, statute or
regulation; or (2) any contract rights (including, without limitation, any
contracts or leases), the encumbrance of which would violate the terms of the
agreements establishing such rights: PROVIDED that Borrowers shall use
reasonable good faith efforts to obtain any necessary consent to enable any such
contract right to be included within the Collateral.
4.2 LIEN ON REALTY HEREAFTER ACQUIRED. The due and punctual payment
and performance of the Obligations shall also be secured by the Lien created
by the Mortgage. If either Borrower shall acquire at any time or times
hereafter any interest in other real Property (other than leasehold interests
in sales offices), such Borrower agrees promptly to execute and deliver to
Agent, for its benefit and the ratable benefit of Lenders, as additional
security and Collateral for the Obligations, deeds of trust, security deeds,
mortgages or other collateral assignments satisfactory in form and substance
to Agent, and its counsel (herein collectively referred to as "New
Mortgages") covering such real Property. Each New Mortgage shall be duly
recorded in each office where such recording is required to constitute a
valid Lien on the real Property covered thereby. In respect to each New
Mortgage, the applicable Borrower shall deliver to Agent, at such Borrower's
expense, mortgagee title insurance policies issued by a title insurance
company satisfactory to Agent, for its benefit and the ratable benefit of
Lenders, insuring Agent, for its benefit and the ratable benefit of Lenders,
as mortgagee; such policies shall be in form and substance satisfactory to
Agent and shall insure a valid first Lien in favor of Agent, for its benefit
and the ratable benefit of Lenders, on the Property covered thereby, subject
only to those exceptions acceptable to Agent and its counsel. Said policies
shall be in form and substance satisfactory to Agent. Such Borrower shall
also deliver to Agent such other documents, including, without limitation,
ALTA Surveys of the real Property, as Agent and its counsel may reasonably
request relating to the real Property subject to any such New Mortgage.
4.3 REPRESENTATIONS, WARRANTIES AND COVENANTS -- COLLATERAL. To
induce Agent and Lenders to enter into this Agreement, Borrowers represent,
warrant, and covenant to Agent and Lenders:
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(A) The Collateral is now, and so long as any of the Obligations
are outstanding, prior to any sale, disposition or condemnation permitted by the
terms hereof, will continue to be, owned solely by Borrowers. No other Person
has or will have any right, title, interest, claim or Lien thereon, other than
Permitted Liens.
(B) Except as specifically consented to in writing by Required
Lenders and except for the Permitted Liens, the Liens granted to Agent, for
its benefit and the ratable benefit of Lenders, shall be first and prior on
the Collateral and as to the Accounts and proceeds, including insurance
proceeds, resulting from the sale, disposition, or loss thereof. To the
knowledge of Borrowers, no further action need be taken in respect to
Collateral located in the United States or Canada to perfect the Liens
granted in the Collateral to Agent, for its benefit and the ratable benefit
of Lenders, other than the filing of financing statements or continuation
statements under the Code or other applicable law, continued possession by
Agent or Lenders of that portion of the Collateral constituting instruments
or documents, the processing of Lien notations on motor vehicle title
certificates and the recording of any Mortgage or New Mortgage.
(C) Collateral evidenced by chattel paper, documents, or
instruments, the possession of which has been given to Agent, is owned by
Borrowers and the same is free and clear of any prior Lien, except for
Permitted Liens. Borrowers further warrant the value, quantities, sound
condition, grades, and qualities of the goods and services described therein.
Borrowers shall pay and discharge when due all taxes, levies, and other
charges upon said Collateral and upon the goods evidenced by any documents
constituting Collateral and shall defend Agent and Lenders against and save
them harmless from all claims of any Person with respect to the Collateral.
This indemnity shall include reasonable attorneys' fees and legal expenses.
4.4 LIEN PERFECTION. Borrowers agree to execute the UCC-1 financing
statements provided for by the Code or otherwise together with any and all other
instruments, assignments or documents and shall take such other action as may be
required to perfect or to continue the perfection of Agent's security interest
in the Collateral, including, without limitation, the execution at Agent's
request of all documents deemed necessary by Agent to cause Agent's Lien to be
noted on any motor vehicle title certificates for motor vehicles forming a part
of the Collateral. Unless prohibited by applicable law, Borrowers hereby
authorize Agent to execute and file any such financing statement on Borrowers'
behalf. The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
4.5 LOCATION OF COLLATERAL. All Collateral, other than Inventory in
transit motor vehicles, or Collateral in the possession of Agent or Lenders,
will at all times be kept by Borrowers at one or more of the business
locations set forth in EXHIBIT C and shall not, without the prior written
approval of Agent, which shall not be unreasonably withheld, delayed or
conditioned, be moved therefrom except, prior to an Event of Default and the
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acceleration of the maturity of the Obligations in consequence thereof, for (A)
sales of Inventory in the ordinary course of business; (B) the storage of
Inventory at locations within the continental United States other than those
shown on EXHIBIT C if (i) Borrowers give Agent written notice of the new storage
location at least thirty (30) days prior to storing Inventory at such location,
(ii) Agent's security interest in such Inventory is and continues to be a duly
perfected, first priority Lien thereon, subject only to Permitted Liens (iii)
neither Borrowers' nor Agent's right of entry upon the premises where such
Inventory is stored. or their right to remove the Inventory therefrom, is
restricted, other than by applicable law, in any material respect, (iv) the
owner of such premises agrees with Agent not to assert any landlord's, bailee's
or other Lien in respect of the Inventory for unpaid rent or storage charges and
(v) all negotiable documents and receipts in respect of any Collateral
maintained at such premises are promptly delivered to Agent; (C) transfers of
Equipment from a location set forth on EXHIBIT C to another location set forth
on EXHIBIT C and (D) removals in connection with dispositions of Equipment that
are permitted by Section 9.2(0) hereof.
4.6 INSURANCE OF COLLATERAL. Borrowers agree to maintain and pay for
insurance upon all Inventory and Equipment wherever located, in storage or in
transit in vehicles, including goods evidenced by documents, covering
casualty, hazard, public liability and such other risks and in such amounts
and with such insurance companies as shall be reasonably satisfactory to
Agent to insure Agent's interest in the Collateral. In respect to casualty
and hazard insurance policies, Borrowers shall deliver the originals or
certified copies of such policies to Agent with satisfactory lender's loss
payable endorsements naming Agent loss payee, for the ratable benefit of
Lenders. In respect to public liability and other insurance policies,
Borrowers shall deliver a certificate of insurance in respect to each such
policy. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than thirty (30) days prior written
notice to Agent in the event of cancellation of the policy for any reason
whatsoever and a clause that the interest of Agent shall not be impaired or
invalidated by any act or neglect of either Borrowers or owner of the
Property nor by the occupation of the premises for purposes more hazardous
than are permitted by said policy. If Borrowers fail to provide and pay for
such insurance, Agent may, at Borrowers' expense, procure the same, but shall
not be required to do so. Borrowers agree to deliver to Agent, true copies of
all reports (which relate to any matter which could reasonably by expected to
involve Fifty Thousand Dollars ($50,000.00) or more) made in any reporting
forms to casualty and hazard insurance companies. Borrowers will maintain,
with financially sound and reputable insurers, insurance with respect to
their respective Properties and business against such casualties and
contingencies of such type (including public liability, product liability,
larceny, embezzlement, or other criminal misappropriation insurance) and in
such amounts as is customary in the business or as otherwise reasonably
required by Agent.
4.7 PROTECTION OF COLLATERAL. All insurance expenses and all expenses of
protecting, storing, warehousing insuring, handling, maintaining and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any state, federal, or local
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authority on any of the Collateral or in respect of the sale thereof shall be
borne and paid by Borrowers. If Borrowers fail to promptly pay any portion
thereof when due, Agent may, at its option, but shall not be required to, pay
the same and charge the Loan Account therefor. Borrowers agree to reimburse
Agent promptly therefor with interest accruing thereon daily at the Applicable
Rate provided in this Agreement unless an Event of Default shall have occurred
and be continuing. All sums so paid or incurred by Agent for any of the
foregoing and all costs and expenses (including reasonable attorneys' fees,
legal expenses, and court costs) which Agent may incur in enforcing or
protecting its Lien on or rights and interest in the Collateral or any of its
rights or remedies under this or any other agreement between the parties hereto
or in respect of any of the transactions to be had hereunder until paid by
Borrowers to Agent with interest at the Applicable Rate unless an Event of
Default shall have occurred and be continuing, shall be considered Obligations
owing by Borrowers to Agent hereunder. Such Obligations shall be secured by all
Collateral and by any and all other collateral, security, assets, reserves, or
funds of Borrowers in or coming into the hands or inuring to the benefit of
Agent or any Lender. Agent shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Agent's
actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other Person who is
not an employee or agent of Agent, but the same shall be at Borrowers' sole
risk.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to all
Accounts, Borrowers represent and warrant to Agent and Lenders that Agent may
rely, in determining which Accounts are Eligible Accounts, on all statements and
representations made by Borrowers with respect to any Account or Accounts, and,
unless otherwise indicated in writing to Agent, that with respect to each
Account:
(A) It is genuine and in all material respects what it purports to
be, and it is not evidenced by a judgment;
(B) It arises out of a completed, BONA FIDE sale of goods or
rendition of services by a Borrower in the ordinary course of its business and
in accordance, in all material respects, with the terms and conditions of all
purchase orders, contracts or other documents relating thereto and forming a
part of the contract between such Borrower and the Account Debtor;
(C) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which,
if requested by Agent, has been furnished or is available to Agent;
(D) To the best of Borrowers' knowledge, such Account and Agent's
security interest therein, is not, and will not be in the future, subject to any
offset, Lien,
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deduction, defense, dispute, counterclaim or any other adverse condition except
for disputes resulting in returned goods where the amount in controversy is
deemed by Agent to be immaterial, and each such Account is absolutely owing to
Borrower and is not contingent in any material respect or for any material
reason;
(E) Neither Borrower has made any agreement with any Account Debtor
thereunder for any deduction therefrom, except for discounts and allowances
which are granted by a Borrower in the ordinary course of its business and
which are reflected in the calculation of the net amount of each respective
invoice related thereto or in the Borrowing Base Certificate;
(F) To the best of Borrowers' knowledge, there are no facts, events
or occurrences which in any material way impair the validity or enforceability
or reduce the amount payable thereunder from the face amount of the invoice and
statements evidencing such Accounts;
(G) To the best of Borrowers' knowledge, the Account Debtor
thereunder (i) had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor is
Solvent; and
(H) Neither Borrower has any knowledge of any fact or circumstance
which would impair the validity or collectability of the Account, and to the
best of Borrowers' knowledge there are no proceedings or actions which are
threatened or pending against any Account Debtor thereunder which might result
in any material adverse change in such Account Debtor's financial condition or
the collectability of such Account.
5.2 BORROWING BASE CERTIFICATES, ASSIGNMENTS, RECORDS AND SCHEDULES OF
ACCOUNTS. Borrowers shall execute and deliver to Agent a Borrowing Base
Certificate, in the form attached hereto as EXHIBIT D (a "Borrowing Base
Certificate"), on Friday of each week, as of Tuesday of the same week. Upon and
during the continuance of an Event of Default, Borrowers shall execute and
deliver to Agent a Borrowing Base Certificate on a daily basis. Said Borrowing
Base Certificate shall include, among other things, formal written assignments
of all Accounts including all Accounts that have been created since the date of
the last Borrowing Base Certificate. Additionally, if separately requested by
Agent, there shall be attached to the Borrowing Base copies of invoices or
invoice registers related the newly created Accounts. Borrowers shall keep
accurate and complete records of its Accounts and all payments and collections
thereon and, if requested by Agent, shall submit to Agent a sales and
collections report for the preceding day, in form satisfactory to Agent. On or
before the 15th day of each fiscal month from and after the date hereof,
Borrowers shall deliver to Agent, in form acceptable to Agent, a detailed aged
trial balance of all Accounts existing as of the last day of the preceding
month, specifying the names, face value and due dates for the Account Debtor
obligated on an Account so listed ("Schedule of Accounts"). Upon Agent's request
therefor, Borrowers shall deliver to Agent such other
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matters and information relating to the status of the existing Accounts as Agent
shall reasonably request.
5.3 ADMINISTRATION OF ACCOUNTS.
(A) Upon the granting of any discounts, allowances or credits by
either Borrower that are not shown on the face of the invoice for the Account
involved (other than what would be considered in the normal course of its
business), Borrowers shall promptly report such discounts, allowances or
credits, as the case may be, to Agent and in no event later than the time of its
submission to Agent of the next Schedule of Accounts as provided in Section 5.2.
After the occurrence of an Event of Default and during the continuation thereof,
Agent shall have the right to settle or adjust all disputes and claims directly
with the Account Debtor and to compromise the amount or extend the time for
payment of the Accounts upon such terms and conditions as Agent may reasonably
deem advisable, and to charge the deficiencies, costs and expenses thereof,
including reasonable attorney's fees, to Borrowers.
(B) If an Account includes a charge for any tax payable to any
governmental taxing authority, Agent is authorized, in its sole discretion, to
pay the amount thereof to the proper taxing authority for the account of
Borrowers and to cause Borrowers' Loan Account hereunder to be charged therefor.
Borrowers shall notify Agent if any Account includes any tax due to any
governmental taxing authority and, in the absence of such notice, Agent shall
have the right to apply the full proceeds of the Account to the Obligations and
shall not be liable for any taxes to any governmental taxing authority that may
be due by Borrowers by reason of the sale and delivery creating the Account.
(C) Whether or not a Default or an Event of Default has occurred,
any of Agent's officers, employees or agents shall have the right at any time or
times hereafter, in the name of Agent, any designee of Agent or in the name of
either or both Borrower, to verify the validity, amount or any other matter
relating to any Accounts by mail, telephone, telegraph or otherwise. Borrowers
shall cooperate fully with Agent in an effort to facilitate and promptly
conclude any such verification process.
5.4 COLLECTION OF ACCOUNTS.
(A) To expedite collection, Borrowers shall endeavor in the first
instance to make collection of its Accounts for Agent. All remittances received
by Borrowers on account of Accounts shall be held to the extent of the
Obligations as Agent's property (for its benefit and the ratable benefit of
Lenders) by Borrowers as trustee of an express trust for Agent's benefit and,
after the occurrence of and during the continuation of an Event of Default,
Borrowers shall immediately deposit same in the Dominion Account. Agent retains
the right at all times, after the occurrence and during the continuation of an
Event of Default, to notify Account Debtors that Accounts have been assigned to
Agent and to collect Accounts directly in its own name and to charge the
collection costs and expenses,
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including reasonable attorneys' fees to Borrowers. After the occurrence and
during the continuation of an Event of Default, for the purpose of computing
interest hereunder, all items of payment received by Agent shall be deemed
applied by Agent on account of Obligations (subject to final payment of such
items) on the second Business Day after receipt by Agent of such items in
immediately available funds.
(B) After the occurrence and during the continuation of an Event of
Default, Borrowers shall deposit all proceeds of the Collateral or cause the
same to be deposited in kind in a Dominion Account pursuant to a lockbox
arrangement with such banks as may be selected by Borrowers and be acceptable to
Agent. Borrowers shall issue to any such banks, an irrevocable letter of
instruction directing such banks to deposit all payments or other remittances
received in the lockbox to the Dominion Account for application by the Agent on
account of the Obligations in accordance with Section 3.6 and the other
provisions of this Agreement. All funds deposited in the Dominion Account shall
immediately become the property of Agent (for its benefit and the ratable
benefit of Lenders), to the extent of the Obligations, and Borrowers shall
obtain the agreement by such banks to waive any offset rights against the funds
so deposited. Agent assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder other than to account
for any amounts withdrawn therefrom.
5.5 NOTICE REGARDING DISPUTED ACCOUNTS. In the event of any dispute
between either Borrower and any Account Debtor involving disputed amounts of
Twenty-Five Thousand Dollars ($25,000.00) or more, Borrowers shall provide Agent
with written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy.
SECTION 6. PROVISIONS RELATING TO INVENTORY
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to
Inventory, Borrowers represent and warrant to Agent and Lenders that Agent may
rely, in determining which items of Inventory constitute Eligible Inventory, on
all statements and representations made by Borrowers with respect to any
Inventory and that, unless otherwise indicated in writing:
(A) All Inventory is presently and will continue to be located at
Borrowers' places of business listed on EXHIBIT C and will not be removed
therefrom except as authorized by Section 4.5 of this Agreement;
(B) No Inventory is now, nor shall any Inventory at any time or
times hereafter be, stored with a bailee, warehouseman or similar party in
excess of $25,000 in the aggregate without Agent's prior written consent, which
shall not be unreasonably withheld, delayed or conditioned, and, if Agent gives
such consent, Borrowers will concurrently therewith cause any such bailee,
warehouseman, or similar party to issue and deliver to
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Agent, in form and substance acceptable to Agent, warehouse receipts therefor in
Agent's name;
(C) Except as provided below, no Inventory is or will be consigned
to any Person without Agent's prior written consent, and, if such consent is
given, Borrowers shall, prior to the delivery of any Inventory on consignment,
(i) provide Agent with all consignment agreements to be used in connection with
such consignment, all of which shall be reasonably acceptable to Agent, (ii)
prepare, execute and file appropriate financing statements with respect to any
consigned Inventory, showing Agent as assignee, for its benefit and the ratable
benefit of Lenders, (iii) conduct a search of all filings made against the
consignee in all jurisdictions in which any consigned Inventory is to be located
and deliver to Agent copies of the results of all such searches and (iv) notify,
in writing, all the creditors of the consignee which are or may be holders of
Liens in the Inventory to be consigned that Borrowers expect to deliver certain
Inventory to the consignee, all of which Inventory shall be described in such
notice by item or type; and
(D) No Inventory is or will be produced in violation of the Fair
Labor Standards Act.
6.2 INVENTORY REPORTS. Borrowers agree to furnish Agent with Inventory
reports at such times as Agent may reasonably request, but at least once each
month, as of the last day of the previous fiscal month on the 15th day of each
fiscal month of Borrowers. Such reports shall be in form and detail reasonably
satisfactory to Agent. Borrowers shall conduct a physical inventory no less
frequently than annually and shall provide to Agent a report based on each such
physical inventory as promptly as practical thereafter, together with such
supporting information as Agent shall in its reasonable judgment request.
6.3 RETURNS OF INVENTORY. If at any time or times hereafter any Account
Debtor returns any Inventory to either Borrower, which returned Inventory had a
sales price of Twenty-Five Thousand Dollars ($25,000.00) or more, Borrowers
shall notify Agent of the same immediately, specifying the reason for such
return and the location and condition of the returned Inventory. After the
occurrence of an Event of Default and during the continuation thereof, Borrowers
shall hold all returned Inventory in trust for Agent, for its benefit and the
ratable benefit of Lenders, shall segregate all returned Inventory from all
other Property owned by Borrowers or in their respective possession and shall
conspicuously label such Inventory as the Property of Agent, for its benefit and
the ratable benefit of Lenders.
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SECTION 7. PR0VISIONS RELATING TO EQUIPMENT
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to the
Equipment, Borrowers represent, warrant and covenant to and with Agent and
Lenders that:
(A) The Equipment is in reasonably good operating condition and
repair, and all necessary replacements of and repairs thereto shall be made so
that the value and operability of the Equipment shall be maintained and
preserved, reasonable wear and tear and insured theft and casualty losses
excepted; and
(B) After the Closing Date, Borrowers will not permit any of the
Equipment to become affixed to any real Property leased to either Borrower so
that an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of Agent, for its benefit and the ratable
benefit of Lenders, and Borrowers will not permit any of the Equipment to become
an accession to any personal Property other than Equipment subject to first
priority Liens in favor of Agent, for its benefit and the ratable benefit of
Lenders, or subject to Permitted Liens.
7.2 EVIDENCE OF OWNERSHIP OF EQUIPMENT. Promptly on request therefor by
Agent, Borrowers shall deliver to Agent any and all evidence of ownership, if
any, of any of the Equipment which constitutes Collateral (including, without
limitation, certificates of title and applications for title).
7.3 RECORDS AND SCHEDULES OF EQUIPMENT. Borrowers shall maintain
accurate records itemizing and describing the kind, type, quantity and value of
its Equipment and all dispositions thereof and, if requested by Agent or
Required Lenders, shall furnish Agent with a current schedule containing the
foregoing information on at least an annual basis and more often if reasonably
requested by Agent or Required Lenders.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1 GENERAL REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders
to enter into this Agreement and to make advances hereunder, Borrowers warrant
and represent to Agent and Lenders that:
(A) ORGANIZATION AND QUALIFICATION. Each Borrower is a corporation
duly organized, validly existing and in good standing under the laws of its
respective state of incorporation. Each Borrower has duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
each state or jurisdiction listed on EXHIBIT E attached hereto and made a part
hereof and in all other states and jurisdictions where the character of its
Properties or the nature of its activities make such qualification necessary,
and in which the failure of either Borrower to be so qualified would have a
material adverse effect on the financial condition, business or Properties of
such Borrower.
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(B) CORPORATE NAMES. During the preceding five (5) years, neither
Borrower has been known as or used any corporate, fictitious or trade names
except as disclosed on EXHIBIT F attached hereto and made a part hereof. Except
as set forth on EXHIBIT F, neither Borrower has, during the preceding five (5)
years, been the surviving corporation of a merger or consolidation or acquired
all or substantially all of the assets of any Person.
(C) CORPORATE POWER AND AUTHORITY. Each Borrower has the legal
right and power and is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents to which
it is a party. The execution, delivery, and performance of this Agreement and
each of the other Loan Documents have been duly authorized by all necessary
corporate action (i) has been approved by the shareholders of each Borrower;
(ii) do not and will not contravene either Borrower's certificate or articles of
incorporation or by-laws; (iii) do not and will not violate or cause either
Borrower to be in default under, any provision or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award in effect
having applicability to either Borrower; (iv) do not and will not result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which either Borrower
is a party or by which it or its Properties may be bound or affected; or (v) do
not and will not result in, or require, the creation or imposition of a Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by either Borrower.
(D) LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of each Borrower (to the extent each is a party
thereto) enforceable against it in accordance with their respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally or by principles of equity pertaining to the availability of equitable
remedies.
(E) USE OF PROCEEDS. Borrowers' uses of the proceeds of any Loans
made pursuant to this Agreement are, and will continue to be, legal and proper
corporate uses, duly authorized by their respective Board of Directors where
necessary, and such uses will not violate any applicable laws, including,
without limitation, the Foreign Assets Control Regulations, the Foreign Funds
Control Regulations and the Transaction Control Regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended).
(F) MARGIN STOCK. Neither Borrower is engaged principally, or as
one of its important activities, in the business of purchasing or carrying
"margin stock" (within the meaning of Regulation G, T or U of the Board of
Governors of the Federal Reserve System), and no part of any Loans to either
Borrower will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any
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margin stock or be used for any purpose which violates or is inconsistent with
the provisions of Regulation G, T, U or X of said Board of Governors.
(G) GOVERNMENTAL CONSENTS. Each Borrower has, and is in good
standing with respect to, all governmental consents, approvals, authorizations,
permits, certificates, inspections, and franchises necessary to continue to
conduct its business as heretofore or proposed to be conducted by it and to own
or lease and operate its Properties as now owned or leased by it except where
the failure to obtain such approval or consent or make such filing would not
have any material adverse effect on such Borrower and would not have any adverse
effect on the enforceability of any of the Loan Documents.
(H) PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each Borrower
owns or possesses all the patents, trademarks, service marks, trade names,
copyrights, licenses, and rights with respect to the foregoing necessary for the
present and planned future conduct of its business without any known conflict
with the rights of others. All such patents, trademarks, service marks,
tradenames, copyrights, licenses and other similar rights are listed on EXHIBIT
G attached hereto and made a part hereof.
(I) CAPITAL STRUCTURE. EXHIBIT H attached hereto and made a part
hereof states (a) the correct name of each of the Subsidiaries of each Borrower
and RFI, the jurisdiction of incorporation and the percentage of its Voting
Stock owned by each Borrower and RFI, (b) the name of each Borrower's and RFI's
corporate or joint venture Affiliates and the nature of the affiliation, (c) the
number and nature of all outstanding Securities of each Borrower and the number,
nature and holder of all outstanding Securities of each Subsidiary of each
Borrower and RFI and (d) the number of authorized, issued and treasury shares of
each Borrower and each Subsidiary of Borrower and RFI. Each Borrower has good
and marketable title to all of the shares it purports to own of the stock of
each of its Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. RFI has good and marketable title to all of the shares of the
capital stock of RMI and RMI has good and marketable title to all of the shares
of capital stock of RISI, in each case, free and clear in each case of any Lien
other than Permitted Liens. Except as set forth on EXHIBIT H, as of the date
hereof, there are not outstanding any options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell, or
any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of either Borrower. Except as set forth
on EXHIBIT H, as of the date hereof, there are not outstanding any agreements or
instruments binding upon any of either Borrower's shareholders relating to the
ownership of its shares of capital stock.
(J) SOLVENT FINANCIAL CONDITION. Each Borrower is now and, after
giving effect to initial Loans to be made hereunder, at all times will be,
Solvent.
(K) RESTRICTIONS. Neither Borrower is a party or subject to any
contract, agreement, or charter or other corporate restriction, which materially
and adversely affects its business or the use or ownership of any of its
Properties. Neither Borrower is a party
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or subject to any contract or agreement which restricts its right or ability to
incur Indebtedness, other than as set forth on EXHIBIT I attached hereto, none
of which prohibits the execution of or compliance with this Agreement by either
Borrowers. Neither Borrowers nor any of their respective Subsidiaries has agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its Property, whether now owned or hereafter
acquired, to be subject to a Lien that is not a Permitted Lien.
(L) LITIGATION. Except as set forth on EXHIBIT J attached hereto
and made a part hereof or in respect to matters which could not be reasonably
expected to have a material adverse effect on either Borrower, there are no
actions, suits, proceedings or investigations pending, or to the knowledge of
either Borrower, threatened, against or affecting either Borrower or any of
their respective Subsidiaries, or the business, operations, Properties, profits
or condition of either Borrower or any of their respective Subsidiaries, in any
court or before any governmental authority or arbitration board or tribunal.
Except as otherwise specifically disclosed on EXHIBIT J, as of the date hereof
no action, suit, proceeding or investigation shown on EXHIBIT J involves the
possibility of materially and adversely affecting the Properties, business,
prospects, profits or condition (financial or otherwise) of either Borrower or
the ability of either Borrower to perform this Agreement. Neither Borrowers nor
any of their respective Subsidiaries is in default with respect to any order,
writ, injunction, judgment, decree or rule of any court, governmental authority
or arbitration board or tribunal.
(M) TITLE TO PROPERTIES. Each Borrower and each of its
Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its real
Property, and good title to all of its other Property, including all of the
Collateral, in each case, free and clear of all Liens except Permitted Liens.
(N) FINANCIAL STATEMENTS; FISCAL YEAR. The unConsolidated,
Consolidating, Consolidated balance sheets of RFI, Borrowers and their
respective Subsidiaries as of October 29, 1994 and January 28, 1995, and the
related statements of income, changes in stockholder's equity, and changes in
financial position for the periods ended on such dates, have been prepared in
accordance with GAAP (except for changes in application in which Borrowers'
independent certified public accountants concur), and present fairly the
financial position of RFI, Borrowers and their respective Subsidiaries at such
date and the results of RFI's and Borrowers' operations for such periods. Except
as disclosed to Agent, since October 29, 1994, there has been no material change
in the condition, financial or otherwise, of RFI, Borrowers and their respective
Subsidiaries as shown on the Consolidated balance sheet as of such date and no
change in the aggregate book value of Equipment and real Property owned by
Borrowers and their respective Subsidiaries, except for changes to reflect
normal depreciation and changes in the ordinary course of business, which in the
aggregate have not been materially adverse. The fiscal year of RFI, each
Borrower and each of their respective Subsidiaries ends on the final Saturday of
each October of each calendar year.
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(0) FULL DISCLOSURE. The financial statements referred to in
Section 8.1(N) above, do not, nor does this Agreement or any other written
statement of RFI or either Borrower to Agent or any Lender (including,
without limitation, RFI's filings with the Securities and Exchange Commission
(the "SEC")), when taken together as a whole, contain any untrue statement of
a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which either
Borrower has failed to disclose to Agent or any Lender in writing which
materially affects adversely or, so far as either Borrower knows, will
materially affect adversely the Properties, business, profits, or condition
(financial or otherwise) of either Borrower or could reasonably be expected
to adversely affect, in any material respect, each Borrower's respective
Properties, business, profits or condition or the ability of Borrowers to
perform this Agreement.
(P) PENSION PLANS. Except as disclosed on EXHIBIT K attached
hereto and made a part hereof, neither Borrowers nor any of their respective
Subsidiaries has any Plan. Except as set forth on EXHIBIT K, neither
Borrowers nor any of their respective Subsidiaries has received any notice
from the Department of Labor to the effect that it is not in compliance, in
all material respects, with any of the requirements of ERISA and the
regulations promulgated thereunder. No fact or situation that could lead to a
material adverse change in the financial condition of Borrowers, including,
but not limited to, any Reportable Event, or Prohibited Transaction, which is
not exempt under ERISA, exists in connection with any Plan. Except as set
forth on EXHIBIT K, neither Borrowers nor any of their respective
Subsidiaries has any withdrawal liability in connection with a Multiemployer
Plan.
(Q) TAXES. The federal tax identification number of RMI is
363018744 and of RISI is 363481768. Each Borrower and each of their
Subsidiaries have filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all taxes, assessments, fees and other governmental, charges that
are due and payable, except where the failure to so file, pay or make
provision would not have a material adverse effect on a Borrower or its
respective business or operations or where any such taxes, assessments or
charges are being contested in good faith and by appropriate proceedings and
where such Borrower maintains reasonable reserves on its books therefor. The
provision for taxes on the books of each Borrower and its Subsidiaries are
adequate for all years not closed by applicable statutes, and for its current
fiscal year.
(R) LABOR RELATIONS. Except as described on EXHIBIT L attached
hereto and made a part hereof, neither Borrowers nor any of their respective
Subsidiaries is a party to any collective bargaining agreement, and there are
no material grievances, disputes or controversies with any union or any other
organization of either Borrower's employees, or threats of strikes, work
stoppages or any asserted pending demands for collective bargaining by any
union or organization.
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(S) COMPLIANCE WITH LAWS. Except as disclosed on EXHIBIT M, (i)
each Borrower has duly complied with, and its Properties, business operations
and leaseholds are in compliance with, the provisions of all federal, state and
local laws, rules and regulations applicable to such Borrower, its Properties or
the conduct of its business, including, without limitation, OSHA and all
Environmental Laws, except where the failure to so comply would not have a
material adverse effect on such Borrower or its business or operations and (ii)
there have been no citations, notices or orders of noncompliance issued to
either Borrower or any of its Subsidiaries under any such law, rule or
regulation.
(T) SURETY OBLIGATIONS. Except as disclosed on EXHIBIT N, neither
Borrower is obligated as surety or indemnitor under any surety or similar bond
or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
(U) NO DEFAULTS. No event has occurred and is continuing and no
condition exists which would, upon the execution and delivery of this Agreement
or Borrowers' performance hereunder, constitute a Default or an Event of
Default. Neither Borrowers nor any of their respective Subsidiaries is in
default, and no event has occurred and is continuing and no condition exists
which constitutes, or which with the passage of time or the giving of notice or
both would constitute, a default in the payment of any Indebtedness to any
Person for Borrowed Money.
(V) BROKERS. Except as otherwise disclosed in writing to Agent
prior to the Closing, there are no claims for brokerage commissions, finder's
fees or investment banking fees in connection with the transactions contemplated
by this Agreement.
(W) BUSINESS LOCATIONS. During the preceding five (5) year period,
Borrowers have had no office or place of business located in any state or county
other than as shown on EXHIBIT C.
(X) TRADE RELATIONS. Except as disclosed in EXHIBIT N-1, there
exists no actual or threatened termination, cancellation or limitation of, or
any modification or change in, the business relationship between either Borrower
and any customer or any group of customers whose purchases individually or in
the aggregate are material to the business of either Borrower, or with any
material supplier, and there exists no present condition or state of facts or
circumstances which would materially affect adversely either Borrower or prevent
either Borrower from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
(Y) LEASES. EXHIBIT O attached hereto is a complete listing of all
capitalized leases of each Borrower as of the date hereof and EXHIBIT P attached
hereto is a complete listing of all operating leases involving annual Rentals of
Two Hundred Fifty Thousand Dollars ($250,000.00) or more of either Borrower as
of the date hereof.
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(Z) INVESTMENT COMPANY ACT. Neither Borrower is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
8.2 REAFFIRMATION. Each request for a Loan made by Borrowers pursuant to
this Agreement or any of the other Loan Documents shall constitute (i) an
automatic representation and warranty by Borrowers to Agent and Lenders that
there does not then exist any Default or Event of Default; (ii) a reaffirmation
as of the date of said request that the representations and warranties of
Borrowers as to the completeness and accuracy of any Exhibit were true and
correct as of the date thereof in all material respects except for changes in
Borrowers' business or operations that would render the information in any
Exhibit attached hereto either inaccurate or incomplete, in any material
respect, so long as Required Lenders has consented to such changes or such
changes are not prohibited by this Agreement; (iii) a reaffirmation as of the
date of such request that any representation and warranty relating to a
specific time was true in all material respects as of such time; and (iv) a
reaffirmation as of the date of said request that all of the other
representations and warranties of Borrowers contained in this Agreement and the
other Loan Documents are true in all material respects except for changes in
Borrowers' business or operations that would render the information in any
Exhibit attached hereto either inaccurate or incomplete, in any material
respect, so long as Required Lenders has consented to such changes or such
changes are not prohibited by this Agreement.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrowers covenant,
warrant and represent to Agent and Lenders that all representations and
warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall be true at the time of Borrowers' execution of this Agreement
and the other Loan Documents, and shall survive the execution, delivery and
acceptance thereof by Agent and Lenders and the parties thereto and the closing
of the transactions described therein or related thereto.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1 AFFIRMATIVE COVENANTS. During the Term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or any Lender,
Borrowers covenant that, unless otherwise consented to by Required Lenders in
writing, they shall:
(A) TAXES AND LIENS. Pay and discharge, and cause each Subsidiary
to pay and discharge, all taxes, assessments and governmental charges upon
either of them, their income and Properties as and when such taxes, assessments
and charges are due and payable, unless and to the extent only that such taxes,
assessments and charges are being contested in good faith and by appropriate
proceedings and Borrowers maintain reasonable reserves on their books therefor.
Borrowers shall also pay and discharge any lawful claims which, if unpaid, might
become a Lien against any of Borrowers' Properties except for Permitted Liens
and any Lien which would, as a matter of law, exist notwithstanding such contest
and late payment.
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(B) TAX RETURNS. File, and cause each of their Subsidiaries to
file, all federal, state and local tax returns and other reports Borrowers or
such Subsidiaries are required by law to file, except where the failure to so
file would not have a material adverse effect on Borrowers or their respective
business or operations and maintain adequate reserves for the payment of all
taxes, assessments, governmental charges, and levies imposed upon either of
them, their income, or their profits, or upon any Property belonging to either
of them.
(C) PAYMENT OF BANK CHARGES. Pay to Agent, on demand, any and all
reasonable and customary fees, costs or expenses which Agent or any Lender pays
to a bank or other similar institution (including, without limitation, any fees
paid by the Agent to any Lender) arising out of or in connection with (i) the
forwarding to either Borrower or any other Person on behalf of either Borrower;
by Agent or any Lender, proceeds of loans made by Lenders to Borrowers pursuant
to this Agreement and (ii) the depositing for collection, by Agent or any
Lender, of any check or item of payment received or delivered to Agent or any
Lender on account of the Obligations.
(D) BUSINESS AND EXISTENCE. Preserve and maintain, and cause each
Subsidiary to preserve and maintain, its separate corporate existence and all
rights, privileges, and franchises in connection therewith except where not
necessary to the conduct of its business, and maintain, and cause each
Subsidiary to maintain, its qualification and good standing in all states in
which such qualification is necessary in order for, Borrowers or their
respective Subsidiaries to conduct their respective businesses in such states.
(E) MAINTAIN PROPERTIES. Maintain, and cause each Subsidiary to
maintain, their or its Properties (ordinary wear and tear excepted) in
reasonably good condition and make, and cause each Subsidiary to make, all
necessary renewals, repairs, replacements, additions and improvements thereto
consistent with past practices.
(F) COMPLIANCE WITH LAWS. Comply, and cause each of their
Subsidiaries to comply, in all material respects with all laws, ordinances,
governmental rules and regulations to which they or it are or is subject, and
obtain and keep in force any and all licenses, permits, franchises, or other
governmental authorizations necessary to the ownership of their or its
Properties or to the conduct of their or its business, except where the failure
to comply or obtain would not materially and adversely affect the respective
businesses, prospects, profits, Properties, or conditions (financial or
otherwise) of Borrowers.
(G) ERISA COMPLIANCE. (i) At all times make prompt payment of
contributions as and when required to meet the minimum funding standards set
forth in ERISA with respect to each Plan; (ii) if requested by Agent, promptly
after the filing thereof, furnish to Agent copies of any annual report (Form
5500) required to be filed pursuant to ERISA in connection with each Plan and
any other employee benefit plan of it and its Affiliates subject to ERISA; (iii)
notify Agent as soon as practicable of any Reportable Event and of any
additional act or condition arising in connection with any Plan
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which Borrowers believe would constitute grounds for the termination thereof by
the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States district court of a trustee to administer the Plan;
and (iv) furnish to Agent, as promptly as practical after Agent's request
therefor, such additional information concerning any Plan or any other such
employee benefit plan as may be reasonably requested.
(H) BUSINESS RECORDS. Keep, and cause each of their Subsidiaries
to keep, adequate records and books of account with respect to their or its
business activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions.
(I) VISITS AND INSPECTIONS. Permit representatives of Agent or any
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of Borrowers
and RFI, inspect and make extracts from their books and records, and discuss
with their officers, their employees and their independent accountants,
Borrowers' businesses, assets, liabilities, financial condition, business
prospects and results of operations.
(J) FINANCIAL STATEMENTS. Cause to be prepared and furnished to
Agent and each Lender the following (all to be kept and prepared in accordance
with GAAP applied on a consistent basis, unless RFI's certified public
accountants concur with any change therein and such change is disclosed to Agent
and Lenders and is consistent with GAAP):
(i) as soon as possible, but not later than ninety (90) days
after the close of each fiscal year of RFI, unqualified audited (in respect to
consolidated statements only) financial statements of RFI, Borrowers and each of
their Subsidiaries as of the end of such year, on an unConsolidated,
Consolidating and Consolidated basis, certified by a firm of independent
certified public accountants of recognized standing selected by RFI but
acceptable to Agent (except for a qualification for a change in accounting
principles with which the accountant concurs);
(ii) as soon as possible, but not later than thirty (30) days
after the end of each fiscal month hereafter which is not the end of any fiscal
quarter, unaudited interim unConsolidated, Consolidating and Consolidated
financial statements of RFI, Borrowers and each of their respective Subsidiaries
as of the end of such month and of the portion of RFI's fiscal year then
elapsed, certified by the principal financial officer of RFI and each Borrower
as prepared in accordance with GAAP and fairly presenting the unConsolidated,
Consolidating and Consolidated financial position and results of operations of
RFI, Borrowers and each of their respective Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments and except
that such statements need not contain notes; provided, however, that the parties
have until forty-five (45) days following the end of the first fiscal month of a
new fiscal year to comply with the terms hereof;
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(iii) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports which
RFI has made available to its shareholders and copies of any regular, periodic
and special reports or registration statements which RFI files with the SEC or
any governmental authority which may be substituted therefor, or any national
securities exchange; and
(iv) such other data and information (financial and otherwise)
as Agent or Required Lenders, from time to time, may reasonably request, bearing
upon or related to the Collateral, RFI's or Borrowers' financial condition or
results of operations, including, without limitation, federal income tax returns
of RFI or either Borrower, accounts payable schedules, and bank statements.
Concurrently with the delivery of the financial statements described in
clause (i) of this section 9.1(J), Borrowers shall forward to Agent a copy of
the accountants' letter to RFI's or Borrowers' management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall furnish to Agent a certificate of the aforesaid certified public
accountants certifying to Agent and Lenders that, based upon their examination
of the financial statements of RFI, Borrowers and their respective Subsidiaries
performed in connection with their examination of said financial statements,
they are not aware of any Default or Event of Default, or, if they are aware of
such Default or Event of Default, specifying the nature thereof. Concurrently
with the delivery of the financial statements described in clauses (i) and (ii)
of this Section 9.1(J), Borrowers shall cause to be prepared and furnished to
Agent a Compliance Certificate in the form of EXHIBIT Q attached hereto, with
appropriate insertions, from the Chief Financial Officer of RFI and each
Borrower certifying to Agent and Lenders that to the best of his knowledge, such
Borrower has kept, observed, performed and fulfilled each and every covenant,
obligation and agreement binding upon Borrowers in this Agreement and the other
Loan Documents and that no Default or Event of Default has occurred and is
continuing, or, if such Default or Event of Default has occurred and is
continuing, specifying the nature thereof. Borrowers authorize Agent or its
designated representatives to communicate directly with its independent
certified public accountants and authorizes those accountants to disclose to
Agent any and all financial statements and other supporting financial documents
and schedules. At or before the initial Closing Date, Borrowers shall deliver a
letter addressed to such accountants instructing them to comply with the
provisions of this Section 9.1(J). Further within five (5) days after the
earlier of the last day of each fiscal year of RFI and Borrowers or the date RFI
and Borrowers engaged independent certified public accountants to audit RFI'S
and Borrowers' financial statements, Borrowers shall deliver to such independent
certified public accountants a letter from Borrowers addressed to such
independent certified public accountants indicating that it is a primary
intention of Borrowers in engaging such accountants that Agent and Lenders rely
upon such financial statements of RFI, Borrowers and its Subsidiaries. Agent
shall promptly forward to Lenders all financial statements, certificates,
reports, and other information received by it from RFI or Borrower or any other
Person pursuant to this Section 9.1(J).
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(K) NOTICES TO AGENT AND LENDERS. Notify Agent and Lenders in
writing: (i) promptly after either Borrower's learning thereof, of the
commencement of any litigation affecting either Borrower or any of its
Properties, whether or not the claim being litigated is considered by either
Borrower to be covered by insurance, and of the institution of any
administrative proceeding, if such litigation or proceeding would, in Borrowers'
reasonable opinion, materially and adversely affect either Borrower's
operations, financial condition, Properties or business or Agent's Lien upon any
of the Collateral; (ii) at least thirty (30) days prior thereto, of either
Borrower's opening of any new office or place of business or either Borrower's
closing of any existing office or place of business; (iii) promptly after either
Borrower's learning thereof, of any labor dispute to which either Borrower may
become a party which would, in Borrowers' reasonable opinion, have a materially
adverse effect on either Borrower, any strikes or walkouts relating to any of
its plants or other facilities, and the expiration of any labor contract to
which it is a party or by which it is bound; (iv) promptly after either
Borrower's learning thereof, of any material default by either Borrower under
any note, indenture, loan agreement, mortgage, lease, deed, guaranty or other
similar agreement relating to any Indebtedness of either Borrower exceeding
Fifty Thousand Dollars ($50,000.00); (v) promptly after the occurrence thereof,
any Default or Event of Default; (vi) promptly after the occurrence thereof, of
any default by any obligor under any note or other evidence of Indebtedness in
excess of Fifty Thousand Dollars ($50,000.00) payable to either Borrower, and
(vii) promptly after the rendition thereof, of any judgment in excess of Fifty
Thousand Dollars ($50,000.00) rendered against either Borrower or any of their
Subsidiaries.
(L) LANDLORD AND STORAGE AGREEMENTS. Provide Agent with copies of
all material agreements between either Borrower and any landlord or warehouseman
which owns any premises at which any Inventory may, from time to time, be kept.
(M) FURTHER ASSURANCES. At Agent's request, promptly execute or
cause to be executed and deliver to Agent any and all documents, instruments and
agreements reasonably deemed necessary by Agent or Required Lenders to give
effect to or carry out the terms or intent of this Agreement or any of the other
Loan Documents. Without limiting the generality of the foregoing, if any of the
Accounts, the face value of which exceeds One Thousand Dollars ($1,000) arises
out of a contract with the United States of America, or any department, agency,
subdivision or instrumentality thereof, Borrowers shall notify Agent thereof in
writing after the end of each month and shall execute any instruments and take
any other action required or requested by Agent to comply with the provisions of
the Federal Assignment of Claims Act.
(N) BOOK ENTRY SYSTEM. Borrowers shall maintain, if requested by
Agent, a book entry system with respect to the Notes, and any transfers thereof,
in accordance with the requirements set forth in temporary Treasury Regulation
Section 5f.103-1(c).
(0) PROJECTIONS. As soon as available, and in any event no later
than thirty (30) days after the end of each fiscal year of RFI and Borrowers,
deliver to Agent monthly
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Projections of RFI, Borrowers and each of their respective Subsidiaries on an
unConsolidated and Consolidated basis for the forthcoming year.
(P) ENVIRONMENTAL MATTERS. (i) Borrowers shall and shall cause
each of their respective Subsidiaries to (a) comply strictly and in all material
respects with all applicable Environmental Laws, (b) take as promptly as legally
required any remediation and/or corrective action necessary to cure any
violation of Environmental Laws of which either Borrower has knowledge, (c)
notify the proper governmental agency as promptly as legally required in the
event of any Release of any Hazardous Substance reportable under 42 USC Section
9603, 42 USC Section 11044, 33 USC Section 1321(b)(5) or any counterpart or
similar state or local requirement, (d) promptly forward to Agent, upon its
request, a copy of any order, notice, permit, application, or any other
communication or report in correction with any such Release of any Hazardous
Substance or any other matter relating to the Environmental Laws as they may
affect its premises, and (e) as promptly as legally required forward to Agent a
copy of any order, notice, permit, application or other communication or report
in connection with any material Release of any Hazardous Substance or any other
material matter relating to the Environmental Laws as they may affect its
premises.
(ii) Borrowers shall indemnify Lenders and Agent and hold
Lenders and Agent harmless from and against any loss, liability, damage or
expense, including reasonable attorneys' fees, suffered or incurred by Lender
and Agent, whether as mortgagee pursuant to any Mortgage, as mortgagee in
possession, or as successor in interest to either Borrower or any of their
respective Subsidiaries as owner or lessee of any premises by virtue of
foreclosure or acceptance of deed in lieu of foreclosure (a) under or on
account of the Environmental Laws, including the assertion of any Lien
thereunder; (b) with respect to any Release of any Hazardous Substance
reportable under 42 USC Section 9603, 42 USC Section 11044, 33 USC Section
1321(b)(5) or any counterpart or similar state or local requirement,
affecting such premises or the premises of any other place, including any
loss of value of such premises as a result of a Release of any Hazardous
Substance; and (c) with respect to any other environmental matter within the
jurisdiction of any federal, state, or municipal official administering the
Environmental Laws; PROVIDED, HOWEVER, that Borrowers will not be liable for
such indemnification to Lenders and/or Agent to the extent that any such
loss, liability, damage or expense results from the gross negligence or
willful misconduct of the Person who would otherwise be entitled to be
indemnified pursuant to this Section 9.1(P)(ii). The procedures to be
followed as to any indemnity pursuant to this Section shall be as set forth
in Sections 13.2 and 13.4 hereof.
(iii) Borrowers shall provide Agent with such evidence, reports
and/or other documentation as reasonably requested by Agent or Required Lenders
to insure that Borrower is in compliance with the terms of this Section 9.1(P).
9.2 NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or any Lender,
Borrowers covenant that, unless Required Lenders have first consented thereto in
writing, they will not:
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(A) MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or consolidate,
or permit any Subsidiary to merge or consolidate, with any Person, except a
consolidation or merger involving only (i) a Borrower and one or more wholly
owned Subsidiaries or (ii) two or more wholly owned Subsidiaries; nor acquire
all or any substantial part of the Properties or capital stock of any Person. In
addition to the foregoing, Borrowers covenant that RFI shall not merge with any
Person, and shall not acquire all or any substantial part of the Properties or
capital stock of any Person.
(B) LOANS. Make, or permit any Subsidiary of either Borrower to
make, any loans or other advances of money other than Permitted Investments and
other than for salary, travel advances, advances against commissions, loans to
employees for the exercise of stock options pursuant hereto or for the purchase
of personal computers and other similar advances in the ordinary course of
business, employee relocation loans provided that the aggregate amount of all
employee relocation loans shall not exceed at any time Twenty-Five Thousand
Dollars ($25,000.00) in the aggregate, including, without limitation, any of
either Borrower's Affiliates, officers or employees, and advances to
unaffiliated suppliers for raw materials and equipment purchases.
(C) TOTAL INDEBTEDNESS. Create, incur, assume, or suffer to exist,
or permit any Subsidiary of either Borrower to create, incur or suffer to exist,
any Indebtedness, except: (i) Obligations owing to Agent and Lenders; (ii)
Indebtedness of any Subsidiary of either to such Borrower, or (iii) accounts
payable to trade creditors which are not more than sixty (60) days past due and
current operating expenses (other than for Borrowed Money) which are not more
than sixty (60) days past due, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are actively being
contested in good faith and, if appropriate, and lawful proceedings and the
contesting Borrowers shall have set aside such reserves, if any, with respect
thereto as are required by GAAP and deemed adequate by such Borrower and, in
respect to reserves contained on year-end statements, its independent
accountants; (iv) obligations to pay Rentals permitted by Section 9.2(X); (v)
Permitted Purchase Money Indebtedness; (vi) contingent liabilities arising out
of endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business; (vii) Indebtedness to Agent, any
Lender or any Affiliate of either under any interest rate hedging, swap, cap or
similar agreement between such Borrower and such Person; (viii) obligations
under Capitalized Leases to the extent not prohibited by any other section of
this Section 9.2; (ix) Indebtedness for deferred taxes; and (x) Indebtedness not
included in paragraphs (i) through (ix) above which does not exceed at any time,
in the aggregate, the sum of One Hundred Thousand Dollars ($100,000.00). RFI and
Borrowers further covenant that RFI shall not create, incur, assume or suffer to
exist any Indebtedness except Indebtedness that a Borrower would be permitted to
incur pursuant to the terms hereof.
(D) AFFILIATE TRANSACTIONS. Except as provided below, enter into,
or be a party to, or permit any Subsidiary of either Borrower to enter into or
be a party to, any transaction with any Affiliate, except in the ordinary course
of and pursuant to the
48
<PAGE>
reasonable requirements of either Borrower's or such Subsidiary's business and
upon fair and reasonable terms which are fully disclosed to Agent and are no
less favorable to a Borrower than would be obtainable in a comparable arm's
length transaction with a Person not an Affiliate of such Borrower or such
Subsidiary. Without limiting the foregoing, neither Borrower shall pay any
management fee or similar compensation to RFI in excess of 105% of the amount
accrued during fiscal 1994, or any Affiliate of Borrowers or RFI unless Required
Lenders have consented to the payment of any such fee or compensation.
(E) PARTNERSHIP OR JOINT VENTURES. Become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture.
(F) ADVERSE TRANSACTIONS. Enter into any transaction, or permit
any Subsidiary of either Borrower to enter into any transaction, which
materially and adversely affects or could reasonably be expected to materially
and adversely affect the Collateral or Borrowers' ability to repay the
Obligations.
(G) GUARANTIES. Guarantee, assume, endorse or otherwise, in any
way, become directly or contingently liable, or permit any Subsidiary of either
Borrower to guarantee, assume, endorse, or otherwise, in any way become directly
or contingently liable, with respect to the Indebtedness of any Person except by
endorsement of instruments or items of payment for deposit or collection. RFI
and Borrowers further covenant that RFI shall not guarantee, assume, endorse or
otherwise, in any way, become directly or contingently liable with respect to
the Indebtedness of any Person unless consented to by the Agent and except by
endorsement or instruments of payment for deposit or collection.
(H) LIMITATION ON LIENS. Create or suffer to exist, or permit any
Subsidiary of either Borrower to create or suffer to exist, any Lien upon any of
their respective Properties, incomes or profits, whether now owned or hereafter
acquired, except: (i) Liens at any time granted in favor of Agent, for its
benefit and the ratable benefit of Lenders; (ii) Liens for taxes (excluding any
Lien imposed pursuant to any of the provisions of ERISA) not yet due or which
are being contested as permitted by Section 9.1(A) hereof other than any Lien
which would, as a matter of law, exist notwithstanding such contest and late
payment, but only if in Agent's reasonable judgment such Lien does not affect
materially and adversely Agent's or Lenders' rights or the priority of Agent's
Lien in Collateral; (iii) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons for labor,
materials, supplies or rentals incurred in the ordinary course of Borrowers'
business, but only if the prompt payment thereof is not at the time required;
(iv) deposits made in the ordinary course of business in connection with
workmen's compensation, unemployment insurance, social security and other like
laws; (v) attachment, judgment and other similar non-tax Liens arising in
connection with court proceedings, but only if and for so long as the execution
or other enforcement of such Liens is and continues to be effectively stayed and
bonded on appeal, the validity and amount of
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<PAGE>
the claims secured thereby are being actively contested in good faith and by
appropriate lawful proceedings and such Liens do not, in the aggregate,
materially detract from the value of the Properties of Borrowers or materially
impair the use thereof in the operation of Borrowers' businesses; (vi) Purchase
Money Liens securing Permitted Purchase Money Indebtedness which is not
incurred in violation of Section 9.2(C) of this Agreement; (vii) reservations,
exceptions, easements, rights of way, and other similar encumbrances affecting
real Property, provided that, in Agent's reasonable judgment, they do not in the
aggregate materially detract from the value of said Properties or materially
interfere with their use in the ordinary conduct of Borrowers' businesses and,
if said real Property constitutes Collateral, such Liens existed as of the
Closing Date or Agent has consented thereto, which consent shall not be
unreasonably withheld, delayed or conditioned; (viii) Liens securing
Indebtedness of a Subsidiary to a Borrower or another Subsidiary; (ix) such
other Liens as appear on EXHIBIT R attached hereto; or (x) such other Liens as
Required Lenders may hereafter approve in writing. RFI and Borrowers further
covenant that RFI shall not create or suffer to exist any Lien, upon any of its
Properties, incomes or profits, whether now or hereafter acquired, except Liens
that a Borrower would be permitted to create or suffer to exist pursuant to the
terms hereof.
(I) SUBORDINATED DEBT. Make, or permit any Subsidiary of either
Borrower to make, any payment of any part or all of any Subordinated Debt, or
otherwise repurchase, redeem or retire any instrument evidencing any such
Subordinated Debt; or enter into any agreement (oral or written) amending,
modifying, altering or terminating any one or more of the instruments or
agreements evidencing or relating to any such Subordinated Debt which materially
and adversely affects the interests of Lenders and Agent or of either Borrower.
(J) DISTRIBUTIONS; INTERCOMPANY ADVANCES; CAPITAL. Neither
Borrower, nor any of its Subsidiaries shall directly or indirectly declare or
make, or incur any liability to make, any Distributions or intercompany advances
except that: (i) each Borrower may make Distributions or intercompany advances
to RFI to enable RFI to make semi-annual cash interest payments or mandatory
non-accelerated principal payments on the Senior Notes; provided that, in each
such case, (a) no Event or Default set forth in Section 11.1(A) or (B) is
outstanding or would result from such Distribution or intercompany advance and
neither Borrower shall be in violation of CLAUSES (ii) OR (iii) of this Section
9.2(J), and (b) prior to such Distribution or intercompany advance, there exists
Available Cash, and such Distribution or intercompany advance is not in excess
of Available Cash; (ii) Borrowers may make intercompany advances to RFI to cover
ordinary course operating expenses in an aggregate amount not to exceed Two
Million Seven Hundred Thousand Dollars ($2,700,000) in any Fiscal Year, in
addition to the Distributions and intercompany advances permitted by CLAUSE (i);
and (iii) each Borrower may make intercompany advances to the other Borrower in
an amount not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) in any
Fiscal Year.
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<PAGE>
(K) SUBSIDIARIES. Hereafter create any Subsidiary or divest
themselves of any material assets by transferring them to any Subsidiary of
either Borrower.
(L) Make Capital Expenditures (including, without limitation, by
way of capitalized leases) which in the aggregate, as to Borrowers and their
Subsidiaries, exceed during any fiscal year of Borrower the amount set forth
opposite such fiscal year in the following schedule:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
------------------------------ ----------
<S> <C>
Fiscal Year Ending
October 28, 1995 $1,000,000
Fiscal Year Ending
October 26, 1996 $1,000,000
</TABLE>
In addition to the foregoing, Borrowers may, during the Original Term of
this Agreement, make additional Capital Expenditures (including, without
limitation, by way of capitalized leases) which in the aggregate, as to a
Borrower and their Subsidiaries, do not exceed Five Hundred Thousand Dollars
($500,000) to support the costs of locating and designing a new operating
facility.
(M) BUSINESS LOCATIONS. Transfer the principal place of business
or chief executive office of either Borrower, or open new manufacturing plants,
or transfer existing manufacturing plants, or maintain warehouses or records
with respect to Accounts or Inventory, to or at any locations other than those
at which the same are presently kept or maintained, as set forth on EXHIBIT C
hereto, except upon at least thirty (30) days prior written notice to Agent and
after the delivery to Agent of financing statements, if required by Agent, in
form satisfactory to Agent to perfect or continue the perfection of Agent's
Lien, for its benefit and the ratable benefit of Lenders, and security interest
hereunder.
(N) CHANGE OF BUSINESS. Enter into any new business unrelated to
the processing, distribution, marketing or sale of meats, seafood or poultry
products or make any material change in any of either Borrower's business
objectives, purposes and operations.
(0) DISPOSITION OF ASSETS. Sell, lease or otherwise dispose of any
of their Properties, or permit any Subsidiary to sell, lease or otherwise
dispose of any of their Properties within any one fiscal year with an aggregate
book value of Fifty Thousand Dollars ($50,000.00) or more, including in either
case any disposition of Property as part of a sale and leaseback transaction, to
or in favor of any Person, except (i) sales of Inventory in the ordinary course
of Borrowers' businesses or sales of slow-moving, obsolete or other Inventory
which is not Eligible Inventory, in either case for so long as no Event of
Default exists hereunder, (ii) a transfer of Property to a Borrower by a
Subsidiary, (iii) dispositions expressly authorized by this Agreement, or (iv)
sales or dispositions of Equipment and/or
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<PAGE>
real Property which would not alone or in conjunction with other sales or
dispositions materially and adversely affect Borrowers' business operations or
abilities to repay the Obligations, or (v) the Plant City, Florida facility.
(P) NAME OF EITHER BORROWER. Except upon twenty (20) days prior
written notice to Agent, use any corporate name (other than their own) or any
fictitious name, tradestyle or "d/b/a" except for the names disclosed on EXHIBIT
F attached hereto.
(Q) BILL-AND-HOLD SALES, ETC. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
(R) USE OF AGENT'S OR ANY LENDER'S NAME. Without the prior written
consent of Agent or the applicable Lender, use the name of Agent or any Lender
or the name of any Affiliates of Agent or any Lender in connection with any of
either Borrower's business or activities, except in connection with internal
business matters, as required in dealings with governmental agencies and
financial institutions and to trade creditors of Borrowers solely for credit
reference purposes and in financial statements and SEC Reports and similar
reports.
(S) MARGIN SECURITIES. Own, purchase or acquire (or enter into any
contract to purchase or acquire) any "margin security" as defined by any
regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, Agent shall have received an opinion of counsel
reasonably satisfactory to Agent to the effect that such purchase or acquisition
will not cause this Agreement to violate Regulations G, T or U or any other
regulation of the Federal Reserve Board then in effect.
T. RESTRICTED INVESTMENT. Make or have, or permit any Subsidiary
either to make or have, any Restricted Investment.
(U) FISCAL YEAR. Change, or permit any Subsidiary of either
Borrower to change, its fiscal year, or permit any Subsidiary of either Borrower
to have a fiscal year different from that of Borrowers. Borrowers further
covenant that RFI shall not change its fiscal year.
(V) STOCK OF SUBSIDIARY, ETC. Sell or otherwise dispose of any
shares of capital stock of any Subsidiary of either Borrower, except to the
other Borrower or in connection with a transaction permitted under Section
9.2(A), or permit any Subsidiary of either Borrower to issue any additional
shares of its capital stock except director's qualifying shares.
(W) LEASES. Become a lessee under any operating lease of Property
if the aggregate Rentals payable during any current or future period of twelve
(12) consecutive
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<PAGE>
months during the Term hereof under the lease in question and all other
operating leases under which Borrowers are then lessee would exceed Two Million
Five Hundred Thousand Dollars ($2,500,000). The term "Rentals" means, as of the
date of determination, all payments which the lessee is required to make by the
terms of any lease, exclusive of payments based on escalation formulae or for
taxes, utilities, fuel services, insurance, common area maintenance and the
like.
(X) TAX CONSOLIDATION. File or consent to the filing of any
consolidated income tax return with any Person other than a Subsidiary.
9.3 SPECIFIC FINANCIAL COVENANTS. During the Term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or any Lender, RFI
and Borrowers covenant that, unless otherwise consented to by Required Lenders
in writing:
(A) MINIMUM TANGIBLE NET WORTH. RFI shall have, as of each of the
dates listed below, a Consolidated Tangible Net Worth of not less than the
amount set forth opposite such dates in the following schedules:
<TABLE>
<CAPTION>
Date Amount
-------------------------------------------------- -----------
<S> <C>
April 29, 1995 $14,500,000
July 29, 1995 $15,500,000
October 28, 1995 $15,500,000
January 27, 1996 $16,000,000
April 27, 1996 $16,000,000
July 27, 1996 $16,500,000
October 26, 1996 $16,500,000
January 25, 1997 and the last day of each $17,000,000
fiscal quarter thereafter
</TABLE>
(B) MINIMUM EBITDA. RFI shall have for each of the rolling twelve
month periods listed below an EBITDA equal to or greater than the amount set
forth opposite such period in the following schedule.
<TABLE>
<CAPTION>
Period Amount
-------------------------------------------------- ----------
<S> <C>
Twelve months ending
April 29, 1995 $4,500,000
Twelve months ending July 29, 1995 $4,500,000
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
Twelve months ending
October 28, 1995 $5,000,000
Twelve months ending
January 27, 1996 $5,000,000
Twelve months ending
April 27, 1996 $5,250,000
Twelve months ending
July 27, 1996 $5,250,000
Twelve months ending
October 26, 1996 and the
last day of each fiscal
quarter thereafter $5,500,000
</TABLE>
(C) MAXIMUM RATIO OF (x) THE SUM OF CONSOLIDATED INDEBTEDNESS
(OTHER THAN THE NON-CURRENT PORTION OF THE SENIOR NOTES) PLUS OUTSTANDING
LETTERS OF CREDIT TO (y) EBITDA. RFI shall have, at each of the dates listed
below, a ratio of (x) the sum of Consolidated Indebtedness (other than the
non-current portion of the Senior Notes) PLUS outstanding Letters of Credit as
of such date to (y) EBITDA for the twelve month period ended on such date of
not more than the ratio set forth opposite such date in the following schedule:
<TABLE>
<CAPTION>
Date Ratio
-------------------------------------------------- ----------
<S> <C>
April 29, 1995 5.75 to 1
July 29, 1995 5.25 to 1
October 28, 1995 4.50 to 1
January 27, 1996 5.25 to 1
April 27, 1996 5.50 to 1
July 27, 1996 5.00 to 1
October 26, 1996 4.25 to 1
January 25, 1997 and the 5.00 to 1
last day of each fiscal
quarter thereafter
</TABLE>
(D) MINIMUM INTEREST COVERAGE RATIO. RFI shall have at the end of
each of the rolling twelve month periods listed below an Interest Coverage Ratio
equal to or greater than the Interest Coverage Ratio set forth opposite such
period in the following schedule:
54
<PAGE>
<TABLE>
<CAPTION>
Period Ratio
-------------------------------------------------- ---------
<S> <C>
Twelve months ending
April 29, 1995 1.15 to 1
Twelve months ending
July 29, 1995 1.20 to 1
Twelve months ending
October 28, 1995 1.40 to 1
Twelve months ending
January 27, 1996 1.30 to 1
Twelve months ending
April 27, 1996 1.30 to 1
Twelve months ending
July 27, 1996 1.50 to 1
Twelve months ending
October 26, 1996 and the
last day of each fiscal
quarter thereafter 1.50 to 1
</TABLE>
(E) MAXIMUM RATIO OF (x) THE SUM OF CONSOLIDATED INDEBTEDNESS
(OTHER THAN THE NON-CURRENT PORTION OF THE SENIOR NOTES) PLUS THE BALANCE OF THE
OUTSTANDING LETTERS OF CREDIT TO (y) TANGIBLE NET WORTH. RFI and Borrowers
shall have on each of the dates listed below a ratio of (x) the sum of
Consolidated Indebtedness (other than the non-current portion of the Senior
Notes) plus the balance of outstanding Letters of Credit as of such date to (y)
Tangible Net Worth as of such date of not more than the ratio set forth opposite
such period in the following schedule:
<TABLE>
<CAPTION>
Period Amount
-------------------------------------------------- ----------
<S> <C>
April 29, 1995 2.00 to 1
July 29, 1995 1.75 to 1
October 28, 1995 1.45 to 1
January 27, 1996 1.85 to 1
April 27, 1996 1.85 to 1
July 27, 1996 1.60 to 1
October 26, 1996 1.45 to 1
January 25, 1997 and the
last day of each fiscal
quarter thereafter 1.85 to 1
</TABLE>
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<PAGE>
(F) MINIMUM CONSOLIDATED WORKING CAPITAL. RFI shall maintain, as
of each of the dates listed below, Working Capital (Consolidated Current Assets
minus Consolidated Current Liabilities) of not less than the amount set forth
opposite such date in the following schedule:
<TABLE>
<CAPTION>
Date Amount
-------------------------------------------------- -----------
<S> <C>
April 29, 1995 $13,500,000
July 29, 1995 $14,500,000
October 28, 1995 $14,500,000
January 27, 1996 $14,000,000
April 27, 1996 $14,000,000
July 27, 1996 $15,000,000
October 26, 1996 $15,000,000
January 27, 1997 and the
last day of each fiscal
quarter thereafter $15,500,000
</TABLE>
(G) LIEN ON PLANT CITY PROPERTY. RFI shall agree not to permit,
create or suffer to exist any Lien or mortgage upon the real or personal
Property in Plant City, Florida owned by RFI or any Affiliate but nothing herein
shall prohibit the sale of or a contract to sell such Property.
SECTION 10. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Agent or
Lenders under the other Sections of this Agreement, it is understood and agreed
that Lenders will not make any Loans or be required to issue any Letters under
Section 2 of this Agreement unless and until each of the following conditions
has been and continues to be satisfied or has been waived in writing by Required
Lenders, all in form and reasonably substance satisfactory to Lenders, Agent and
Agent's and Lender's counsel:
10.1 DOCUMENTATION. Agent shall have received the following documents,
each to be in form and substance reasonably satisfactory to Agent and its
counsel:
(A) Certified copies of each Borrower's casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
Loss Payee Endorsement naming Agent, for its benefit and the ratable benefit of
Lenders, as loss payee, and certificates of insurance in respect to each
Borrower's liability insurance policies together with endorsements naming Agent,
for its benefit and the ratable benefit of Lenders, as a co-insured;
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<PAGE>
(B) Copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Agent in the Collateral and evidence in a form reasonably
acceptable to Agent that such Liens constitute valid and perfected security
interests and Liens, having the Lien priority specified in Section 4.3(B)
hereof;
(C) Landlord or warehouseman waivers or agreements with respect to
those premises leased by either Borrower and which are disclosed on EXHIBIT S
attached hereto in respect to which Agent has required such agreements;
(D) A copy of the Certificate of Incorporation of each Borrower and
RFI and all amendments thereto, certified by the Secretary of State or other
appropriate official of its jurisdiction of incorporation;
(E) Good standing certificates for each Borrower and RFI issued by
the Secretary of State or other appropriate official of each Borrower's and
RFI's jurisdiction of incorporation and each jurisdiction where the conduct of
such Borrower's or RFI's business activities or the ownership of their
respective Properties necessitates qualification and in which the failure to
qualify would have a material adverse effect on such Borrower or RFI or their
respective business or operations;
(F) A Certificate of the Secretary of each Borrower, together with
true and correct copies of the Certificate (Articles) of Incorporation and
Bylaws of each Borrower, and all amendments thereto, true and correct copies of
the resolutions of the Board of Directors of each Borrower authorizing or
ratifying the execution, delivery and performance of this Agreement, the Notes,
the Security Documents and the Other Agreements and the names of the officer or
officers of each Borrower authorized to sign this Agreement, the Notes, the
Security Documents and the Other Agreements together with a sample of the true
signature of each such officer;
(G) The Security Documents duly executed, accepted and acknowledged
by or on behalf of each of the signatories thereto;
(H) The Other Agreements duly executed and delivered by each
Borrower;
(I) The favorable, written opinion of Berlack, Israels & Liberman,
counsel to Borrowers and RFI, as to the transactions contemplated by this
Agreement and any of the other Loan Documents, to be substantially in the form
of EXHIBIT T attached hereto;
(J) Written instructions from each Borrower directing the application
of proceeds of the initial Revolving Credit Loan made pursuant to this
Agreement, and an initial Borrowing Base Certificate from Borrowers reflecting
that Borrowers have Eligible Accounts and Eligible Inventory in amounts
sufficient in value and amount to support the
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<PAGE>
Revolving Credit Loans in the amount requested by Borrowers on the date of such
certificate;
(K) Duly executed agreement establishing the Dominion Account with a
financial institution acceptable to Agent for the collection or servicing of the
Accounts;
(L) Pay-off statements, releases and UCC-3 termination statements
from Borrowers' existing senior lenders;
(M) An executed copy of the accountant's letter referenced in Section
9.1(J);
(N) A Guaranty Agreement executed by RFI;
(0) A Solvency Certificate executed by the chief financial officer
(or such other officer as is acceptable to Agent) of each Borrower; and
(P) Such other documents, instruments and agreements as Agent shall
reasonably request in connection with the foregoing matters.
10.2 OTHER CONDITIONS. The following conditions have been and shall
continue to be satisfied:
(A) No Default or Event of Default shall exist;
(B) Each of the conditions precedent set forth in the other Loan
Documents shall have been satisfied in all material respects;
(C) Since January 28, 1995, there shall not have occurred any
material adverse change in the business, financial condition or results of
operations of Borrowers, or the existence or value of any Collateral, or any
event, condition or state of facts which would reasonably be expected materially
and adversely to affect the business, financial condition or results of
operations of Borrowers, taken as a whole;
(D) Agent shall have determined, in its sole discretion, that
immediately after the Closing, the sum of Excess Revolving Credit Loan
Availability plus Borrowers' Cash and Cash Equivalents, minus Borrowers' closing
costs incurred in connection with this Agreement, as estimated by Agent, will
not be less than One Million Dollars ($1,000,000.00);
(E) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated
58
<PAGE>
hereby or which, in Lenders' reasonable judgment, would make it inadvisable to
make the initial Revolving Credit Loan; and
(F) Agent and Lenders shall have received such certificates and
documents reflecting the Solvency of Borrowers, after giving effect to the
transactions contemplated by this Agreement, as Agent and Lenders shall find
acceptable, including, without limitation, pro-forma balance sheets, forecasted
financial statements consisting of balance sheets, income statements and cash
flow statements for Borrowers covering at least the one-year period commencing
on the Closing Date, prepared by Borrowers and a fair valuation balance sheet
for Borrowers showing that Borrowers are Solvent.
SECTION 11. EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON
DEFAULT
11.1 EVENTS OF DEFAULT. The occurrence of one or more of the following
events shall constitute an "Event of Default":
(A) PAYMENT OF NOTES. Borrowers shall fail to pay any installment of
principal, interest or premium, if any, owing on the Notes on the due date of
such installment.
(B) PAYMENT OF OBLIGATIONS. Borrowers shall fail to pay any of the
Obligations that are not evidenced by the Notes on the due date thereof (whether
due at stated maturity, on demand, upon acceleration or otherwise) and such
failure shall continue for five (5) days.
(C) MISREPRESENTATIONS. Any warranty, representation, or other
statement made or furnished to Agent or any Lender by or on behalf of Borrowers
or RFI or in any instrument, certificate or financial statement furnished in
compliance with or in reference to this Agreement or any of the other Loan
Documents when taken together as a whole proves to have been false or misleading
in any material respect when made or furnished.
(D) BREACH OF COVENANTS. Borrowers shall fail or neglect to perform,
keep or observe (i) any covenant contained in Sections 4.3, 4.4, 4.5, 4.6,
5.4(B), 9.1(A), 9.1(F), 9.2 or 9.3 of this Agreement or (ii) any other covenant
contained in this Agreement (other than a covenant default in the performance or
observance of which is dealt with specifically elsewhere in this Section 11.1)
and the breach of such other covenant is not cured to Required Lenders'
satisfaction within twenty (20) days (one (1) day in respect to Section 5.2 and
five (5) days in respect to Section 9.1(J)) after the sooner to occur of
Borrowers' receipt of notice of such breach from Agent or any Lender or the date
on which such failure or neglect becomes known to any officer of Borrowers.
(E) DEFAULT UNDER OTHER AGREEMENTS. Any event of default shall occur
under, or either Borrower shall default in any material respect in the
performance or
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<PAGE>
observance of any term, covenant, condition or agreement contained in, any of
the Other Agreements and such Borrower shall have received any required notice
of such default and such default shall continue beyond any applicable period of
grace.
(F) DEFAULT UNDER SECURITY DOCUMENTS. Any event of default shall
occur under, or either Borrower shall default in the performance or observance
of any term, covenant, condition or agreement contained in, any of the Security
Documents, in either case in any material respect, and such default shall
continue beyond any applicable period of grace.
(G) OTHER DEFAULTS. There shall occur any default or event of
default on the part of either Borrower (including specifically, but without
limitation, due to non-payment) under any agreement, document or instrument to
which Borrower is a party or by which either Borrower or any of their Properties
is bound, creating or relating to any Indebtedness in the aggregate principal
amount of Fifty Thousand Dollars ($50,000.00) or more (other than the
Obligations) if the payment or maturity of such Indebtedness is accelerated (or
in the case of Indebtedness due on demand, demanded) in consequence of such
event of default.
(H) UNINSURED LOSSES; UNAUTHORIZED DISPOSITIONS. Any material loss,
theft, damage or destruction not covered by insurance (to the extent required by
this Agreement), or sale, lease or encumbrance of any of the Collateral by
either Borrower or the making of any levy, seizure, or attachment thereof or
thereon except in all cases as may be specifically permitted by other provisions
of this Agreement.
(I) ADVERSE CHANGES. There shall occur any material adverse change
in the financial condition or business prospects of either Borrower or RFI.
(J) INSOLVENCY, ETC. Either Borrower or RFI shall cease to be
Solvent or shall suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit of creditors, or
any petition for an order for relief shall be filed by or against either
Borrower or RFI under the Bankruptcy Code (if against either Borrower or RFI,
the continuation of such proceeding for more than thirty (30) days unless prior
to the expiration of such period, either Borrower or RFI consents to, or is no
longer actively contesting such order of relief), or either Borrower or RFI
shall make any offer of settlement, extension or composition to their respective
unsecured creditors generally.
(K) BUSINESS DISRUPTION; CONDEMNATION. There shall occur a cessation
of a substantial part of the businesses of Borrowers for a period which
significantly affects Borrowers' capacity to continue their business, on a
profitable basis; or either Borrower shall suffer the loss or revocation of any
license or permit now held or hereafter acquired by either Borrower which is
necessary to the continued or lawful operation of all or a substantial part of
its business; or either Borrower shall be enjoined, restrained or in any way
prevented by court, governmental or administrative order from conducting all or
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a substantial part of its business affairs; or any material lease or agreement
pursuant to which either Borrower leases, uses or occupies any Property shall
be canceled or terminated prior to the expiration of its stated term other
than by the exercise of a purchase option; or any material portion of the
Collateral shall be taken through condemnation.
(L) CHANGE OF OWNERSHIP. (i) There shall have occurred a "Change
in Control." "Change of Control" shall mean the occurrence of any of the
foregoing: (1) any Person, or any group within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations promulgated thereunder, shall have
acquired after the date hereof beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act), directly or indirectly on a single day or
with respect to one transaction, of Securities (or other Securities
convertible into such Securities) representing fifty percent (50%) of the
combined voting power of all Securities of RFI entitled to vote in the
election of directors other than Securities having such power only by reason of
the happening of a contingency (hereinafter called a "Controlling Person");
or (2) a majority of the Board of Directors of RFI shall cease for any reason
to consist of (A) individuals who on the date hereof were serving as
directors of RFI and (B) individuals who subsequently become members of the
Board if such individuals' nomination for election or election to the Board
is recommended or approved by a majority of the Board of Directors or
stockholders of RFI. For purposes of clause (1) above, a person or group
shall not be a Controlling Person if such Person or group holds voting power
in good faith and not for the purposes of circumventing this provision as an
agent, bank, broker, nominee, trustee, or holder of revocable proxies given
in response to a solicitation pursuant to the Exchange Act, for one or more
beneficial owners who do not individually, or, if they are a group acting in
concert, as a group, have the voting power specified in clause (1); or
(ii) RFI shall cease to own and control, beneficially and of
record, a majority of the outstanding capital stock of RMI or RMI shall cease
to own and control, beneficially and of record, a majority of the capital
stock of RISI.
(M) ERISA. A Reportable Event shall occur which Required
Lenders, in their sole discretion, shall determine in good faith constitutes
reasonable grounds for the termination by the Pension Benefit Guaranty
Corporation of any Plan or for the appointment by the appropriate United
States district court of a trustee for any Plan, or if any Plan shall be
terminated other than in a standard termination or any such trustee shall be
requested or appointed, or if either Borrower is in "default" (as defined in
Section 4219(c) (5) of ERISA) with respect to payments to a Multiemployer
Plan resulting from either Borrower's complete or partial withdrawal from
such Plan aggregating One Hundred Thousand Dollars ($100,000.00) or more.
(N) LITIGATION. Either Borrower, or any Affiliate of either
Borrower, shall challenge or contest in any action, suit or proceeding the
validity or enforceability of this Agreement, or any of the other Loan
Documents, the legality or enforceability of any of the
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Obligations or the perfection or priority of any Lien granted to Agent, for its
benefit and the ratable benefit of Lenders.
(0) CRIMINAL FORFEITURE. Any of either Borrower or RFI shall be
criminally indicted or convicted under any law that could lead to a forfeiture
of any Property of either Borrower or RFI having an aggregate book value of One
Hundred Thousand Dollars ($100,000) or more.
(P) JUDGMENTS. Final judgment or judgments (after the expiration of
all times to appeal therefrom) for the payment of money in excess of One Hundred
Thousand Dollars ($100,000) in the aggregate shall be rendered against either
Borrower or RFI and the same shall not (i) be fully covered by insurance, or
(ii) within thirty (30) days after the entry thereof, have been discharged or
execution thereof stayed pending appeal or other post-trial motion, or shall not
have been discharged within ten (10) days after the expiration of any such stay.
11.2 ACCELERATION OF THE OBLIGATIONS. Upon the occurrence of an Event of
Default and during the continuance thereof, Agent shall, at request of the
Required Lenders, without notice, (i) terminate this facility with respect to
further Revolving Credit Loans or Letters of Credit, whereupon no further
Revolving Credit Loans may be made hereunder and no further Letters of Credit
may be issued thereunder, and/or (ii) declare all Obligations to be forthwith
due and payable, whereupon all Obligations shall become and be due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by Borrowers; PROVIDED, HOWEVER, that upon the occurrence
of an Event of Default specified in Section 11.1(J) hereof, the Obligations
shall become due and payable without declaration, notice or demand by Agent.
Agent shall take such action with respect to any Default or Event of
Default as shall 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
interests of Agent and Lenders holding Notes taken as a whole, including any
action (or the failure to act) pursuant to the Loan Documents.
11.3 REMEDIES. After the occurrence of an Event of Default and during the
continuance thereof, Agent and/or Lenders shall have and may exercise from time
to time the following rights and remedies:
(A) All of the rights and remedies of a secured party under the Code
or under other applicable law, and all other legal and equitable rights to which
Agent or any Lender may be entitled, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, and shall be in addition to
any other rights or remedies contained in this Agreement or any of the other
Loan Documents.
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(B) The right to take immediate possession of the Collateral,
and (i) to require Borrowers to assemble the Collateral, at Borrowers' expense,
and make it available to Agent at a place designated by Agent which is
reasonably convenient to both parties, and (ii) to enter any of the premises of
either Borrower or wherever any of the Collateral shall be located, and to keep
and store the same on said premises until sold (and if said premises be the
Property of either Borrower, such Borrower agrees not to charge Agent for
storage thereof).
(C) The right to sell or otherwise dispose of all or any
Collateral in its then condition or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, all as
Agent, in its sole discretion, may deem advisable. Borrowers agree that ten
(10) days written notice to Borrowers of any public or private sale or other
disposition of Collateral shall be reasonable notice thereof, and such sale
shall be at such locations as Agent may designate in said notice. Agent
shall have the right to conduct such sales on Borrowers' premises without
charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law. Agent shall have the right to sell, lease or
otherwise dispose of the Collateral, or any part thereof, for cash, credit or
any combination thereof, and Agent or any Lender may purchase all or any part
of the Collateral at public or, if permitted by law, private sale and, in
lieu of actual payment of such purchase price, may set off the amount of such
price against the Obligations.
(D) Except as otherwise limited by any applicable contract,
Agent is hereby granted a license or other right to use, without charge,
Borrowers' labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral and Borrowers' rights under all licenses and all
franchise agreements shall inure to Agent's benefit and the ratable benefit of
Lenders.
(E) The proceeds realized from the sale of any Collateral may
be applied, after allowing one (1) Business Day for collection, first to the
costs, expenses and reasonable attorneys' fees incurred by Agent or any Lender
in collecting the Obligations, in enforcing the rights of Agent and Lenders
under the Loan Documents and in collecting, retaking, completing, protecting,
removing, storing, advertising for sale, selling and delivering any Collateral,
secondly to the interest due upon any of the Obligations; and thirdly, to the
principal of the Obligations. If any deficiency shall remain, Borrowers shall
remain liable to Agent and Lenders therefor.
(F) With respect to the face amount of all Letters of Credit
issued by Agent then outstanding, Agent or Lenders may, at its or their option,
require Borrowers to deposit with Agent funds equal to such face amount, and if
Borrowers fail to promptly make such deposit, Lenders may advance such amount as
a Revolving Credit Loan (whether or not an Overadvance is created thereby). Any
such deposit or advance shall be held by Agent as a reserve to fund future
drawings against such Letters of Credit. At such time as all Letters
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of credit have been drawn upon or expired, any amounts remaining in such reserve
shall be applied against any outstanding Obligations, or to the extent all
Obligations have been indefeasibly paid in full, returned to Borrowers.
11.4 REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrowers contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Agent or any Lender or contained in any other
agreement between Agent or any Lender and Borrowers, heretofore, concurrently,
or hereafter entered into, shall be deemed cumulative to and not in derogation
or substitution of any of the terms, covenants, conditions, or agreements of
Borrowers herein contained. The failure or delay of Agent or any Lender to
exercise or enforce any rights, Liens, powers, or remedies hereunder or under
any of the aforesaid agreements or other documents or security or Collateral
shall not operate as a waiver of such Liens, rights, powers and remedies, but
all such Liens, rights, powers, and remedies shall continue in full force and
effect until all Loans and all other Obligations owing or to become owing from
Borrowers to Agent or any Lender shall have been fully satisfied and Lenders
shall have no further obligations to make Loans or issue Letters of Credit and
all Liens, rights, powers, and remedies herein provided for are cumulative and
none are exclusive.
SECTION 12. THE AGENT
12.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes
Agent to take such action on its behalf and to exercise such powers under this
Agreement, and the other Loan documents as are delegated to Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement and the
other Loan Documents (including, without limitation, enforcement or collection
of the Notes), Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders;
PROVIDED, HOWEVER, that Agent shall not be required to take any action which
exposes Agent to personal liability or which is contrary to this Agreement or
the other Loan Documents or applicable law. Agent agrees to give each Lender
promptly a copy of each notice given to it by Borrowers pursuant to the terms of
this Agreement and the other Loan Documents.
12.2 AGENT'S RELIANCE, ETC. Neither Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this Agreement or the
other Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, Agent: (i)
may treat the payee of any note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and
in form satisfactory to Agent; (ii) may consult with legal counsel,
independent public
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accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts, (iii) makes no warranty or
representations to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty beyond
Agent's customary practices to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of Borrowers or to inspect the property
(including the books and records) of Borrowers; (v) shall not be responsible to
any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto; and
(vi) shall incur no liability under or in respect of this Agreement or the other
Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy, telegram, cable or telex)
believed in good faith by it to be genuine and signed or sent by the proper
party or parties.
12.3 LASALLE AND AFFILIATES. With respect to its commitment hereunder to
make Revolving Credit Loans made by it, LaSalle shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender and
may exercise the same as though it were not Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include LaSalle in its
individual capacity. LaSalle and its Affiliates may lend money to, and
generally engage in any kind of business with, Borrowers, any of their
Subsidiaries and any Person who may do business with or own securities of either
Borrower or any such Subsidiary, all as if LaSalle were not Agent and without
any duty to account therefor to Lenders.
12.4 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Section 8.1 (N) and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
12.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrowers), ratably according to the respective principal
amounts of the Notes then held by each of them, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by Agent under this Agreement, PROVIDED that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Agent's gross negligence
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or wilful misconduct. Without limitation of the foregoing, each Lender agrees
to reimburse Agent promptly upon demand for its ratable shares of any out-of-
pocket expenses (including reasonable counsel fees) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Agent is not reimbursed for such expenses by Borrowers or RFI.
12.6 SUCCESSOR AGENT. Agent may resign at any time by giving written
notice thereof to Lenders and Borrowers. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor. If no successor
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent which shall be a commercial bank or financial
institution organized under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least Five Hundred
Million Dollars ($500,000,000). Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
12 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement and the other Loan Documents.
SECTION 13. MISCELLANEOUS
13.1 POWER OF ATTORNEY. Borrowers hereby irrevocably designate, make,
constitute and appoint Agent (and all Persons designated by Agent) as Borrowers'
true and lawful attorney (and agent-in-fact) and Agent, or Agent of Agent, may,
without notice to Borrowers and in either Borrowers' or Agent's names or name,
but at the cost and expense of Borrowers:
(A) At such time or times hereafter as Agent or said agent,
in its sole discretion, may determine, endorse either Borrower's name on any
checks, notes, acceptances, drafts, money orders or any other evidence of
payment or proceeds of the Collateral which come into the possession of Agent or
under Agent's control; and
(B) At such time or times upon or after the occurrence of an
Event of Default and during the continuance thereof as Agent or its agent in its
sole discretion may determine: (i) demand payment of the Accounts from the
Account Debtors, enforce payment of the Accounts by legal proceedings or
otherwise, and generally exercise all of either Borrower's rights and remedies
with respect to the collection of the Accounts; (ii) settle, adjust, compromise,
discharge or release any of the Accounts or other Collateral or any legal
proceedings brought to collect any of the Accounts or other Collateral; (iii)
sell
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or assign any of the Accounts and other Collateral upon such terms, for such
amounts and at such time or times as Agent or Required Lenders deems or deem
advisable; (iv) take control, in any manner, of any item of payment or proceeds
relating to any Collateral; (v) prepare, file and sign either Borrower's name to
a proof of claim in bankruptcy or similar document against any Account Debtor or
to any notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to either Borrower and notify postal authorities to change the
address for delivery thereof to such address as Agent may designate; (vii)
endorse the name of either Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Agent on
account of the Obligations; (viii) endorse the name of either Borrower upon any
chattel paper, document, instrument, invoice, freight bill, bill of lading or
similar document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use either Borrower's stationery and sign the name of either
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Accounts,
Inventory, Equipment and any other Collateral and to which either Borrower has
access; (xi) make and adjust claims under policies of insurance; and (xii) do
all other acts and things necessary, in Agent's determination, to fulfill
Borrowers' obligations under this Agreement.
13.2 INDEMNITY. Borrowers hereby agree to indemnify Agent and each Lender
and hold Agent and each Lender harmless from and against any liability, loss,
damage, suit, action or proceeding ever suffered or incurred by Agent or any
Lender as the result of Borrowers' failure to observe, perform or discharge
Borrowers' duties hereunder, PROVIDED that the same does not result from the
gross negligence or willful misconduct of the indemnitee. This indemnity shall
extend to any claims asserted against Agent or any Lender by any Person under
any Environmental Laws or similar laws by reason of Borrowers' failure to comply
with laws applicable to solid or hazardous waste materials or other toxic
substances. Notwithstanding any contrary provision in this Agreement, the
obligations of Borrowers under this Section 13.2 shall survive the payment in
full of the Obligations and the termination of this Agreement, but shall not
thereafter be secured by the Collateral.
13.3 COMPLETE AGREEMENT: MODIFICATION OF AGREEMENT; SALE OF INTEREST. (a)
The Loan Documents constitute the complete agreement between the parties with
respect to the subject matter hereof and may not be modified, altered or amended
except by an agreement in writing signed by Borrowers, Agent and Required
Lenders. Borrowers may not sell, assign or transfer any of the Loan Documents
or any portion thereof, including without limitation, Borrowers' rights, title,
interests, remedies, powers and duties hereunder or thereunder. Borrowers
hereby consent to Agent's and any Lender's sale of participation, assignment,
transfer or other disposition, at any time or times, of any of the Loan
Documents or of any portion thereof or interest therein, including, without
limitation, Agent's and any Lender's rights, title, interests, remedies, powers
or duties thereunder, whether evidenced by a writing or not; Borrowers agree
that they will use commercially reasonable efforts to assist and cooperate with
Agent and any Lender in any manner
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reasonably requested by Agent or such Lender to effect the sale of
participation in or assignment of any of the Loan Documents or of any portion
thereof or interest therein, including, without limitation, assistance in the
preparation of appropriate disclosure documents or placement memoranda and
executing appropriate amendments to the signature pages hereto to reflect the
addition of any Lenders and such Lender's respective commitments at such
Lender's expense. The foregoing notwithstanding, except with respect to
sales, assignments or transfers to Affiliates under common control pursuant
to which the selling, assigning or transferring Lender retains its voting
rights, no Lender shall sell participation or assign, transfer or otherwise
dispose of any of the Loan Documents or any portion thereof or interest
therein, without the prior written consent of Agent, which shall not be
unreasonably withheld.
(b) In respect to any assignment by a Lender of its rights and
obligations under this Agreement the Lender agrees to give Agent five (5) days
notice (including, without limitation, all or a portion of its Revolving Loan
Commitments and of the Revolving Credit Loans owed to it and the Revolving
Credit Note(s) held by it) (i) each such assignment shall be of a uniform, and
not a varying, percentage of all rights and obligations, (ii) except in the case
of an assignment of all of a Lender's rights and obligations under this
Agreement, (A) the aggregate amount of the Revolving Loan Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than Five Million Dollars ($5,000,000.00), and in
integral multiples of One Million Dollars ($1,000,000.00) thereafter, or such
lesser amount as to which the Borrowers and the Agent may consent to and (B)
after giving effect to each such assignment, the aggregate amount of the
Revolving Loan of the assigning Lender shall in no event be less than Five
Million Dollars ($5,000,000.00), (iii) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance, an Assignment and
Acceptance in the form of EXHIBIT U hereto (an "Assignment and Acceptance"),
together with any Revolving Credit Note(s) subject to such assignment and a
processing and recordation fee payable to Agent of Twenty Five Hundred Dollars
($2,500.00), and (iv) any Lender may without the consent of Borrowers or the
Agent, and without paying any fee, assign to any Affiliate of such Lender that
is a bank or financial institution all of its rights and obligations under this
Agreement. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto). If, pursuant to this Section
13.4, any interest in this Agreement or any Revolving Credit Loan, Letter of
Credit or Note is transferred to any transferee which is organized under the
laws of any jurisdiction other than the United States or any state thereof, the
transferor
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Lender shall cause such transferee (other than any participant), and may cause
any participant, concurrently with the effectiveness of such transfer, (a) to
represent to the transferor Lender (for the benefit of the transferor Lender,
the Agent, and Borrowers) that under applicable law and treaties no Taxes will
be required to be withheld by Agent, Borrowers or the transferor Lender with
respect to any payments to be made to such transferee in respect of the
Revolving Credit Loans, Letters of Credit, (b) to furnish to the transferor
Lender, Agent and Borrowers either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 (wherein such transferee claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments hereunder), and (c) to agree (for the benefit of the
transferor Lender, Agent and Borrowers) to provide the transferor Lender, Agent
and Borrowers a new Form 4224 or Form 1001 upon the obsolescence of any
previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
(c) In the event any Lender assigns or otherwise transfers all or any
part of its Revolving Credit Note, any such Lender shall so notify Borrowers and
Borrowers shall record the assignment pursuant to Section 9.l(N) hereof, and
shall, upon the request of such Lender, issue new Revolving Credit Notes in
exchange for the old Revolving Credit Notes.
(d) No amendment or waiver of any provision of this Agreement or the
Notes or any other Loan Document, nor consent to any departure by Borrowers
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; PROVIDED, HOWEVER: (a) that no amendment, waiver or consent
shall, unless in writing and signed by each Lender affected thereby do any of
the following: (i) increase the Maximum Revolving Credit Loan to be made
hereunder or subject any Lender to any additional obligations, (ii) reduce
the principal of, or rate of interest on, the Notes or other amount payable
hereunder other than those payable only to LaSalle in its capacity as Agent
which may be reduced by LaSalle unilaterally, (iii) postpone any date fixed
for any payment of principal of, or interest on, the Notes or other amounts
payable hereunder, other than those payable only to LaSalle in its capacity
as Agent which may be postponed by LaSalle unilaterally, (iv) change the
aggregate unpaid principal amount of the Notes, or the number of Lenders
which shall be required for the Lenders or any of them to take any action
hereunder, (v) release or discharge any Person liable for the performance of
any obligations of Borrowers hereunder or under any of the Loan Documents,
(vi) increase the advance rates contained in the definition of the Borrowing
Base, (vii) to the extent Agent's or Lenders' consent is required by the
terms hereof, release all or substantially all of the Collateral, (viii)
amend this Section 13.3; (b) that no amendment, waiver or consent shall be
effective unless in writing and signed by Agent and either Required Lenders
or all Lenders, as required by the terms hereof.
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13.4 REIMBURSEMENT OF EXPENSES. If, at any time or times prior or
subsequent to the date hereof, regardless of whether or not an Event of Default
then exists or any of the transactions contemplated hereunder are concluded,
Agent, Lender or any Participating Lender employs counsel for advice or other
representation, or incurs legal expenses or other costs or out-of-pocket
expenses in connection with: (A) the negotiation and preparation of this
Agreement or any of the other Loan Documents, any amendment of or modification
of this Agreement or any of the other Loan Documents, or, except any expenses in
connection with, any sale or attempted sale of any interest herein to a Lender
or Participating Lender; or (B) the administration of this Agreement or any of
the other Loan Documents and the transactions contemplated hereby and thereby;
(C) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Agent, any Lender, either Borrowers or any other Person) in any
way relating to the Collateral, this Agreement or any of the other Loan
Documents or Borrowers' affairs; (D) any attempt to enforce any rights of Agent
or any Lender or any Participating Lender against Borrowers or any other Person
which may be obligated to Agent or any Lender by virtue of this Agreement or any
of the other Loan Documents, including, without limitation, the
Account Debtors; or (E) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then in any such event, the reasonable attorneys' fees arising from
such services and all reasonable expenses, costs, charges and other fees of such
counsel or of Agent or any Lender or relating to any of the events or actions
described in this Section shall be payable, on demand, by Borrowers to Agent,
any Lender or to such Participating Lender, as the case may be, and shall be
additional Obligations hereunder secured by the Collateral. Without limiting
the generality of the foregoing, such expenses, costs, charges and fees may
include reasonable accountants' fees, costs and expenses; court costs and
expenses; reasonable photocopying and duplicating expenses; reasonable court
reporter fees, costs and expenses; long distance telephone charges; air express
charges; telegram charges; reasonable secretarial over-time charges; and
reasonable expenses for travel, lodging and food paid or incurred in connection
with the performance of such legal services. Additionally, if any taxes
(excluding taxes imposed upon or measured by the net income of Agent or any
Lender) shall be payable on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any of the other
Loan Documents, or the creation of any of the Obligations hereunder, by reason
of any existing or hereafter enacted federal or state statute, Borrowers will
pay all such taxes, including, but not limited to, any interest and penalties
thereon, and will indemnify and hold Agent and any Lender harmless from and
against liability in connection therewith. Borrowers' obligations pursuant to
this Section 13.4 shall survive the termination of this Agreement. The foregoing
notwithstanding, Borrowers shall not be required to reimburse Agent or Lenders
for its or their legal expenses in connection with any proceeding in which
Borrowers pursuant to a final, non-appealable judgment are the prevailing
party.
13.5 INDULGENCES NOT WAIVERS. Agent's or Required Lenders' failure, at
any time or times hereafter, to require strict performance by Borrowers of any
provision of this Agreement shall not waive, affect or diminish any right of
Agent or Required Lenders thereafter to demand strict compliance and performance
therewith. Any suspension or
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<PAGE>
waiver by Agent or Required Lenders of an Event of Default by Borrowers under
this Agreement or any of the other Loan Documents shall not suspend, waive or
affect any other Event of Default by Borrowers under this Agreement or any of
the other Loan Documents, whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of Borrowers contained in
this Agreement or any of the other Loan Documents and no Event of Default by
Borrowers under this Agreement or any of the other Loan Documents shall be
deemed to have been suspended or waived by Agent or Required Lenders, unless
such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Agent
and Required Lenders and directed to Borrowers.
13.6 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
13.7 SUCCESSORS AND ASSIGNS. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrowers, Agent and Lenders. This provision,
however, shall not be deemed to modify Section 13.3 hereof.
13.8 CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.5 of
this Agreement and except as otherwise provided in any of the other Loan
Documents by specific reference to the applicable provision of this Agreement,
if any provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
13.9 EXECUTION IN 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 and delivered shall be deemed to
be an original and all of which counterparts taken together shall constitute
but one and the same instrument.
13.10 NOTICE. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing shall be delivered in person (by personal delivery, delivery service
or overnight courier service) with receipt acknowledged, or telecopied with
receipt acknowledged, or sent by certified mail, return receipt requested,
postage prepaid, addressed
71
<PAGE>
as hereafter set forth, or mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(A) If to Agent: LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
ATTENTION: Lori C. Weidner
Telecopier No.: (312) 750-6189
WITH A COPY TO:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Suite 2600
Chicago, Illinois 60601
ATTENTION: John T. McEnroe
Telecopier No.: (312) 609-5005
(B) If to Borrowers and/or RFI: c/o Rymer Foods Inc.
4600 S. Packers Avenue
Suite 400
Chicago, Illinois 60609
ATTENTION: Ludwig A. Streck
Telecopier No.: (312) 650-0500
WITH A COPY TO:
Berlack, Israels & Liberman
120 West 45th Street
29th Floor
New York, New York 10036
ATTENTION: Jesse Meer
Telecopier No.: (212) 704-0196
(C) If to any Lender, at its address indicated on the signature pages hereof or
in a Notice to Borrowers of assignment of a Note,
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 13.10;
The foregoing notwithstanding, any notice, request or demand to or upon
Agent and Lenders pursuant to Section 3.3 or 3.4 shall not be effective until
received by Agent and Lenders.
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<PAGE>
13.11 AGENT'S OR REQUIRED LENDERS' CONSENT. Except as otherwise
specifically provided for herein whenever Agent's or Required Lenders' consent
is required to be obtained under this Agreement, any of the Other Agreements or
any of the Security Documents as a condition to any action, inaction, condition
or event, Agent or Required Lenders shall be authorized to give or withhold such
consent in its or their sole and absolute discretion and to condition its or
their consent upon the giving of additional collateral security for the
Obligations, the payment of money or any other matter.
13.12 DEMAND OBLIGATIONS. Nothing in this Agreement shall affect or
abrogate the demand nature of any portion of the Obligations expressly made
payable on demand by this Agreement or by any instrument evidencing or securing
same, and the occurrence of an Event of Default shall not be a prerequisite for
Agent or any Lender requiring payment of such Obligations.
13.13 TIME OF ESSENCE. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
13.14 ENTIRE AGREEMENT. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
13.15 INTERPRETATION. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
13.16 GOVERNING LAW: CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
CHICAGO, ILLINOIS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO ANY
CONFLICT OF LAW PROVISIONS; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL
SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS, THE LAWS OF SUCH
JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF
AGENTS LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OR LENDERS'
OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF
SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS.
AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY
PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWERS, AGENT OR
73
<PAGE>
ANY LENDER, BORROWERS, AGENT AND LENDERS HEREBY CONSENT AND AGREE THAT THE
CIRCUIT COURT OF COOK COUNTY, ILLINOIS, OR, AT REQUIRED LENDERS' OPTION, THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF ILLINOIS, EASTERN
DIVISION, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN BORROWERS AND AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR
TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWERS, AGENT AND
LENDERS EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWERS HEREBY WAIVE ANY
OBJECTION WHICH BORROWERS MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING FOR
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
BORROWERS HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWERS AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWERS' ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT
THE RIGHT OF AGENT OR LENDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR LENDERS OF ANY
JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
13.17 WAIVERS BY BORROWERS. BORROWERS WAIVE (i) THE RIGHT TO TRIAL BY
JURY (WHICH AGENT AND LENDERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL, (ii) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY AND,
IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT OR
LENDERS ON WHICH BORROWERS MAY IN ANY WAY BE LIABLE AND HEREBY RATIFY AND
CONFIRM WHATEVER COMMERCIALLY REASONABLE STEPS AGENT OR LENDERS MAY TAKE IN THIS
REGARD; (iii) EXCEPT AS OTHERWISE EXPLICITLY PROVIDED HEREIN OR IN THE UCC,
NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL
74
<PAGE>
OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING
AGENT OR ANY LENDER TO EXERCISE ANY OF AGENT'S OR LENDERS' REMEDIES; (iv) THE
BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (v) ANY RIGHT
BORROWERS MAY HAVE UPON PAYMENT IN FULL OF THE OBLIGATIONS TO REQUIRE AGENT TO
TERMINATE ITS SECURITY INTEREST IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF
BORROWERS UNTIL TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS AND
THE EXECUTION BY BORROWERS, AND BY ANY PERSON WHOSE SECURED LOANS TO BORROWERS
ARE USED IN WHOLE OR IN PART TO SATISFY THE OBLIGATIONS, OF A USUAL AND
CUSTOMARY INDEMNITY AND RELEASE AGREEMENT INDEMNIFYING AGENT AND LENDERS FROM
ANY LOSS OR DAMAGE AGENT OR ANY LENDER MAY INCUR AS THE RESULT OF DISHONORED
CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED BY AGENT OR ANY LENDER FROM BORROWERS
OR ANY ACCOUNT DEBTOR AND APPLIED TO THE OBLIGATIONS; AND (vi) NOTICE OF
ACCEPTANCE HEREOF AND BORROWERS ACKNOWLEDGE THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO AGENTS AND LENDERS' ENTERING INTO THIS AGREEMENT AND THAT
AGENT AND LENDERS ARE RELYING UPON THE FOREGOING WAIVERS IN THEIR FUTURE
DEALINGS WITH BORROWERS. BORROWERS WARRANT AND REPRESENT THAT THEY HAVE
REVIEWED THE FOREGOING WAIVERS WITH THEIR LEGAL COUNSEL AND HAVE KNOWINGLY AND
VOLUNTARILY WAIVED THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
13.18 PUBLICITY. Borrowers hereby consent to Agent's use of the name or
tradestyle of Borrowers in any announcements or advertisements relating to the
completion of the transactions contemplated hereby and the role played by Agent
in providing financing to Borrowers hereunder in such media and in such manner
as Agent, in its reasonable judgment, determines.
13.19 REIMBURSEMENT. The undertaking by Borrowers to repay the
Obligations and each representation warranty or covenant of Borrowers are and
shall be joint and several. To the extent that either Borrower shall be
required to pay a portion of the Obligations which shall exceed the amount of
loans, advances or other extensions of credit, received by any such Borrower
and all interest, costs, fees and expenses attributable to such loans, advances
or other extensions of credit, then such Borrower shall be reimbursed by the
other Borrower for the amount of such excess PRO RATA, based on their
respective net worths as of the date hereof. This Section 13.19 is intended
only to define the relative rights of the Borrowers, and nothing set forth in
Section 13.19 is intended or shall impair the obligations of each Borrower,
jointly and severally, to pay Agent and Lenders the Obligations as when the
same shall become due and payable in accordance with the terms hereof.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed in Chicago,
Illinois, on the day and year specified at the beginning hereof.
BORROWERS:
RYMER MEAT INC. LASALLE NATIONAL BANK
("Borrower") ("Agent and a "Lender")
By: /s/ Ludwig A. Streck By: /s/ Lori C. Weidner
----------------------------------- ----------------------------------
Name: Name:
------------------------------ -----------------------------
Title: Title:
----------------------------- ----------------------------
Revolving Loan Commitment: $25,000,000
RYMER INTERNATIONAL
SEAFOOD INC.
("Borrower")
By: /s/ Ludwig A. Streck
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
RYMER FOODS INC.
("Guarantor")
By: /s/ Ludwig A. Streck
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
76
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$____________ April ____, 1995
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, Rymer Meat Inc., an Illinois
corporation ("RMI"), and Rymer International Seafood Inc., an Illinois
corporation ("RISI") and together with RMI, "Borrowers"), hereby, jointly and
severally, PROMISE TO PAY to the order of ____________________________, a
_________ ("Lender"), or its registered assigns, at ____________________, or at
such other place in the United States of America as the holder of this Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of
_________________________ Dollars ($__________), or such lesser principal amount
as may be outstanding pursuant to the Loan Agreement (as hereinafter defined)
with respect to the Revolving Credit Loan owed to Lender, together with interest
on the unpaid principal amount of this Note outstanding from time to time.
This Note is one of the Revolving Credit Notes issued pursuant to Section
2.1 of that certain Loan and Security Agreement dated the date hereof among
Borrowers, "Lenders" (as defined therein) and LaSalle National Bank as agent for
such Lenders, (such Loan Agreement, as amended from time to time, the "Loan
Agreement"), and is entitled to the benefit and security of the "Loan Documents"
(as defined in the Loan Agreement) provided for therein, to which reference is
hereby made for a statement of all of the terms and conditions under which the
loan evidenced hereby is made. All capitalized terms herein, unless otherwise
defined, shall have the meanings ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be payable
in the amounts and on the dates specified in the Loan Agreement and, if not
sooner paid in full, on April 1, 1997, unless the term hereof is extended in
accordance with the Loan Agreement. Interest thereon shall be paid until such
principal amount is paid in full at such interest rates and at such times as are
specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
<PAGE>
Upon and after the occurrence, and during the continuation, of an Event of
Default, this Note shall or may, as provided in the Loan Agreement, and without
demand, notice or legal process of any kind, become or be declared immediately
due and payable.
The right to receive principal of, and stated interest on, this Note may
only be transferred in accordance with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrowers.
This Note shall be interpreted, governed by, and construed in accordance
with, the internal laws of the State of Illinois, without regard to any conflict
of laws provisions.
RYMER MEAT INC.
By:_____________________________________
Name:______________________________
Title:_____________________________
RYMER INTERNATIONAL SEAFOOD INC.
By:_____________________________________
Name:______________________________
Title:_____________________________
A-2
<PAGE>
EXHIBIT B
NOTICE OF REVOLVING CREDIT LOAN
________________, 199__
LaSalle National Bank,
as Agent for the Lenders Participating
in the Loan and Security Agreement
referred to below
120 South LaSalle Street
Chicago, Illinois 60603
Gentlemen:
The undersigned, [Pick either Rymer Meat Inc. or Rymer International
Seafood Inc.], refer to the Loan and Security Agreement, dated as of April
__, 1995 (the "Loan Agreement", the terms defined therein being used herein as
therein defined), between the undersigned, Rymer Foods Inc., the Lenders named
therein and LaSalle National Bank, as a Lender and as Agent for Lenders, and
hereby give you notice, irrevocably, pursuant to Section 2.1 of the Loan
Agreement, that the undersigned hereby request a Revolving Credit Loan under the
Loan Agreement, and in that connection set forth below the information relating
to such Revolving Credit Advance as required by Section 2.1(a) of the Loan
Agreement:
(i) The date of the requested Revolving Credit Loan
shall be _________________, 199___.
(ii) The aggregate amount of the requested Revolving Credit Loan is
$_____________.
<PAGE>
The undersigned hereby certify that the statements contained in Section 8.2
of the Loan Agreement are true on the date hereof, and will be true on the date
of the requested Revolving Credit Advance, before and after giving effect
thereto and to the application of the proceeds therefrom.
Very truly yours,
[RYMER MEAT INC.] OR [RYMER
INTERNATIONAL SEAFOOD INC.]
By: ____________________________________
Name: ___________________________
Title: __________________________
B-2
<PAGE>
EXHIBIT C
BORROWERS' BUSINESS LOCATIONS
(1) Borrowers currently have the following business locations, and not
others:
(2) Borrowers maintain their books and records relating to Accounts and
General Intangibles at:
(3) During the preceding five-year period, Borrowers have had no office,
place of business or agent for process located in any county other than as set
forth above, except:
<PAGE>
EXHIBIT E
JURISDICTION IN WHICH BORROWERS
ARE AUTHORIZED TO DO BUSINESS
(1)
(2)
<PAGE>
EXHIBIT F
CORPORATE NAMES AND PREDECESSORS
(1) Each Borrower's correct corporate name, as registered with the
Secretary of State (Commonwealth) of its State (Commonwealth) of incorporation
is:
Name State (Commonwealth) of Incorporation
---- -------------------------------------
(a)
(b)
(c)
(d)
(2) During the preceding five-year period, each Borrower has used the
following names:
<PAGE>
EXHIBIT G
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
(1) Borrowers have no patents [, except].
(2) Borrowers have no trademarks [, except].
(3) Borrowers have no copyrights [, except].
(4) Borrowers have no licenses, other than routine business licenses,
authorizing them to transact business in local jurisdictions [and the
following:].
<PAGE>
EXHIBIT H
CAPITAL STRUCTURE AND AFFILIATES
(1) The number of authorized shares of common stock of RMI is _______.
The number of issued shares of common stock of RMI is ______. RMI has no
treasury stock.
(2) All of the issued shares of RMI are fully paid and non-assessable
and are owned by the following Persons: Rymer Foods Inc.
(3) RMI has no Subsidiaries, except the following:
State of Percent of Voting
Name Incorporation Stock Borrower Owns
- ---- ------------- -------------------
(a) Rymer International Seafood Inc. Illinois 100%
(b) __________________________________ _________ ___%
(4) The number of authorized shares of common stock of RISI is ________.
The number of issued shares of common stock of RISI is ________. RISI has no
treasury stock.
(5) All of the issued shares of RISI are fully paid and non-assessable
and are owned by the following Persons:
(6) RISI has no Subsidiaries [, except the following:]
State of Percent of Voting
Name Incorporation Stock Borrower Owns
- ---- ------------- -------------------
<PAGE>
EXHIBIT I
CONTRACTS RESTRICTING BORROWERS' RIGHT TO INCUR DEBTS
There are no contracts that restrict the right of either Borrower to incur
Indebtedness, except the following:
(1)
(2)
None of the foregoing contracts restricts or prohibits either Borrower from
executing, delivering and performing this Agreement, the Other Agreements or the
Security Documents or incurring any Obligations to Agent and Lenders in
accordance with this Agreement.
<PAGE>
EXHIBIT J
LITIGATION
(1) There are no proceedings pending against either Borrower in any court,
except as follows:
____________
____________
(2) The only threatened litigation of which either Borrower is aware is as
follows:
____________
____________
<PAGE>
EXHIBIT K
PENSION PLANS
<PAGE>
EXHIBIT L
LABOR CONTRACTS
Neither Borrower has any agreements with any organization of its
employees[, except the following:]
<PAGE>
EXHIBIT M
EXCEPTIONS TO COMPLIANCE WITH LAWS
<PAGE>
EXHIBIT N
SURETY OBLIGATIONS
<PAGE>
N-1
ADVERSE TRADE RELATIONS
<PAGE>
EXHIBIT O
CAPITALIZED LEASES
Borrowers have the following capitalized leases:
<PAGE>
EXHIBIT P
OPERATING LEASES
Borrowers have the following operating leases:
<PAGE>
EXHIBIT Q
COMPLIANCE CERTIFICATE
[LETTERHEAD OF RYMER FOODS INC.]
______, 19__
TO: LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
The undersigned, in his capacity as the chief financial officer of Rymer
Foods Inc. ("RFI"), Rymer Meat Inc. ("RMI") and Rymer International Seafood,
Inc. ("RISI" and together with RMI, "Borrowers") gives this certificate to
LaSalle National Bank ("Agent") in accordance with the requirements of
Section 9.1(J) of that certain Loan and Security Agreement dated April __, 1995,
among Borrowers, RFI, the "Lenders" (as defined therein) and LaSalle National
Bank, as agent for said Lenders (the "Loan Agreement"). Capitalized terms used
in this Certificate, unless otherwise defined herein, shall have the meanings
ascribed to them in the Loan Agreement:
(1) Based upon my review of the consolidated balance sheets and
statements of income of [RFI] for the [fiscal year] [fiscal month] ending
_______, 19__, copies of which are attached hereto, I hereby certify that:
(a) RFI's Tangible Net Worth as of _______, 19__, is $____________;
(b) The excess of RFI's Consolidated Current Assets over
Consolidated Current Liabilities as of ___________________, 199__ is
____________ Dollars ($____________);
(c) The Interest Coverage Ratio for the fiscal period ending
______________ is ______________ to 1;
(d) The ratio of (x) the sum of RFI's Consolidated Indebtedness
(other than the non-current portion of the Senior Notes) plus the aggregate
balance of the outstanding Letters of Credit as of ______________, 199__ to (y)
EBITDA for the twelve month period ended __________, 199__ is ___________ to 1;
(e) The ratio of (x) the sum of RFI's Consolidated Indebtedness
(other than the non-current portion of the Senior Notes) plus the aggregate
balance of outstanding Letters of Credit to (y) Tangible Net Worth all as of
_____, 199__ is to 1;
(f) The amount of Capital Expenditures for the period from _______
to _______ is ______________ Dollars ($___________); and
<PAGE>
(g) The aggregate amount of Rentals payable under operating leases
in the current fiscal year is _______________________ Dollars ($_____________).
(2) No Default exists on the date hereof, other than: _____________ (if
none, so state); and
(3) No Event of Default exists on the date hereof, other than:
_____________ (if none, so state).
Very truly yours,
Chief Financial Officer
Q-2
<PAGE>
EXHIBIT R
PERMITTED LIENS
<PAGE>
EXHIBIT S
LANDLORD OR WAREHOUSE LOCATIONS
<PAGE>
EXHIBIT U
FORM OF
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") made
as of ____________, 199__ by and between _____________ ("Assignee") and
____________________ ("Assignor").
RYMER Meat Inc. an Illinois corporation ("RMI"), Rymer International
Seafood Inc., an Illinois corporation ("RISI", and together with RMI,
"Borrowers"), the lender signatories, thereto ("Lenders") and LaSalle National
Bank, a national banking association ("LaSalle") as agent for such Lenders
(LaSalle, in such capacity "Agent"), entered into a certain Loan and Security
Agreement dated as of April 7, 1995 (the "Loan Agreement") pursuant to which
Lenders extended credit to the Borrowers in an aggregate principal amount not to
exceed at any time outstanding Twenty-Five Million Dollars ($25,000,000). The
parties are entering into this Agreement to provide for the transfer by Assignor
of a portion of its rights and obligations under the Loan Agreement to Assignee.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Loan Agreement.
NOW THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignee and Assignor agree as
follows:
1. ASSIGNMENT
(a) Assignor hereby sells, assigns and transfers to Assignee,
and Assignee hereby purchases and assumes from the Assignor as of the
Effective Date (as defined in Section 4 hereof) subject to the terms and
conditions set forth in Section 13.3(b) of the Loan Agreement
(i)_________________________ Dollars ($________) Revolving Loan Commitment,
including without limitation, an equivalent undivided interest and
participation in and to all Letters of Credit, whether outstanding on the
Effective Date or issued thereafter (collectively, the "Assigned
Commitment"), which is evidenced by the Revolving Credit Note in the form of
EXHIBIT A hereto (the "________ Revolving Credit Note"), and (ii) a
proportional __________ percent (___%) portion of the Revolving Credit Loans
outstanding as of the Effective Date (the "Assigned Revolving Credit,
Loan"), also evidenced by the __________ Revolving Credit Note. As of the
date hereof, the face amount of all outstanding Letters of Credit is
____________________ ($______).
(b) The Assignee hereby irrevocably purchases, takes and assumes
for the benefit or Assignor and Borrowers, effective on the Effective Date, all
duties, liabilities,
<PAGE>
obligations; rights and interests assigned and delegated to it by the Assignor
(including, without limitation, the obligation to make Revolving Credit Loans or
to incur obligations in respect to Letters of Credit up to the amount of the
Assignee's Assigned Commitment) and agrees to perform and assume all such
duties, liabilities and obligations, and shall have all such rights and
interests, on and after the Effective Date as if it had been an original party
to the Loan Agreement and each of the other Loan Documents having a Revolving
Credit Loan Commitment equal to _______________________________ (____%) of the
total Revolving Credit Loan Commitments under the Loan Agreement (but not to
exceed ________________ Dollars ($_________________)) all as is more
specifically set forth in Section 1(a) hereof.
(c) Assignor makes no representation or warranty and assumes no
responsibility with respect to: (x) any statements, warranties or
representations made in or in connection with the Loan Agreement or the other
Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Agreement and the other Loan
Documents, other than that it is the legal and beneficial owner of the interests
being assigned by it hereunder, that such interests are free and clear of any
adverse claim, that it is legally authorized to enter into this Agreement and
that this Agreement constitutes its legal, valid and binding obligations; and
(y) the financial condition of Borrowers or the performance or observance by
Borrowers of any of their obligations under the Loan Agreement or any of the
other Loan Documents.
(d) The Assignee (i) represents and warrants that it is legally
authorized to enter into this Agreement, that the same constitutes its legal,
valid and binding obligations and that all necessary consents, licenses,
approvals, authorizations of, and all registrations or declarations with, any
governmental or regulatory authority or body (collectively, the "Consents" and
individually, a "Consent") presently required in connection with its execution,
delivery and performance of this Agreement or for the enforcement of this
Agreement against it have been obtained or made and are in full force and
effect, and agrees that it shall (x) use its best efforts to obtain any
additional Consents that become necessary for such execution, delivery,
performance or enforcement, (y) comply in all material aspects with the terms of
each such Consent and (z) notify the Agent promptly upon any such Consent being
withdrawn, suspended or otherwise limited in effect or ceasing to be in full
force and effect or of any such additional Consent becoming necessary; (ii)
confirms that it has received a copy of the Loan Agreement and each of the other
Loan Documents, together with copies of financial statements which Assignor has
identified as the most recent financial statements delivered in accordance with
the terms of the Loan Agreement and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Agreement; (iii) agrees that it will, independently and without
reliance upon Agent, Assignor or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Loan Agreement and
each of the other Loan Documents; (iv) appoints and authorizes Agent to take
such action as Agent on its behalf and to exercise such powers under the Loan
Agreement and
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<PAGE>
each of the other Loan Documents as are delegated to Agent by the terms thereof;
(v) confirms that it is purchasing and assuming the interests in the Assigned
Commitment, the Assigned Revolving Credit Loan, the Loan Agreement and each of
the other Loan Documents hereunder in the course of making loans in the ordinary
course of its commercial lending business and not with any present intention of
distributing or selling such interests (except as permitted under the Loan
Agreement); and (vi) agrees that it will perform in accordance with their terms
all the obligations which by the terms of the Loan Agreement and each of the
other Loan Documents are required to be performed by it as a Lender under the
Loan Agreement and each of the other Loan Documents.
(e) Assignee agrees to indemnify Assignor from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Assignor in any way relating
to or arising out of Assignee's failure to perform Assignee's obligations under
the Assigned Commitment on or after Effective Date.
2. PAYMENT FOR ASSIGNED REVOLVING CREDIT LOANS.
(a) On or before 11:00 a.m. on the Effective Date, Assignee shall
deliver to Assignor in immediately available funds an amount (the "Purchase
Price") equal to _____________________________ percent (_____%) of the aggregate
principal amount of all of the Revolving Credit Loans outstanding on the
Effective Date.
(b) Notwithstanding the terms of the Loan Agreement or the
_____________________ Revolving Credit Note with respect to: (a) the first
interest payments due after the Effective Date on the Loans, (b) the first
Revolving Credit Loan Unused Line Fee due after the Effective Date and (c) fees
received by Agent prior to the Effective Date in respect to Letters of Credit
outstanding on the Effective Date:
(i) Whenever Agent receives a payment of such interest, Agent will
promptly pay over to Assignee interest on the Loan at the interest rates
provided for in the Loan Agreement calculated from the Effective Date; and
(ii) Whenever Agent receives a payment of such Revolving Credit Loan
Unused Line Fee, it will promptly pay over to Assignee its proportionate
share of said charge calculated from the Effective Date in accordance with
the terms of the Loan Agreement.
Agent shall pay over to Assignor (x) the difference between the total
amount of the first payments due after the Effective Date in respect to the Loan
and the amounts paid to Assignee pursuant to 2(b)(i) above and (y) the
difference between the first payment of Revolving Credit Loan Unused Line Fee
due after the Effective Date and the amounts paid to Assignee pursuant to
Section 2(b)(ii) above.
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<PAGE>
3. DELIVERY OF AMENDMENT.
On the Effective Date, Assignor and Assignee shall execute an
amendment to the Loan Agreement in the form of EXHIBIT B hereto (the
"Amendment"). Assignor will use its best efforts to cause Borrowers to promptly
deliver to Assignee the Amendment and the Revolving Credit Note, each executed
by Borrowers.
4. EFFECTIVE DATE.
(a) This Agreement shall become effective on the first date (the
"Effective Date") when each of the following conditions precedent is satisfied
in full:
(i) Agent shall have received counterparts of this Agreement which,
when taken together, bear the signature of all of the parties hereto;
(ii) Agent shall have received, for and on behalf of Assignor and
Assignee the Amendment executed by all parties thereto, the _______________
Revolving Credit Note and the Revolving Credit Note to be delivered to
Assignee pursuant to the Amendment; and
(iii) Assignee shall have delivered to the Assignor in immediately
available funds the Purchase Price, and Assignor shall have delivered to
Assignee in immediately available funds amounts due Assignee pursuant to
Section 2 above.
(b) All notices shall be delivered to the Assignee, at the
following address:
Attention: __________________________________________
__________________________________________
__________________________________________
Attention: ______________________________
Telephone No.: __________________________
Telecopier No.: _________________________
5. GOVERNING LAW.
This Agreement and the obligations arising hereunder shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Illinois applicable to contracts made and performed in such state, without
regard to the principles thereof regarding conflict of laws.
6. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and by
the different parties hereto on separate counterparts, each of which when so
executed and
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<PAGE>
delivered shall be an original, but all of which shall together constitute one
and the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their duly authorized representatives, all as of the day and
year first above written.
________________________________, as Assignor
By: ______________________________________________
Name: ____________________________________________
Title: ___________________________________________
________________________________, as Assignee
By: ______________________________________________
Name: ____________________________________________
Title: ___________________________________________
Accepted and Agreed to as of
this ___ day of _______, 199__.
LaSalle National Bank, as Agent
By: ____________________________________
Name: _____________________________
Title: ____________________________
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<PAGE>
EXHIBIT B TO FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
FORM OF AMENDMENT TO LOAN AND SECURITY AGREEMENT
AMENDMENT, dated as of ______________________________, to the Loan and
Security Agreement, dated as of April ___, 1995, among Rymer Meat Inc. an
Illinois corporation ("RMI"), Rymer International Seafood Inc., an Illinois
corporation ("RISI" and together with RMI, "Borrowers") the Lenders named
therein, and LaSalle National Bank ("LaSalle"), as agent for said Lenders
(LaSalle, in such capacity, "Agent") (the "Loan Agreement", the terms used
herein and not otherwise defined shall have the meanings attributed to them in
the Loan Agreement).
WHEREAS, pursuant to the Loan Agreement, INTER ALIA, Lenders (i) have
committed to make Revolving Credit Loans to Borrower in the principal amount of
Twenty-Five Million Dollars ($25,000,000); and (ii) have committed to incur
certain obligations on behalf of Borrowers in respect to Letters of Credit;
WHEREAS, __________________________________________ ("Assignor") has
sold, transferred and assigned the following Revolving Credit Loans and the
Revolving Credit Loan Commitments to the following party:
(a) [ASSIGNEE]
(i) Assigned Revolving Credit Loans: ____________________ Dollars
($___________); and
(ii) Assigned Revolving Credit Loan Commitment: _______________
Dollars ($___________), and
Assignee has assumed the obligations thereunder for the benefit of
Assignor and Borrowers.
WHEREAS, as a result of such sale, assignment and transfer ASSIGNEE
has become a Lender with a Revolving Credit Loan Commitment under the Loan
Agreement; and
WHEREAS, the parties hereto desire to amend the Loan Agreement to add
ASSIGNEE as a Lender.
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and contained in the Loan Agreement, the parties
hereto hereby agree as follows:
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<PAGE>
1. The signature block to the Loan Agreement is hereby amended to
read as the signature block to this Amendment.
2. Borrowers hereby confirm that the representations and
warranties of Borrower contained in the Loan Documents are correct on the date
hereof, except (i) to the extent that any such representation or warranty
expressly relates to an earlier date, and (ii) for changes therein permitted or
contemplated by the Loan Agreement.
3. Borrowers represent and warrant that no Default or Event of
Default exists as of the date hereof.
4. Assignee confirms to Borrowers that it has assumed and accepted
the obligations of Assignor to the extent of the Assigned Revolving Loan
Commitment.
5. On the date hereof, Borrowers shall issue and deliver a
Revolving Credit Notes to ASSIGNEE and, if applicable ASSIGNOR, in the amount of
each such Lender's respective Revolving Credit Loan Commitment as shown below
such Lender's name on the signature block of this Amendment. Upon the delivery
to Lenders of such Notes, ASSIGNOR will deliver to Borrower for cancellation the
Revolving Credit Note delivered to it at Closing.
6. Notices to ASSIGNEE shall be addressed as follows:
______________________________________
______________________________________
______________________________________
Attention: ________________________________
Telecopier No.: _______________________________
7. Except as otherwise specifically set out herein, the provisions
of the Loan Agreement shall remain in full force and effect.
8. This Amendment and the obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Illinois applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws.
9. This Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
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<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.
Rymer Meat Inc. LaSalle National Bank, as
Agent
By: _________________________________ By: __________________________________
Name: _______________________________ Name: ________________________________
Title: ______________________________ Title: _______________________________
Rymer International Seafood Inc. ASSIGNOR:
By: _________________________________ By: __________________________________
Name: _______________________________ Name: ________________________________
Title: ______________________________ Title: _______________________________
Revolving Credit Loan Commitment:
$_______________
ASSIGNEE:
By: __________________________________
Name: ________________________________
Title: _______________________________
Revolving Credit Loan Commitment:
$_______________
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<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-END> APR-29-1995
<CASH> 0
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<RECEIVABLES> 15,201
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0
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