UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 27, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file No. 00-19800
GIBRALTAR PACKAGING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0496290
(State of incorporation) (IRS Employer Identification No.)
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274 RIVERSIDE AVENUE
WESTPORT, CONNECTICUT 06880
(Address of principal executive offices) (Zip Code)
(203) 227-0400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. |X|
The aggregate market value of voting stock held by nonaffiliates of the
registrant on September 14, 1998 was $5,292,953 (based upon the September 14,
1998 closing sale price of the common stock as reported by the NASDAQ National
Market System).
The number of shares of common stock of the registrant outstanding as of
September 14, 1998 was 5,041,544 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III are incorporated by reference to the
definitive proxy statement relating to the registrant's Annual Meeting of
Stockholders for fiscal 1998, which definitive proxy statement will be filed
within 120 days of the end of the registrant's fiscal year.
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TABLE OF CONTENTS
PART I
Page
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Item 1 Business.............................................................1
Item 2. Properties...........................................................8
Item 3. Legal Proceedings....................................................8
Item 4. Submission of Matters to a Vote of Security Holders..................9
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.....................................10
Item 6. Selected Financial Data.............................................11
Item 7. Management's Discussion and Analysis of
Financial Conditions and Results of Operations......................12
Item 8. Financial Statements and Supplementary Data.........................17
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..............................17
PART III
Item 10. Directors and Executive Officers of the Registrant.................18
Item 11. Executive Compensation.............................................18
Item 12. Security Ownership of Certain Beneficial Owners and Management.....18
Item 13. Certain Relationships and Related Transactions.....................18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...19
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PART I
ITEM 1. BUSINESS
GENERAL
Gibraltar Packaging Group, Inc. (Gibraltar or the Company) designs,
manufactures and markets packaging products for a number of consumer and
industrial markets. The Company is the combination of several previously
independent packaging companies, each with its own distinctive products,
customer base and geographic focus. The acquisitions of Standard Packaging &
Printing Corp. (Standard), Niemand Industries, Inc. (Niemand), and GB
Labels, Inc. (GB Labels) in 1993 expanded the Company's products from folding
cartons and specialty laminated containers to include tubular, spiral-wound
paper packaging, flexible poly-film packaging, contract packaging and filling
and pressure-sensitive labels. Although most of the Company's sales are made to
customers located in the central and southern regions of the United States, the
Company sells its products to customers throughout the nation. The Company
derives its sales from a diverse market base, primarily comprised of the
following markets: textiles, pharmaceutical, auto aftermarket parts, household
and industrial products, office supplies and paper products, food, cosmetics and
personal care, and toys.
The Company currently serves approximately 1,200 customers from five
divisions: Gibraltar Packaging Group, Inc. (dba Great Plains Packaging, or
Great Plains) in Hastings, Nebraska; RidgePak Corporation (dba Flashfold Carton)
in Fort Wayne, Indiana; Niemand in Marion, Alabama; Standard in Mount Gilead,
North Carolina and GB Labels in Burlington, North Carolina. Gibraltar recently
announced that it is seeking offers for its Niemand Division, so that it can
focus on its folding carton, flexible poly-film and specialty laminated
operations, which make up the majority of its business. Although Niemand holds a
strong presence in tubular spiral-wound paper packaging and contract packaging,
the operations are distinctly different from the folding carton business. The
Company believes the three folding carton divisions are situated to enhance the
Company's competitive position by providing broader geographic coverage,
enabling the Company to serve customers that operate from several locations. The
Company's revised business strategy is to focus on the folding carton business
and increase sales and profitability of its packaging products.
Gibraltar's predecessor was incorporated under the name GPC Co. in Nebraska
in 1967 and subsequently changed its name to Great Plains Packaging Co. in 1986.
In 1991, Great Plains Packaging Co. was reincorporated in Delaware, and its name
was changed to Gibraltar Packaging Group, Inc. Gibraltar's executive offices are
currently located in Westport, Connecticut. The Company anticipates closing the
Westport office and moving the corporate office functions, in the second
fiscal quarter of fiscal 1999, to its Great Plains Packaging facility
located at 2000 Summit Avenue, Hastings, Nebraska 68902.
MANUFACTURING PRODUCTS AND PROCESSES
The Company offers its customers six types of packaging products, as
described below.
FOLDING CARTONS
The Company designs, manufactures and markets a variety of printed folding
cartons, which are purchased by customers in a variety of consumer and
industrial markets. The Company's customers use folding cartons for both the
shipment and retail display of the customers' products. Sales of folding cartons
represented approximately 66% of the Company's net sales for the year ended June
27, 1998, approximately 63% of the Company's net sales for the year ended June
28, 1997 and approximately 62% of the Company's net sales for the year ended
June 29, 1996.
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The Company believes that recent trends in the folding carton market favor
manufacturers that can produce creative graphics to enhance visual presentation,
point-of-sale appeal and product differentiation. Specialty packaging designed
to address these needs often includes graphics with high-resolution print, more
colors and innovative designs. The Company's internal design teams have won
numerous industry awards, due, in part, to the Company's emphasis on product
design. The Company believes that its design resources enhance the Company's
competitiveness in the folding carton market and result in increased
profitability.
Folding cartons are produced at the Company's production facilities in
Hastings, Nebraska; Fort Wayne, Indiana; and Mount Gilead, North Carolina. After
a customer's order is received, paperboard purchased from outside suppliers in
rolled form is converted into sheets of specified sizes by sheeting equipment.
Specialized printing plates are created from specifications, artwork or film
supplied by the Company's customers or developed by the Company's design teams.
The paperboard sheets are then printed on multicolor offset printing presses.
The printed board is then cut, creased, embossed, folded and glued into
individual cartons and packaged for shipment to customers.
In June 1996, the Company's Hastings, Nebraska facility became the sixth
folding carton plant in the United States to achieve ISO 9001 certification, the
rigorous international quality standard. In January 1998 the Company's Fort
Wayne, Indiana facility also achieved ISO 9001 certification. The facility in
Mount Gilead, North Carolina is currently scheduled to receive their
certification in December 1999. ISO (International Organization for
Standardization) is steadily becoming a worldwide standard for quality
management. It requires a company to codify its quality program by defining and
documenting its quality system.
TUBULAR, SPIRAL-WOUND PAPER PACKAGING
Tubular paper packaging products represented approximately 14% of the
Company's net sales for the year ended June 27, 1998, approximately 17% of the
Company's net sales for the year ended June 28, 1997 and approximately 18% of
the Company's net sales for the year ended June 29, 1996.
The Company's tubular packaging is structurally strong, high-quality,
spiral-wound paper packaging that is suitable for direct labeling with
high-quality graphics. Tubular paper packaging offers a biodegradable product
that is, in smaller quantities, generally cheaper than plastic alternatives.
Tubular paper packaging is used widely for personal care products (talcum
powders, bath powders and scented products), for food products (spices and
non-dairy creamer) and for household products (carpet freshener and wildflower
seeds). Additionally, these products are used as gift boxes, as well as having
uses in the toy/game industry. The Company believes that it is a leading
supplier of tubular paper packaging to the cosmetics and personal care markets.
The Company manufactures tubular paper packaging at its Marion, Alabama
facility. Several pieces of equipment used in this process are proprietary to
the Company. The process of producing tubular paper packaging begins with
slitting various types of rolled paper, then winding the paper into tubes by
gluing the individual strips or plies of paper together. The tubes are then
labeled with printed paper labels (typically of high-graphic quality) and cut
into individual canisters. Canisters may have closure/dispenser tops that offer
a variety of dispensing features, for example, sifting features as in the case
of spice shakers and talcum powder containers. The empty canisters are filled by
the Company or the customer with a variety of products. The canisters are then
sealed with a metal or plastic plug at the bottom.
Gibraltar recently announced that it is seeking offers for its Niemand
Division, so that it can focus on its folding carton, flexible poly-film and
specialty laminated operations, which make up the majority of its business.
Although Niemand holds a strong presence in tubular spiral-wound paper packaging
and contract packaging, the operations are distinctly different from the folding
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carton business.
FLEXIBLE POLY-FILM PACKAGING
Flexible packaging sales represented approximately 9% of the Company's net
sales for the year ended June 27, 1998, and approximately 8% of the Company's
net sales for each of the years ended June 28, 1997 and June 29, 1996.
Flexible packaging offers light-weight, low-bulk, resource-conserving
packaging that also protects perishable products by creating a barrier against
air and moisture. For consumer marketing purposes, flexible packaging combines
high-quality, multicolor graphics, similar to folding carton graphics, with a
see-through feature that enables the consumer to see the product itself along
with the package graphics. Although the Company sells most of its flexible
packaging for use in the textile, food and household products markets, flexible
packaging is also used for many other products, including pharmaceuticals and
other medical products and toys.
Flexible packaging is produced at the Standard plant in Mount Gilead from
polyethylene, polypropylene and similar plastic materials. The Company purchases
its plastic films from film manufacturers rather than producing its own plastic
films. The film is printed at the Company's facilities using multicolor printing
presses that are similar to those used in folding carton manufacture. The
printed rolls are slit into smaller rolls. Some printed film is shipped in roll
form to customers who then convert it into its final package form (for example,
bags, pouches or overwrap). Some of the printed film is converted into bags or
pouches by the Company and then shipped to customers.
SPECIALTY LAMINATED CONTAINERS
At the Company's Hastings facility, the Company manufactures a specialized
type of folding carton, specialty laminated packaging, which it markets to
customers throughout the United States, primarily in the automotive aftermarket
parts, frozen food and toy markets. Laminated packages are used for retail sales
of products and offer customers a number of visual marketing benefits. Specialty
laminated container sales represented approximately 5% of the Company's net
sales for each of the years ended June 27, 1998, June 28, 1997 and June 29,
1996. During the manufacturing process, laminated sheets, which are composed of
a printed paperboard folding carton sheet glued onto single face corrugate, are
die cut, glued and folded into containers. Laminated packaging offers a
structurally stronger package suitable for packaging heavier contents,
protecting products during shipping or meeting other package performance needs,
while at the same time providing high-resolution graphics. The Company believes
that the resolution of the print and graphics enhances the product's appeal, and
that the lamination provides increased product visibility with a large, exposed
graphics area.
CONTRACT PACKAGING AND FILLING
The Company's facility in Marion provides contract packaging and filling
services, which represented approximately 3% of the Company's net sales for the
year ended June 27, 1998, and approximately 2% of the Company's net sales for
each of the years ended June 28, 1997 and June 29, 1996. The Company fills, and
in some cases, manufactures tubular spiral-wound paper containers. Contract
packaging and filling can provide a cost-effective alternative for customers
with small in-house purchasing departments with the Company taking
responsibility for obtaining materials as well as packaging the product. The
Company believes that the combination of container manufacture and contract
filling provides an attractive product for its customers. With a single purchase
order, a customer of the Company's Marion facility can contract for container
procurement, product specification and procurement, blending, filling, packaging
and shipment to a distribution center.
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The Company fills spices as well as other food products, including
non-dairy creamer; household products such as carpet freshener and wildflower
seeds; and other types of dry granular products using a similar process. The
Company may formulate, procure, blend and fill the container or it may package
product supplied by a customer. Machines using gravity or vacuum-based filling
techniques to fill the containers. Once the containers are filled, the Company
packs them in shipping containers for delivery to its customers.
In connection with its filling operations, the Company maintains an
environmentally controlled work area for food packaging and other services that
must meet specific cleanliness and quality standards.
PRESSURE-SENSITIVE LABELS
At the Company's GB Labels plant in Burlington and Standard Packaging plant
in Mt. Gilead, the Company manufactures pressure-sensitive labels, which are
printed by multicolor printing presses similar to those used in printing
paperboard and flexible films. Pressure-sensitive labels accounted for
approximately 3% of the Company's net sales in the year ended June 27, 1998 and
approximately 5% of the Company's net sales for each of the years ended June 28,
1997 and June 29, 1996. The labels are backed with adhesive, mounted on paper
backing and typically shipped in rolls to customers. Customers use the Company's
labels for a variety of applications, including product promotions, packaging
modifications, clothing packaging and labeling and other applications.
Labels provide a cost-effective means of altering other packaging (for
example, folding cartons or flexible packaging) in connection with product
promotions or tie-ins. Labels also may be used to highlight pricing or product
features or for other purposes. Labels themselves, typically in the form of
adhesive-backed bands, can be used as a form of packaging. Socks and hosiery
represent the most common application for the Company's label packaging.
COMPETITION
The packaging markets in which the Company competes are highly fragmented
and increasingly competitive. The Company competes with numerous small,
non-integrated companies that produce one or more packaging products and, to a
lesser extent, with divisions or subsidiaries of large integrated packaging
producers as well as in-house packaging operations. The vertically integrated
paperboard, oil and chemical companies that the Company competes with may have
many lines of business and produce their own raw materials. In general, the
integrated companies focus primarily on producing large quantities of basic,
commodity packaging and often provide their products to large companies
nationwide. The non-integrated manufacturers generally operate only one or two
production facilities and emphasize higher-margin, value-added packaging, often
with specialized or customized graphics. Unlike the integrated manufacturers,
these manufacturers produce smaller orders of packaging with quick turnaround,
in many cases also working with the customer in designing the packaging. The
Company believes that it offers a broader range of packaging products than most
other non-integrated manufacturers that produce similar packaging.
Competition among the non-integrated packaging manufacturers, against which
the Company primarily competes, is based on product quality, service, timeliness
of delivery, manufacturing capabilities and, to a lesser extent than with
commodity packaging, price. The Company believes that its expertise and
reputation within the packaging industry for providing timely service and
high-quality packaging, as well as a diverse product line, enable it to
compete effectively with other non-integrated packaging companies.
The Company's largest competitors in the flexible poly-film packaging
market operate as vertically integrated divisions or subsidiaries of large oil
and chemical companies. If the supply of
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oil-based resins or plastic films should tighten in the future, large vertically
integrated producers may have an advantage over the Company, as such competitors
could allocate scarce resin resources to their own flexible packaging units or
transfer them at advantageous prices to their own flexible packaging units.
Other competitors in the flexible packaging market are part of diversified
packaging companies like the Company and offer both paper-based and film-based
packaging. Some of the Company's other flexible packaging competitors are
smaller packaging companies that offer only flexible film packaging.
Competition in the tubular packaging, contract filling and label markets is
highly fragmented. Tubular packaging is provided by a large number of relatively
small competitors and by a few large packaging companies. Competition among the
smaller, non-integrated packagers is based on product quality, service,
timeliness of delivery, manufacturing capabilities and, to a lesser extent than
with large packagers, price. Contract filling is provided not only by a large
number of relatively small competitors, but also internally by goods and food
producers themselves. The Company's filling capability is limited to
dry-granular types of products, and, therefore, the Company competes only in
this area of the contract filling market. In comparison with the Company's other
packaging markets, the label market is generally characterized by lower barriers
to entry.
During the past fiscal year, the Company has also been impacted by the
increasing trends of customers to increase their buying power by consolidating
the number of vendors they maintain, as well as entering into alliances with
their direct competitors to use their competitors' excess packaging capacity.
Many of the Company's competitors have greater financial and other
resources than the Company. In addition, to the extent that packaging methods
are developed and successfully marketed as alternatives to the Company's
products, the Company may compete with producers of such alternative packaging
methods.
RAW MATERIALS
Raw materials used in the Company's production process include paperboard,
paper labels, inks, flexible films, resin and adhesives, all of which the
Company purchases from more than one supplier. Costs for non-corrugated
materials at the Company's Niemand facility increased in the first and second
quarters of fiscal 1998, and stabilized in the third and fourth quarters. All
other prices for raw materials throughout the Company were stable in fiscal
1998, and are expected to remain stable through fiscal 1999. Any such price
increases will have an adverse impact on the Company's results of operations if
the Company is unable to pass these increases on to its customers.
The supply of materials such as polyethylene, polypropylene, other plastic
films and plastic resins used in the Company's flexible packaging and contract
packaging products is subject to the disruptions generally associated with the
petroleum and petroleum product markets. The supply of plastic materials depends
upon factors beyond the control of the Company, including, directly or
indirectly, changes in the economy, price levels and seasons, the level of
domestic oil production, the availability of imports and the actions of OPEC.
Although the Company's supply of raw materials is presently sufficient, its
business could be adversely affected by a prolonged shortage of raw materials,
the resulting higher costs and diminished availability of such materials.
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CUSTOMERS
The Company derives its sales from a diverse market base. The Company sells
its products throughout the United States to over 1,200 different customers for
use in a variety of industries. The table below sets forth the Company's percent
of net sales by market for each of the years indicated:
JUNE 27 JUNE 28 JUNE 29
1998 1997 1996
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Textile 17% 17% 15%
Pharmaceutical 15% 17% 19%
Auto aftermarket parts and hardware 14% 14% 14%
Household and industrial 13% 7% 4%
Office supplies and paper products 12% 16% 17%
Food 12% 12% 11%
Cosmetics and personal care 6% 7% 7%
Toy 2% 4% 5%
Other 9% 6% 8%
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Total net sales 100% 100% 100%
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Sales to the Company's top three customers accounted for approximately 17%
of the Company's net sales for the year ended June 27, 1998. This compares to
approximately 18% and 20% for the years ended June 28, 1997 and June 29, 1996,
respectively. Sales to one customer, Smead Manufacturing, represented
approximately 11% of net sales in fiscal years 1998, 1997 and 1996,
respectively.
The Company believes that developing long-term relationships with customers
is critical to success in the packaging industry. Customers generally purchase
products and services under firm purchase orders rather than long-term
contracts, although the Company does have several customers with contracts
ranging from one to three years.
PATENTS
Niemand holds several patents which cover proprietary technology and
packaging solutions, including a patent for the spiral-wound applicator used for
products that treat yeast infections. Although the Company believes these
patents to be economically valuable in the conduct of its business, the Company
does not believe that expiration or invalidation of any of these patents would
have a material adverse effect on the Company.
EMPLOYEES
As of June 27, 1998, the Company employed approximately 762 full-time
employees of whom 136 are salaried and 626 are hourly. The Graphics
Communication Union, No. 19-M, represents the 98 hourly employees at Fort Wayne,
Indiana and their union contract expires in November 1998. The Retail, Wholesale
and Department Store Workers Union represents approximately 185 hourly employees
at Niemand's Marion, Alabama plant, and their union
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contract expires in August 2000. None of the Hastings, Nebraska; Mount Gilead,
North Carolina or Burlington, North Carolina employees are covered by union
contracts or collective bargaining agreements.
Effective August 4, 1998, Walter E. Rose was appointed Chairman of the
Company, and will continue as Chief Executive Officer. David G. Chandler,
who was Chairman, will continue as a Director of the Company.
Effective August 4, 1998, Richard D. Hinrichs, who served as
Division President of Great Plains for the past six years, was appointed
President and Chief Operating Officer of the Company. Mr. Hinrichs will
report directly to Mr. Rose.
Deke C. Abbott, Jr., who rejoined the Company last October as Executive
Vice President and Chief Operating Officer, completed his interim assignment and
resigned effective July 31, 1998.
James A. Stajkowski, former Division President of Standard Packaging, left
the Company, effective June 1998 to pursue other opportunities.
Jon P. Crane, also a former Division President of Standard Packaging,
retired in January 1998.
As part of the Company's continuing efforts to consolidate the management
functions of its folding carton divisions, the management staff of Flashfold
Carton and Standard Packaging now report directly to Mr. Hinrichs.
The Company markets its products and services primarily through about 15
employee salesmen, as well as several commissioned brokers or agents.
The Company considers its relationship with its employees and unions to be
generally satisfactory. The Company is unable to forecast the future outcome of
negotiations between the Company and any union or the potential impact any
dispute could have on the Company's financial position or results of operations.
REGULATION
The Company's activities are subject to various environmental, health and
worker safety laws. The Company has expended resources, both financial and
managerial, to comply with applicable environmental, health and worker safety
laws in its operations and at its facilities and anticipates that it will
continue to do so in the future. Compliance with environmental laws has not
generally had a material effect on the Company's capital expenditures, earnings
or competitive position. However, as part of the environmental due diligence
carried out in fiscal 1995 in connection with a proposed merger, the Company
became aware of groundwater contamination at its GB Labels facility in
Burlington, North Carolina.
Groundwater testing performed in 1995 revealed the presence of
tetrachlorethelene ("PCE") and related compounds in the groundwater at the site,
and in three of the neighboring properties' wells. The North Carolina Division
of Environmental Management ("DEM") was notified. The Company also notified the
County Health Department, provided bottled water to affected residents, and
offered to connect, at its cost, any resident wishing to be connected to the
municipal water supply. In August 1995, the Company filed a preliminary site
assessment with the DEM, which was updated and re-filed with the DEM in December
1995.
In 1996, the groundwater program was transferred from the DEM to the newly
created North Carolina Division of Water Quality ("DWQ"). In February 1997 the
DWQ asked Gibraltar
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to conduct a follow-up assessment of the GB Labels facility. The Company
arranged with its environmental consultants to install additional groundwater
monitoring wells, conduct additional investigative work at the GB Labels site
and prepare an updated report. The Comprehensive Assessment Report was filed
with the DWQ in June 1998.
In May 1998 two separate lawsuits were brought against GB Labels and the
Company, alleging property damage and personal injury arising from the
contamination. For further discussion, see "Item 3. Legal Proceedings."
Following the August 1995 preliminary site assessment, the Company had its
environmental consultants prepare an estimate of likely remediation costs based
on all of the information known at that time. These estimated costs ranged from
$750,000 to $1.1 million over a period of seven to ten years. Accordingly, the
Company recorded a liability for such remediation costs of $750,000 in fiscal
year 1995. This estimate may be affected by new information learned, any
modifications to any remediation plan that may be proposed by the DWQ and the
actual costs incurred as part of evaluation and remediation. The reduction in
the accrual for such remediation costs to $578,000 from $598,000 at June 27,
1998 and June 28, 1997, respectively, reflects legal and environmental
consulting expenses incurred in fiscal 1998. Incurred expenses as of June 27,
1998 related to remediation totaled $172,000.
ITEM 2. PROPERTIES
The Company owns offices and manufacturing facilities in Hastings,
Nebraska; Fort Wayne, Indiana; Mount Gilead and Burlington, North Carolina; and
Marion, Alabama. It leases warehouse facilities in Hastings, Nebraska; Fort
Wayne, Indiana; and Mebane, North Carolina. The Company's manufacturing
facilities consist of a total of more than 600,000 square feet. In addition, the
Company leases approximately 2,700 square feet of office space in Westport,
Connecticut. The Company owns and leases vehicles for use by management, sales
and delivery personnel and also owns and leases various manufacturing, computer
and other equipment used for product development, customer technical support
services and administrative purposes. The Company's products are distributed to
customers primarily utilizing commercial transportation and, to a limited
extent, Company-owned trucks.
The Company's facilities have been expanded in prior years through its
capital expenditure program. No facilities expansions occurred in fiscal 1998.
The total expenditures for fiscal 1997 and fiscal 1996 approximated 0.2 million
and 1.5 million respectively.
The Company's facilities and equipment are generally in good operating
condition, are suitable for their respective uses and are adequate for current
needs.
The Company maintains business property and other insurance, covering its
facilities and its operations, in amounts and covering such risks as are
generally consistent with industry practice for companies of similar size.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to certain lawsuits and
administrative proceedings that arise in the conduct of its business. While the
outcome of these lawsuits and proceedings
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cannot be predicted with certainty, management believes that, if adversely
determined, the lawsuits and proceedings, either singularly or in the aggregate,
would not have a material adverse effect on the financial condition, results
of operations or net cash flows of the Company.
In May 1998, two lawsuits, MONROE B. MOOREFIELD ET AL V. BERNARD H. OAKLEY,
SR., ET AL, File Number 98 CVS 990; and HAROLD L. FOGLEMAN ET AL V. BERNARD H.
OAKLEY, SR., ET AL, File Number 98 CVS 989, were filed in Alamance County, State
of North Carolina, alleging property damage and personal injury arising from
groundwater contamination at the Company's GB Labels facility. Gibraltar
Packaging Group and GB Labels, among others, were also named as defendants in
the lawsuits. The contamination and the Company's response is described under
"Business -- Regulation." The plaintiffs are all property owners or family
members residing near the GB labels facility. Damage amounts are specified as
"in excess of $10,000" in each action. The Company and GB Labels have in their
responses to the complaints denied liability and intend to vigorously defend
themselves. Although, at this time, the Company cannot predict the outcome of
either lawsuit, the Company does not believe that the lawsuits will have a
material adverse effect on the business or financial condition of the Company.
On October 7, 1997, the Company agreed to settle the Internal Revenue
Services examination of the Company's income tax returns for the years 1992
through 1995. The settlement amount was fully reserved for by the Company as of
June 28, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders of Gibraltar during
the fourth quarter of Gibraltar's fiscal year ended June 27, 1998.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock has been traded over-the-counter and quoted on
the NASDAQ National Market System since the Company's initial public offering on
March 5, 1992. The trading symbol for the Company's common stock is "PACK." The
following table sets forth, for the periods indicated, the high and low sale
prices for the Company's common stock on the NASDAQ National Market System, as
reported by NASDAQ:
HIGH LOW
FISCAL 1998
First Quarter $ 3 1/2 $ 2 5/8
Second Quarter 3 1/4 2 1/8
Third Quarter 3 9/16 2 13/32
Fourth Quarter 4 5/8 1 3/4
FISCAL 1997
First Quarter $ 5 3/4 $ 3 7/8
Second Quarter 4 3/4 3 1/4
Third Quarter 4 1/8 3
Fourth Quarter 3 1/4 2 3/4
There were approximately 140 shareholders of record of the Company's common
stock as of September 14, 1998. The Company believes that the number of
beneficial owners of its common stock is greater than 1,500.
DIVIDEND POLICY
The Company has never paid cash dividends on its common stock. Any payment
of cash dividends in the future will depend upon the terms of the Company's debt
instruments, the financial condition, capital requirements and earnings of the
Company, as well as other factors the Board of Directors may deem relevant. In
addition, the Company's credit facility with Harris Trust and Savings Bank
restricts the ability of the Company to pay dividends.
RECENT SALES OF UNREGISTERED SECURITIES
None.
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ITEM 6.SELECTED FINANCIAL DATA
The following selected historical financial information has been derived
from the Company's audited consolidated financial statements. This information
should be read in connection with the Company's Consolidated Financial
Statements and the Notes thereto, as well as "Management's Discussion and
Analysis of Financial Condition and Results of Operations," included elsewhere
in this Annual Report.
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED
--------------------------------------------------
JUNE 27 JUNE 28 JUNE 29 JULY 1 JULY 2
1998(3) 1997(2) 1996 1995 1994(1)
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Net Sales $75,890 $74,710 $74,384 $76,456 $75,574
Cost of Goods Sold 64,138 59,396 58,328 64,045 58,769
Gross Profit 11,752 15,314 16,056 12,411 16,805
Operating Expenses 26,411 11,362 11,481 14,061 10,143
Income (Loss) From
Operations (14,659) 3,952 4,575 (1,650) 6,662
Other Expense - Net 3,989 3,061 3,208 3,652 2,624
Provision (Benefit) for
Income Taxes (1,435) 559 666 (1,617) 1,235
Income (Loss) before
Extraordinary Item (17,213) 332 701 (3,685) 2,803
Net Income (Loss) (17,213) 225 701 (3,685) 2,803
Basic and Diluted Per Common Share Amounts:
Income (Loss) before
Extraordinary Item (3.41) 0.07 0.14 (0.73) 0.56
Net Income (Loss) Per Share (3.41) 0.05 0.14 (0.73) 0.56
Weighted Average Shares
Outstanding 5,042 5,042 5,042 5,040 5,037
BALANCE SHEET DATA:
Working Capital 4,969 6,078 6,455 5,940 10,669
Total Assets 59,257 75,058 74,045 79,036 86,934
Long-Term Debt (net of
current portion) 27,872 27,382 27,834 31,527 34,540
Stockholders' Equity 14,018 31,100 31,006 30,305 33,968
(1) Includes the assets and liabilities and results of operations of GB Labels
since November 8, 1993.
(2) Includes an extraordinary after-tax loss of $107,000 reflecting the
write-off of unamortized finance costs of a previous refinancing.
(3) Includes an increase in receivable, inventory and other reserves of
approximately $600,000, a charge for severance and relocation costs of
approximately $500,000 and a restructuring charge of $170,000 consisting of
severance costs for divisional personnel. Results also include an
impairment write down of long-lived assets related to Niemand Industries,
Inc. of approximately $14,083,000, and a write-off of unamortized finance
costs related to the Harris Bank refinancing of approximately $854,000.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Unless otherwise stated in this form 10-K references to the fiscal years
1998, 1997 and 1996 relate to the fiscal years ended June 27, 1998, June 28,
1997 and June 29, 1996, respectively.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the percentage
relationship that certain items in the Company's Consolidated Statement of
Operations bear to net sales. This information should be read in conjunction
with the Company's Consolidated Financial Statements and the Notes thereto
included elsewhere in this Annual Report.
YEARS ENDED
------------------------------
JUNE 27 JUNE 28 JUNE 29
1998 1997 1996
Net Sales 100.0% 100.0% 100.0%
Cost of Goods Sold 84.5 79.5 78.4
Gross Profit 15.5 20.5 21.6
Operating Expenses 34.8 15.2 15.4
Income (Loss) from Operations (19.3) 5.3 6.2
Other Expense - Net 5.3 4.1 4.3
Provision (Benefit) for Income Taxes (1.9) 1.0 1.0
Income (Loss) before Extraordinary Item (22.7) 0.4 1.0
Net Income (Loss) (22.7)% 0.3% 1.0%
FISCAL YEAR 1998 VS. 1997
In fiscal 1998 the Company had net sales of $75.9 million compared with
$74.7 million in fiscal 1997. Net sales increased $1.2 million or 1.6% in fiscal
1998 compared with a $0.3 million or 0.4% increase in sales for fiscal 1997.
Sales of spiral wound paper packaging and pressure sensitive labels decreased
compared with prior year levels while sales of folding and flexible cartons
increased $3.9 million in fiscal 1998 over fiscal 1997.
Cost of goods sold increased $4.7 million, or 8.0% to $64.1 million in
fiscal 1998 compared with $59.4 million in fiscal 1997. Cost of goods sold
expressed as a percentage of net sales increased to 84.5% for fiscal 1998
compared to 79.5% for fiscal 1997. The increase in the costs of products sold
over the comparable period in fiscal 1998 is primarily attributable to the
following events. Standard Packaging and Printing Corporation (Standard
Packaging) incurred higher manufacturing costs associated with both gearing up
and servicing new customers in the second half of 1998. Additionally, Standard
Packaging and Niemand Industries suffered some adverse mix changes as sales of
its higher margin products declined. Flashfold Carton incurred unusually high
costs related to preventative maintenance and modifications made to its presses,
in order to add capacity in the third quarter of fiscal 1998. Flashfold Carton
also experienced higher manufacturing costs related to increased production in
anticipation of new business in the first quarter of fiscal 1999. In addition,
during the second quarter of fiscal 1998, the Company changed from a
self-insured medical plan to a new fully insured plan, and experienced a number
of large claims under the old plan, which significantly increased medical costs
for the period.
Selling expenses decreased $0.2 million or 5.5% in fiscal 1998 from $4.3
million in fiscal 1997. Selling expenses for the second half of fiscal 1998
decreased $0.5 million compared to the corresponding period in fiscal 1997 as a
direct result of realized cost savings associated with the Company's
organizational and facility consolidations implemented in the second quarter of
fiscal 1998.
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General and administrative expenses expressed as a percentage of net sales
increased to 9.9% for fiscal 1998 compared with 8.7% for fiscal 1997, an
increase of $1.0 million or 16.0%. Included in the second quarter of fiscal 1998
is an increase in receivable, inventory and other reserves of $0.6 million and a
charge for severance and relocation costs of approximately $0.5 million. The
Company began to realize the cost saving benefits of the second quarter
restructuring program as general and administrative expenses for the second half
of fiscal 1998 decreased $0.3 million compared to the corresponding period in
fiscal 1997.
Included in the second quarter of fiscal 1998 is a restructuring charge of
$0.2 million consisting of severance costs for divisional personnel. Other costs
relating to the reorganization are included in general and administrative
expenses and consist of severance and relocation costs.
In connection with a modification of the Company's strategic plan, the
Company decided to divest one of its subsidiaries, Niemand Industries, Inc. As a
result, the Company recorded a charge of $14,083,000 in the fourth quarter of
fiscal 1998 to write down the carrying amount of goodwill and fixed assets of
Niemand Industries to estimated fair value less cost to sell. In prior years,
the Company evaluated the recoverability of long-lived assets at Niemand
Industries using estimated, undiscounted cash flows. By deciding to divest
of that business, recoverability now must be based on estimated fair value
less cost to sell. The impairment loss resulted in completely writing-off the
Niemand Industries goodwill and reducing the carrying value of fixed assets.
Interest expense for fiscal 1998 increased $1.0 million or 32.4% to $4.0
million from $3.0 million for fiscal 1997. The increase is primarily
attributable to the Company writing-off the unamortized financing costs of $0.9
million related to the credit agreement with Harris Bank as a result of the
acceleration of the maturity date of such credit agreement to July 1998.
The benefit for income taxes as a percentage of pre-tax loss for fiscal
1998 is (7.7%), which differs from the statutory rate primarily as a result of
non-deductible amortization in excess of purchase price over net assets acquired
and the effect of disallowed losses with respect to the impaired asset writedown
as discussed in Note 1 to the Company's Consolidated Financial Statements
included elsewhere in this Annual Report. This compares with an effective tax
rate of 62.7% in the prior year.
In fiscal 1998, the Company reported a net loss of $17.2 million or $3.41
per common share compared with net income of $0.2 million or $0.05 per common
share in fiscal 1997. Net income and net income per common share decreased $17.4
million and $3.46, respectively, in fiscal 1998 compared to fiscal 1997,
primarily as a result of the foregoing factors.
FISCAL YEAR 1997 VS. 1996
In fiscal 1997 the Company attained net sales of $74.7 million compared
with $74.4 million in fiscal 1996. Net sales increased $0.3 million or 0.4% in
fiscal 1997 compared with a $2.1 million or 2.7% decrease in sales for fiscal
1996. The increase in sales in fiscal 1997 compared to fiscal 1996 was
primarily due to volume increases of approximately $3.5 million attributable
to increased sales from new and existing customers. This increase
however, was negatively impacted primarily by the loss of business with four
major customers as a result of vendor consolidations and changes in customer
packaging designs. Vendor consolidations, increased competition and pricing
pressure continued to affect the Company's marketplace in fiscal 1997 and the
Company expects these trends to continue into the foreseeable future.
Cost of goods sold expressed as a percentage of net sales increased to
79.5% for fiscal 1997 compared to 78.4% for fiscal 1996. The increase in the
cost of products sold is primarily attributable to a less favorable shift in
product mix, and increased labor costs incurred to meet customer needs.
Selling expense increased $0.2 million or 4.2% in fiscal 1997 to $4.3
million from $4.1 million in fiscal 1996, primarily as a result of increases in
marketing and sales efforts.
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<PAGE>
General and administrative expenses expressed as a percentage of net sales
increased to 8.7% for fiscal 1997 compared with 7.7% for fiscal 1996. The
increase is primarily attributable to additional administrative overhead costs
and the cost of filling positions not staffed in the prior year.
The Company recorded restructuring charges of approximately $1.0 million
during the second half of fiscal 1996 that related primarily to severance costs
for divisional personnel of $0.9 million and $0.1 million of relocation costs
related to the move of the corporate office. The majority of the cash outlays
relative to these restructuring charges were made during 1997. There were no
material changes to accrued restructuring charges for fiscal 1997.
Interest expense for fiscal 1997 decreased $0.2 million or 5.7% to $3.0
million from $3.2 million for fiscal 1996. The decrease is a direct result of
overall lower net borrowings as well as lower interest rates in fiscal 1997 as
compared to the prior year, attributable to the Company's debt refinancing which
was completed September 25, 1996 and is further described in Financial Condition
and Note 4 to the Company's Consolidated Financial Statements included elsewhere
in this Annual Report.
The provision for income taxes as a percentage of pre-tax income for fiscal
1997 is 62.7%, which differs from the statutory rate primarily as a result of
non-deductible amortization in excess of purchase price over net assets
acquired. This compares with an effective tax rate of 48.7% in the prior year.
During the first quarter of fiscal 1997 the Company recorded an
extraordinary after tax loss of $107,000 or $0.02 per common share reflecting
the write-off of unamortized finance costs of a previous refinancing.
In fiscal 1997 the Company reported net income of $0.2 million or $0.05 per
common share compared with $0.7 million or $0.14 per common share in fiscal
1996. Net income and net income per common share decreased $0.5 million and
$0.09, respectively, in fiscal 1997 compared to fiscal 1996, primarily as a
result of the foregoing factors.
FINANCIAL CONDITION
At June 27, 1998, the Company had working capital of $5.0 million, as
compared to $6.1 million at June 28, 1997. Historically, the Company's liquidity
requirements have been met by a combination of funds provided by operations and
its revolving credit agreements. Funds provided by operations totaled $1.7
million in fiscal 1998 and $4.2 million in fiscal 1997. The Company had
available to it unused borrowing capacity of $0.7 million and $3.6 million at
June 27, 1998 and June 28, 1997, respectively. The decrease in operating cash
flow for fiscal 1998 was primarily due to the Company's net loss of $3.1 million
(excluding the impairment writedown of long-lived assets of $14.1 million) in
fiscal 1998 compared with net income of $0.2 million in fiscal 1997. The
increase in borrowings under the revolving credit facility is primarily
attributable to the repayment of long-term obligations and related fees incurred
in amending the Company's revolving credit facility in fiscal 1998.
Through various amendments of the credit agreement during fiscal 1998, the
Company and Harris Trust and Savings Bank agreed to accelerate the maturity of
the Company's bank credit agreement to August 10, 1998, and to eliminate all
financial covenants as of June 27, 1998. The Company's bank credit agreement
with Harris Bank consists of a $25 million term loan and a $10 million revolving
credit facility. The amount available under the revolving credit facility is
reduced by the amount of outstanding standby letters of credit, $222,000 and
$474,000 as of June 27, 1998 and June 28, 1997, respectively. The standby
letters of credit relate to workman's compensation insurance policies. At June
27, 1998 both facilities bear interest at the banks prime rate plus 1%. The
banks prime rate was 8.5% at June 27, 1998. At June 28, 1997 the facilities bore
interest rates
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<PAGE>
based on Harris Bank's prime rate or the London Interbank Offered Rate (LIBOR).
The interest rate for the term loan was 8.26% based on the LIBOR rate, and the
effective interest rate for the revolving credit facility was 8.12%.
On July 31, 1998, the Company refinanced its debt. The new facility with
First Source Financial LLP (First Source) provides for a five year $25 million
term loan and a five year $15 million working capital revolving line of credit
(Revolver). The term loan requires principal payments of $562,500 in the first
year of the loan, with the first quarterly payment due October 15, 1998. The
balance of the term loan is due in quarterly installments of $625,000 in fiscal
year 2000, $687,500 per quarter through April, 2003 and the balance of
$12,687,500 due on July 31, 2003.
The Revolver provides for a revolving line of credit under a borrowing base
commitment subject to certain loan availability requirements. Loan availability
under the Revolver may not exceed the lessor of (A) the Revolver Commitment or
(B) the sum of (a) up to 85% of Gibraltar's "Eligible Accounts Receivable" plus
(b) up to 60% of Gibraltar's "Eligible Net Finished Goods and Raw Materials
Inventory." At no time may the sum of aggregate loan advances outstanding plus
the aggregate amount of Letter of Credit guarantees then extended exceed loan
availability. As part of the refinancing all outstanding letters of credit were
cash collateralized with Harris Bank from the proceeds of the refinancing. The
Company also pays a commitment fee of 0.5% on the difference between the average
daily loan balance and the amount of the Revolver.
The term loan bears interest at First Source's prime rate plus 0.75% or
LIBOR plus 2.75%. The Revolver bears interest at First Source's prime rate plus
1.25% or LIBOR plus 3.25%. The initial interest rates are at prime but may be
converted to LIBOR at the Company's option.
The proceeds from the new credit facility will be used to refinance the
Harris Bank credit facility, to repay the note payable related to the Alabama
facility, to pay the related transaction costs and to fund the future working
capital and capital expenditure needs of the Company. The new credit facility is
secured by a first priority perfected security interest in a lien on all assets
(real and personal tangible and intangible) of the Company excluding the
Burlington, North Carolina property, however, including any assets acquired
after closing.
During fiscal 1998, capital expenditures totaled $2.1 million as compared
with $2.6 million for fiscal 1997, and consisted primarily of additions to
machinery and equipment and building improvements. Gibraltar makes capital
improvements to improve efficiency and product quality and upgrades its
equipment by purchasing or leasing new or previously used equipment.
During the second half of fiscal 1998, the Company reassessed its
strategic direction which resulted in a decision to focus the Company's
operations on the folding carton business and to leverage the success of the
Company's largest folding carton Division, Great Plains Packaging. As a
result, it was announced on August 4 that Richard D. Hinrichs, President of
Great Plains had been appointed President and Chief Operating Officer of the
Company. The Company's major focus is to implement the programs and practices
that have contributed to Great Plains' success across the Company to improve
operations and profitability. It was also decided to close the Company's
Corporate office and move the Company's corporate functions to Great Plains.
As a result of its decision to focus on folding cartons, the Company
announced on September 23, 1998 that it was seeking offers for its Niemand
Industries Division which specializes in tubular spiral-wound paper packaging
and contract packaging. The Company anticipates completing this divestiture
in fiscal 1999. Niemand Industries recorded sales of $12,831,000, $14,392,000
and $14,989,000 and contributed a net (loss) income of approximately ($699,000),
$317,000 and $423,000 in fiscal 1998, 1997, and 1996, respectively, excluding
the impairment charge in fiscal 1998, intercompany interest, and corporate
overhead charges.
Management believes that funds generated by operations, and borrowings
available under its new credit facility with First Source will be sufficient to
meet working capital, and capital expenditure requirements in fiscal 1999 and
for the foreseeable future thereafter.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
ADOPTION OF FAS 130 - In June of 1997, the Financial Accounting Standards
Board issued SFAS No. 130, "Reporting Comprehensive Income," which requires
disclosures of comprehensive income to be included in the financial statements
for fiscal years beginning after December 15, 1997. The Company will include
such disclosure, if applicable, beginning with the first quarter of fiscal 1999.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None.
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<PAGE>
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer systems that use two digits
rather than four to define the applicable year, which may prevent such systems
from accurately processing dates ending in the Year 2000 and after. This could
result in system failures or in miscalculations causing disruption of
operations, including, but not limited to, an inability to process transactions,
to send and receive electronic data, or to engage in routine business activities
and operations.
The Company has completed its initial assessment of all currently used
computer systems and has developed a plan to correct those areas that will be
affected by the Year 2000 issue. The folding carton divisions of the Company
(Great Plains, RidgePak and Standard) have recently installed AmTech's Imaginera
software for their manufacturing and accounting IS systems. These information
systems are certified by the vendor to be Year 2000 Compliant. Niemand
Industries has done an extensive review of all its current computer programs and
files. They are evaluating options to upgrade all IS systems for Year 2000
compliance. They have completed the assessment phase, and will finalize their
decision on vendor selection by 10/31/98. Anticipated costs for these upgrades
is between $50,000 and $75,000.
The Company began in fiscal 1998 evaluating personal computer hardware and
software outside of the Company's IS systems. The Company's goal is to complete
any upgrade requirements by the end of fiscal 1999.
In addition to reviewing its internal systems, the Company is currently
compiling a list of its significant vendors to initiate communications
concerning Year 2000 compliance. There can be no assurance that the systems of
other companies that interact with the Company will be sufficiently Year 2000
compliant so as to avoid an adverse impact on the Company's operations,
financial condition and results of operations.
The Company presently anticipates that it will complete its Year 2000
assessment and remediation by the end of fiscal 1999. However, there can be no
assurance that the Company will be successful in implementing its Year 2000
remediation plan according to the anticipated schedule. In addition, the Company
may be adversely affected by the inability of other companies whose systems
interact with the Company to become Year 2000 compliant and by potential
interruptions of utility, communication or transportation systems as result of
Year 2000 issues.
Although the Company expects its internal systems to be Year 2000 compliant
as described above, the Company intends to prepare a contingency plan that will
specify what it plans to do if it or important external companies are not Year
2000 compliant in a timely manner. The Company expects to prepare its
contingency plan during calendar year 1999.
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about our
confidence in the Company's prospects and strategies and our expectations about
the Company's sales expansion, are forward-looking statements that involve risks
and uncertainties. These risks and uncertainties include, but are not limited
to, (1) market acceptance risks, including whether or not the Company will be
able to successfully gain market share against competitors many of which have
greater financial and other resources than the Company and the increasing trends
of customers to increase their buying power by consolidating the number of
vendors they maintain; (2) manufacturing capacity constraints, including whether
or not as the Company increases its sales it will be able to successfully
integrate its new customers into its existing manufacturing and distribution
system; (3) whether the Company will be able to pass on to its customers
price increases for paper and paperboard products in fiscal 1999; (4) continued
stability in other raw material prices, including oil-based resin and plastic
film; (5) the impact of government
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regulation on the Company's manufacturing, including whether or not additional
capital expenditures will be needed to comply with applicable environmental laws
and regulations as the Company's production increases; (6) pressure on prices
from competition or purchasers of the Company's products; and (7) the
introduction of competing products by other firms; (8) whether the proposed
sale of Niemand Industries will be successful. Investors and potential
investors are cautioned not to place undue reliance on these forward-looking
statements, which reflect the Company's analysis only as of the date hereof.
Gibraltar undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
These risks and others that are detailed in this Form 10-K and other documents
that the Company files from time to time with the Securities and Exchange
Commission, including quarterly reports on Form 10-Q and any current reports on
Form 8-K must be considered by any investor or potential investor in the
Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements, the report thereon, the
notes thereto, and supplementary data commencing at page F-1 of this Annual
Report on Form 10-K which financial statements, report, notes, and data are
incorporated herein by reference.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the identification, business experience and
directorships of each director and nominee for director of Gibraltar and the
information relating to the identification and business experience of
Gibraltar's executive officers, required by Item 401 of Regulation S-K, will be
presented in the sections entitled "Election of Directors - Nominees for
Director" and "Executive Compensation and Other Information - Executive
Officers" of Gibraltar's definitive proxy statement for the Annual Meeting of
Stockholders for fiscal 1998, and is hereby incorporated by reference. If the
definitive proxy statement for the 1998 annual meeting is not filed with the
Securities and Exchange Commission within 120 days of the end of Gibraltar's
1998 fiscal year, Gibraltar will amend this Annual Report and include such
information in the amendment.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to the cash compensation of directors and officers
required by Item 402 of Regulation S-K will be presented in the sections
entitled "Election of Directors - Director Compensation" and "Executive
Compensation and Other Information" of Gibraltar's definitive proxy statement
for the Annual Meeting of Stockholders for fiscal 1998 and is hereby
incorporated by reference. If the definitive proxy statement for the 1998 annual
meeting is not filed with the Securities and Exchange Commission within 120 days
of the end of Gibraltar's 1998 fiscal year, Gibraltar will amend this Annual
Report and include such information in the amendment.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information relating to security ownership required by Item 403 of
Regulation S-K will be presented in the section entitled "Voting Securities and
Principal Stockholders" of Gibraltar's definitive proxy statement for the Annual
Meeting of Stockholders for fiscal 1998 and is hereby incorporated by reference.
If the definitive proxy statement for the 1998 annual meeting is not filed with
the Securities and Exchange Commission within 120 days of the end of Gibraltar's
1998 fiscal year, Gibraltar will amend this Annual Report and include such
information in the amendment.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to certain relationships and transactions required
by Item 404 of Regulation S-K will be presented in the section "Executive
Compensation and Other Information - Certain Transactions" of Gibraltar's
definitive proxy statement for the Annual Meeting of Stockholders for fiscal
1998 and is hereby incorporated by reference. If the definitive proxy statement
for the 1998 annual meeting is not filed with the Securities and Exchange
Commission within 120 days of the end of Gibraltar's 1998 fiscal year, Gibraltar
will amend this Annual Report and include such information in the amendment.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Page
Independent Auditors' Report F-1
Consolidated Balance Sheets,
June 27, 1998 and June 28,1997 F-2
Consolidated Statements of Operations,
Years Ended June 27, 1998, June 28, 1997 and June 29, 1996 F-3
Consolidated Statements of Stockholders' Equity, Years Ended
June 27, 1998, June 28, 1997 and June 29, 1996 F-4
Consolidated Statements of Cash Flows,
Years Ended June 27, 1998, June 28, 1997 and June 29, 1996 F-5
Notes to Consolidated Financial Statements F-6 to F-18
All schedules of the Registrant for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable, or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore, have
been omitted.
(2) Exhibits
EXHIBITS
--------
3.1 Certificate of Incorporation, as amended, of Gibraltar Packaging Group,
Inc. (incorporated by reference to Exhibit 3.1 to Gibraltar's
Registration Statement on Form S-1 (File No. 33-44965), as amended,
filed January 9, 1992).
3.2 By-Laws of Gibraltar Packaging Group, Inc. (incorporated by
reference to Exhibit 3.2 to Gibraltar's Registration Statement on
Form S-1 (File No. 33-44965), as amended, filed January 9, 1992).
4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit
4.1 to Gibraltar's Registration Statement on Form S-1 (File No.
33-44965), as amended, filed January 9, 1992).
10.1 Agreement and Plan of Reorganization, dated as of January 7, 1992,
among Gibraltar Packaging Group, Inc., RidgePak Acquisition
Corporation, RidgePak Corporation, and the Shareholders of RidgePak
Corporation (incorporated by reference to Exhibit 10.1 to Gibraltar's
Registration Statement on Form S-1 (File No. 33-44965),
as amended, filed January 9, 1992).
10.2 Registration Rights Agreement, dated March 4, 1992, by and among
Gibraltar Packaging Group, Inc. and certain stockholders of Gibraltar
Packaging Group, Inc. (incorporated by reference to Exhibit 4.2 to
Gibraltar's Annual Report on Form 10-K for the year ended June 30, 1992
(File No. 00-19800)).
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<PAGE>
10.3 Employment Agreement, dated February 10, 1992, between Gibraltar
Packaging Group, Inc. and Deke C. Abbott, Jr. (incorporated by
reference to Exhibit 10.6 to Gibraltar's Registration Statement on
Form S-1 (File No. 33-44965), as amended, filed January 9, 1992).
10.4 Gibraltar Packaging Group, Inc. 1992 Incentive Stock Option Plan, dated
March 5, 1992 and amended as of April 28, 1994 (incorporated by
reference to Exhibit 10.5 to Gibraltar's Annual Report on Form 10-K for
the year ended July 2, 1994 (File No. 00-19800)).
10.5 Gibraltar Packaging Group, Inc. Director Stock Option Plan dated July
13, 1992 and amended as of April 28, 1994 (incorporated by reference to
Exhibit 10.6 to Gibraltar's Annual Report on Form 10-K for the year
ended July 2, 1994 (File No. 00-19800)).
10.6 Employment Agreement, dated December 1, 1992, between Gibraltar
Packaging Group, Inc. and Richard Hinrichs (incorporated by reference
to Exhibit 28.1 to Gibraltar's Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1992 (File No.
00-19800)).
10.7 Stock Purchase Agreement, dated January 28, 1993, by and among
Gibraltar Packaging Group, Inc., Standard Packaging and Printing Corp.
and each of the shareholders of Standard Packaging and Printing Corp.
(incorporated by reference to Exhibit 2.1 to Gibraltar's Current Report
on Form 8-K dated January 28, 1993 (File No. 00-19800)).
10.8 Registration Rights Agreement, dated as of January 28, 1993, between
Gibraltar Packaging Group, Inc. and Brady W. Dickson and Joan H.
Dickson (incorporated by reference to Exhibit 28.1 to Gibraltar's
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1993 (File No. 00-19800)).
10.9 Agreement and Plan of Reorganization, dated April 28, 1993, by and
among Gibraltar Packaging Group, Inc., Niemand Acquisition Corporation,
Niemand Holdings, Inc., Niemand Industries, Inc., and each of the
stockholders of Niemand Holdings, Inc. (incorporated by reference to
Exhibit 2.1 to Gibraltar's Current Report on Form 8-K dated April 28,
1993 (File No. 00-19800)).
10.10 Registration Rights Agreement, dated April 28, 1993, by and among
Gibraltar Packaging Group, Inc. and the former stockholders of Niemand
Holdings, Inc. listed on Schedule I thereto (incorporated by reference
to Exhibit 28.1 to Gibraltar's Current Report on Form 8-K dated April
28, 1993 (File No. 00-19800)).
10.11 Stock Sale Agreement, dated November 8, 1993, between Gibraltar
Packaging Group, Inc. and Golden Belt Manufacturing Company
(incorporated by reference to Exhibit 10.35 to Gibraltar's Annual
Report on Form 10-K for the year ended July 2, 1994 (File No.
00-19800)).
10.12 Agreement and Plan of Merger, dated as of March 17, 1995, as extended
by letter agreement dated June 15, 1995 and as terminated by letter
agreement dated August 3, 1995, among Caraustar Industries, Inc.,
GibPac Acquisition Company and Gibraltar Packaging Group, Inc.
(incorporated by reference to Exhibit 10.37 to Gibraltar's Annual
Report on Form 10-K for the year ended July 1, 1995 (File No.
00-19800)).
10.13 Gibraltar Packaging Group, Inc. 1996 Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit 10.39 to Gibraltar's Annual
Report 10-K for the year ended June 29, 1996 (File No. 00-19800)).
-20-
<PAGE>
10.14 Letter Agreement, dated September 21, 1996 between Gibraltar Packaging
Group, Inc. and Jon P. Crane regarding employment (incorporated by
reference to Exhibit 10.48 to Gibraltar's Annual Report on Form 10-K
for the year ended June 29, 1996 (File No.
00-19800)).
10.15 Letter Agreement, dated January 29, 1996 between Gibraltar Packaging
Group, Inc. and James A. Stajkowski regarding employment (incorporated
by reference to Exhibit 10.49 to Gibraltar's Annual Report on Form 10-K
for the year ended June 29, 1996 (File No. 00-19800)).
* 10.16 Letter Agreement, dated December 18, 1997 between Gibraltar
Packaging Group, Inc. and Richard D. Hinrichs regarding employment.
* 10.17 Secured Credit Agreement, dated July 31, 1998, among Gibraltar
Packaging Group, Inc., various financial institutions and First Source
Financial LLP, Individually and as Agent ("The Credit Agreement").
* 10.18 Term Note, dated July 31, 1998, in favor of First Source
Financial LLP, executed by Gibraltar Packaging Group, Inc. In the
principal amount of $25,000,000.
* 10.19 Revolving Note, dated July 31, 1998, in favor of First Source
Financial LLP, executed by Gibraltar Packaging Group, Inc. In the
principal amount of $15,000,000.
* 10.20 Security Agreement executed by GB Labels, Inc., dated July 31,
1998, in favor of First Source Financial LLP.
* 10.21 Security Agreement executed by RidgePak Corporation, dated July
31, 1998, in favor of First Source Financial LLP.
* 10.22 Security Agreement executed by Standard Packaging and Printing
Corp., dated July 31, 1998, in favor of First Source Financial LLP.
* 10.23 Security Agreement executed by Niemand Holdings, Inc., dated July
31, 1998, in favor of First Source Financial LLP.
* 10.24 Security Agreement executed by Niemand Industries, Inc., dated
July 31, 1998, in favor of First Source Financial LLP.
* 10.25 Pledge Agreement executed by Niemand Holdings, Inc., dated July
31, 1998, in favor of First Source Financial LLP.
* 10.26 Deed of Trust Security Agreement, executed by Gibraltar Packaging
Group, Inc., dated July 31, 1998, in favor of First Source Financial
LLP.
* 10.27 Deed of Trust Security Agreement, executed by Standard Packaging
and Printing Corp., dated July 31, 1998, in favor of First Source
Financial LLP.
* 10.28 Security Agreement executed by Gibraltar Packaging Group, Inc.,
dated July 31, 1998, in favor of First Source Financial LLP.
* 10.29 Pledge Agreement executed by Gibraltar Packaging Group, Inc.,
dated July 31, 1998, in favor of First Source Financial LLP.
-21-
<PAGE>
* 10.30 Guaranty, dated July 31, 1998 among Gibraltar Packaging Group, Inc.,
RidgePak Corporation, Standard Packaging and Printing Corp., Niemand
Holdings, Inc., Niemand Industries Inc., GB Labels, Inc. And First
Source Financial LLP.
* 10.31 Mortgage Security Agreement executed by RidgePak Corporation,
dated July 31, 1998 in favor of First Source Financial LLP.
* 10.32 Mortgage Security Agreement executed by Niemand Industries, Inc.,
dated July 31, 1998 in favor of First Source Financial LLP.
21.1 Subsidiaries of Gibraltar Packaging Group, Inc. (incorporated by
reference to Exhibit 21.1 to Gibraltar's Annual Report on Form 10-K for
the year ended July 1, 1995 (File No. 00-19800)).
* 23.1 Consent of Deloitte & Touche LLP.
* 27.1 Financial Data Schedule.
- -----------------
* Filed herewith.
(b) Reports on Form 8-K.
NONE.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
--------------------------
John W. Lloyd
Chief Financial Officer
Date: September 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Walter E. Rose /s/ John W. Lloyd
---------------------------------- ---------------------------
Walter E. Rose John W. Lloyd
Chief Executive Officer and Chief Financial Officer
Chairman of the Board (Principal Financial and
(Principal Executive Officer) Accounting Officer)
September 24, 1998 September 24, 1998
/s/ David G. Chandler /s/ Robert G. Shaw
---------------------------------- ---------------------------
David G. Chandler Robert G. Shaw
Director Director
September 24, 1998 September 24, 1998
/s/ Edgar D. Jannotta, Jr. /s/ John D. Strautnieks
---------------------------------- ---------------------------
Edgar D. Jannotta, Jr. John D. Strautnieks
Director Director
September 24, 1998 September 24, 1998
-23-
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
GIBRALTAR PACKAGING GROUP, INC.
WE HAVE AUDITED THE ACCOMPANYING CONSOLIDATED BALANCE SHEETS OF GIBRALTAR
PACKAGING GROUP, INC. AND ITS SUBSIDIARIES AS OF JUNE 27, 1998 AND JUNE 28,
1997, AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS, STOCKHOLDERS'
EQUITY, AND CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JUNE 27,
1998. THESE FINANCIAL STATEMENTS ARE THE RESPONSIBILITY OF THE COMPANY'S
MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON THESE FINANCIAL
STATEMENTS BASED ON OUR AUDITS.
WE CONDUCTED OUR AUDITS IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING
STANDARDS. THOSE STANDARDS REQUIRE THAT WE PLAN AND PERFORM THE AUDIT TO OBTAIN
REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERIAL
MISSTATEMENT. AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING
THE AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS. AN AUDIT ALSO INCLUDES
ASSESSING THE ACCOUNTING PRINCIPLES USED AND SIGNIFICANT ESTIMATES MADE BY
MANAGEMENT, AS WELL AS EVALUATING THE OVERALL FINANCIAL STATEMENT PRESENTATION.
WE BELIEVE THAT OUR AUDITS PROVIDE A REASONABLE BASIS FOR OUR OPINION.
IN OUR OPINION, SUCH FINANCIAL STATEMENTS PRESENT FAIRLY, IN ALL MATERIAL
RESPECTS, THE FINANCIAL POSITION OF GIBRALTAR PACKAGING GROUP, INC. AND
SUBSIDIARIES AT JUNE 27, 1998 AND JUNE 28, 1997, AND THE RESULTS OF THEIR
OPERATIONS AND THEIR CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
JUNE 27, 1998 IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
STAMFORD, CONNECTICUT
SEPTEMBER 23, 1998
F-1
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
JUNE 27 JUNE 28
1998 1997
ASSETS
CURRENT ASSETS:
Cash $ - $ 110
Accounts receivable (NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $162 AND $127, RESPECTIVELY) 7,820 8,840
Inventories 10,667 9,006
Deferred income taxes 892 412
Prepaid and other current assets 483 437
------ -----
Total current assets 19,862 18,805
PROPERTY, PLANT AND EQUIPMENT - Net 25,362 34,544
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED
(NET OF ACCUMULATED AMORTIZATION OF $3,368 AND
$2,783, RESPECTIVELY) 13,775 20,524
OTHER ASSETS (NET OF ACCUMULATED AMORTIZATION OF $1,199
AND $137, RESPECTIVELY) 258 1,185
------ ------
TOTAL $59,257 $75,058
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $1,005 $ -
Current portion of long-term debt 2,034 3,313
Accounts payable 9,310 5,947
Accrued expenses 2,344 2,775
Income taxes payable 200 692
------ ------
Total current liabilities 14,893 12,727
LONG-TERM DEBT - Net of current portion 27,872 27,382
DEFERRED INCOME TAXES 1,659 3,028
OTHER LONG-TERM LIABILITIES 815 821
------ ------
Total liabilities 45,239 43,958
------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000
shares authorized; none issued
Common stock, $.01 par value; 10,000,000 shares
authorized; 5,041,544 issued and outstanding 50 50
Additional paid-in capital 28,162 28,162
Retained earnings (deficit) (14,194) 3,019
Minimum pension liability in excess of unrecognized
prior service costs - (131)
------ ------
Total stockholders' equity 14,018 31,100
------- -------
TOTAL $59,257 $75,058
======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 27, 1998, JUNE 28, 1997 AND JUNE 29, 1996
(IN THOUSANDS EXCEPT SHARE DATA)
1998 1997 1996
NET SALES $75,890 $74,710 $74,384
COST OF GOODS SOLD 64,138 59,396 58,328
------ ------ ------
GROSS PROFIT 11,752 15,314 16,056
------ ------ ------
OPERATING EXPENSES:
Selling 4,065 4,301 4,128
General and administrative 7,508 6,475 5,733
Amortization of excess of purchase price
over net assets acquired 585 586 582
Restructuring charges 170 - 1,038
Impairment of long-lived assets 14,083 - -
------ ------ ------
Total operating expenses 26,411 11,362 11,481
------ ------ ------
INCOME (LOSS) FROM OPERATIONS (14,659) 3,952 4,575
------- ------ ------
OTHER (INCOME) EXPENSE:
Interest expense 4,016 3,033 3,218
Interest income - - (5)
Other (income) expense - net (27) 28 (5)
------ ------ -------
Other expense - net 3,989 3,061 3,208
------ ------ -------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (18,648) 891 1,367
PROVISION (BENEFIT) FOR INCOME TAXES (1,435) 559 666
------- ------ ------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (17,213) 332 701
EXTRAORDINARY ITEM (net of tax effect of $66)
(Write-off of finance charges as a result of
debt repayment) - (107) -
-------- ------ -------
NET INCOME (LOSS) ($17,213) $ 225 $ 701
======== ====== ======
BASIC AND DILUTED PER COMMON SHARE AMOUNTS:
Income (Loss) Before Extraordinary Item ($3.41) $ 0.07 $ 0.14
====== ====== ======
Net Income (Loss) ($3.41) $ 0.05 $ 0.14
====== ====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING
(basic and diluted) 5,041,544 5,041,544 5,041,544
========= ========= ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 27, 1998, JUNE 28, 1997 AND JUNE 29, 1996
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK
------------------ ADDITIONAL RETAINED
NUMBER OF PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) OTHER TOTAL
BALANCE, July 1, 1995 5,041,544 $ 50 $ 28,162 $2,093 $ - $30,305
Net income 701 701
--------- ------ -------- ------ ----- -------
BALANCE, June 29, 1996 5,041,544 50 28,162 2,794 - 31,006
Net income 225 225
Adjustment for minimum
pension liability (131) (131)
--------- ------ -------- ------ ----- -------
BALANCE, June 28, 1997 5,041,544 50 28,162 3,019 (131) 31,100
Net loss (17,213) (17,213)
Adjustment for minimum
pension liability 131 131
--------- ------ -------- ------ ----- -------
BALANCE, June 27, 1998 5,041,544 $ 50 $28,162 ($14,194) $ - $14,018
========= ====== ======== ======== ===== =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 27, 1998, JUNE 28, 1997 AND JUNE 29, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($17,213) $225 $701
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Extraordinary item - write-off of finance charges - 173
Impairment writedown of long-lived assets 14,083 - -
Depreciation 3,346 3,203 3,182
Amortization 1,647 774 710
(Gain) Loss on sale of property, plant and equipment (27) 32 31
Deferred income taxes (1,849) - 551
Changes in operating assets and liabilities:
Accounts receivable - net 1,020 (1,980) 824
Inventories (1,661) 166 1,315
Prepaid expenses and other assets (197) 213 23
Accounts payable 3,363 686 (806)
Income taxes payable (492) 424 495
Accrued expenses and other liabilities (306) 275 15
------ ------ ------
Net Cash Provided by Operating Activities 1,714 4,191 7,041
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 103 28 108
Purchases of property, plant and equipment (2,143) (2,640) (1,480)
------ ------ ------
Net Cash Used in Investing Activities (2,040) (2,612) (1,372)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit
facility 3,149 356 (2,196)
Net principal repayments of long-term debt (3,801) (30,557) (3,765)
Net repayments under capital leases (137) (103) (6)
Proceeds from refinancing - 31,050 -
Refinancing costs - (1,173) -
------ ------ ------
Net Cash Used in Financing Activities (789) (427) (5,967)
------ ------ ------
NET (DECREASE) INCREASE IN CASH (1,115) 1,152 (298)
CASH (CHECKS NOT YET PRESENTED) AT
BEGINNING OF YEAR 110 (1,042) (744)
------ --------- ------
(CHECKS NOT YET PRESENTED) CASH AT END OF YEAR ($1,005) $110 ($1,042)
------ --------- ------
SUPPLEMENTAL DISCLOSURE:
Income taxes paid $899 $62 $59
====== ====== ======
Interest paid $2,997 $2,376 $2,902
====== ====== ======
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations $61 $198 $301
====== ====== ======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 27, 1998, JUNE 28, 1997 AND JUNE 29, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of Gibraltar Packaging Group, Inc. (the Company) and its
wholly owned subsidiaries - RidgePak Corporation (Flashfold Carton), Standard
Packaging & Printing Corporation, Niemand Industries, Inc. and GB Labels, Inc.
All significant intercompany accounts and transactions have been eliminated.
DESCRIPTION OF BUSINESS - The Company designs and manufactures high quality
specialty packaging products in facilities located in Nebraska, Indiana, Alabama
and North Carolina, and markets these products to customers throughout the
United States and Canada. The Company's products include folding cartons,
specialty laminated containers, pressure-sensitive labels, flexible packaging,
tubular packaging and contract packaging and filling for a wide range of
businesses.
FISCAL YEAR - The Company ends its fiscal year on the Saturday closest to June
30.
ACCOUNTS RECEIVABLE - The changes in the allowance for doubtful accounts
receivable consist of the following (in thousands):
YEARS ENDED
--------------------------------
JUNE 27 JUNE 28 JUNE 29
1998 1997 1996
Allowance, Beginning of Year $ 127 $ 231 $ 211
Provision for Uncollectible Accounts 184 74 171
Write-off of Uncollectible Accounts (149) (178) (151)
------- ------- -------
Allowance, End of Year $ 162 $ 127 $ 231
======= ======= =======
INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out
method) or market.
PROPERTY, PLANT AND EQUIPMENT - Depreciation is provided using the straight-line
method over the following estimated useful lives:
Buildings 30 years
Machinery and equipment 2-20 years
Vehicles 3-8 years
Furniture and fixtures 3-10 years
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED - The excess of the purchase
price over the net assets acquired is being amortized over a forty-year period
on a straight-line basis. The carrying value of goodwill is evaluated in
relation to the operating performance and future undiscounted net cash flows of
the related acquired businesses.
F-6
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the recoverability of
long-lived assets not held for sale by measuring the carrying amount of the
assets against the estimated undiscounted future cash flows associated with
them. Based on these evaluations, there were no adjustments to the carrying
value on long-lived assets in fiscal 1997 and 1996. In connection with a
modification of the Company's strategic plan, the Company decided to divest of
one of its subsidiaries, Niemand Industries, Inc. The evaluation of the
recoverability of long-lived assets held for sale are based on comparing the
assets carrying amount with its fair value less cost to sell. Based on fair
market value estimates, the Company recorded a charge of $14,083,000 in the
fourth quarter of fiscal 1998 to write down the carrying amount of goodwill and
fixed assets of Niemand Industries to estimated fair value less cost to sell.
Due to uncertainties inherent in the estimation process, it is reasonably
possible that the ultimate loss on the sale of Niemand Industries may
vary from the current estimate.
The Company will not depreciate any of the remaining long-lived assets of
Niemand Industries while they are held for sale. The Company anticipates
completing this divestiture in fiscal 1999. Niemand Industries recorded sales of
$12,831,000, $14,392,000 and $14,989,000 and contributed a net (loss) income of
approximately ($699,000), $317,000 and $423,000, in fiscal 1998, 1997 and 1996,
respectively, excluding the impairment charge in fiscal 1998, intercompany
interest and corporate overhead charges.
OTHER ASSETS - Costs associated with obtaining financing arrangements are
included in other assets. At June 27, 1998, unamortized financing costs of
$854,000 related to the credit agreement with Harris Trust and Savings Bank
(Harris Bank) were amortized as a result of the acceleration of the maturity
date of such credit agreement to July 1998.
REVENUE RECOGNITION - Sales and related cost of sales are recognized upon the
earlier of shipment of products or acceptance by the customer.
NET INCOME (LOSS) PER COMMON SHARE - The Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," in the second quarter of fiscal 1998, as required. The new standard
requires dual presentation of basic and diluted earnings per share for all
periods for which an income statement is presented. Basic income per common
share is based on the weighted average outstanding common shares during the
respective period. Diluted income per share is based on the weighted average
outstanding common shares and the effect of all dilutive potential common
shares, such as stock options. All prior period per share data has been restated
in accordance with SFAS 128.
ADOPTION OF FAS 130 - In June of 1997, the Financial Accounting Standards Board
issued SFAS No. 130, "Reporting Comprehensive Income," which requires
disclosures of comprehensive income to be included in the financial statements
for fiscal years beginning after December 15, 1997. The Company will include
such disclosure, if applicable, beginning with the first quarter of fiscal 1999.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
2. INVENTORIES
Inventories consisted of the following (in thousands):
JUNE 27 JUNE 28
1998 1997
Finished goods $ 6,506 $ 5,262
Work in process 1,396 1,160
Raw materials 2,319 2,160
Manufacturing supplies 446 424
------- -------
$10,667 $ 9,006
======= =======
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (at cost) consisted of the following (in
thousands):
JUNE 27 JUNE 28
1998 1997
Land $ 699 $ 676
Buildings 11,558 11,703
Machinery, equipment
and vehicles 28,023 33,559
Furniture and fixtures 2,191 1,828
Construction-in-progress 808 1,517
------- -------
43,279 49,283
Less accumulated depreciation 17,917 14,739
------- -------
$25,362 $34,544
======= =======
4. FINANCING AGREEMENTS
Long-term debt consisted of (columnar amounts in thousands):
JUNE 27 JUNE 28
1998 1997
Bank term loan, monthly principal payments of
$312,500 through August 1, 1998, balance due
upon maturity on August 10, 1998, interest is
payable monthly. $ 20,000 $ 23,750
Revolving credit facility, matures August 10,
1998, interest is payable monthly. 9,099 5,950
Note payable, for capital expansion of Marion,
Alabama facility, due in monthly principal and
interest installments of $8,000 through June,
2008. Note bears interest at 5% per annum. 746 797
Capital lease obligations 61 198
-------- --------
Total 29,906 30,695
Less current portion 2,034 3,313
-------- --------
Long-term debt $ 27,872 $ 27,382
======== ========
Through various amendments of the credit agreement during fiscal 1998, the
Company and Harris Bank agreed to accelerate the maturity of the Company's bank
credit agreement to August 10,
F-8
<PAGE>
1998, and to eliminate all financial covenants as of June 27, 1998. The
Company's bank credit agreement with Harris Bank consists of a $25 million term
loan and a $10 million revolving credit facility. The amount available under the
revolving credit facility is reduced by the amount of outstanding standby
letters of credit, $222,000 and $474,000 as of June 27, 1998 and June 28, 1997,
respectively. The standby letters of credit relate to workman's compensation
insurance policies. At June 27, 1998, both facilities bear interest at the banks
prime rate plus 1%. The banks prime rate was 8.5% at June 27, 1998. At June 28,
1997, the facilities bore interest rates based on Harris Bank's prime rate or
the London Interbank Offered Rate (LIBOR). The interest rate for the term loan
was 8.26% based on the LIBOR rate, and the effective interest rate for the
revolving credit facility was 8.12%.
On July 31, 1998, the Company refinanced its debt. The new facility with First
Source Financial LLP (First Source) provides for a five year $25 million term
loan and a five year $15 million working capital revolving line of credit
(Revolver). The term loan requires principal payments of $562,500 in the first
year of the loan, with the first quarterly payment due October 15, 1998. The
balance of the term loan is due in quarterly installments of $625,000 in fiscal
year 2000, $687,500 per quarter through April, 2003 and the balance of
$12,687,500 due on July 31, 2003.
The Revolver provides for a revolving line of credit under a borrowing base
commitment subject to certain loan availability requirements. Loan availability
under the Revolver may not exceed the lessor of (A) the Revolver Commitment or
(B) the sum of (a) up to 85% of Gibraltar's "Eligible Accounts Receivable" plus
(b) up to 60% of Gibraltar's "Eligible Net Finished Goods and Raw Materials
Inventory." At no time may the sum of aggregate loan advances outstanding plus
the aggregate amount of Letter of Credit guarantees then extended exceed loan
availability. As part of the refinancing, all outstanding letters of credit were
cash collateralized with Harris Bank from the proceeds of the refinancing. The
Company also pays a commitment fee of 0.5% on the difference between the average
daily loan balance and the amount of the Revolver.
The new credit facility contains certain restrictive covenants including
financial covenants related to Net Worth, minimum interest coverage, capital
expenditures, the debt ratio and fixed charge coverage.
The term loan bears interest at First Source's prime rate plus 0.75% or LIBOR
plus 2.75%. The Revolver bears interest at First Source's prime rate plus 1.25%
or LIBOR plus 3.25%. The initial interest rates are at prime but may be
converted to LIBOR at the Company's option.
The proceeds from the new credit facility will be used to refinance the Harris
Bank credit facility, to repay the note payable related to the Alabama facility,
to pay the related transaction costs and to fund the future working capital and
capital expenditure needs of the Company. The new credit facility is secured by
a first priority perfected security interest in a lien on all assets (real and
personal, tangible and intangible) of the Company excluding the Burlington,
North Carolina property, however, including any assets acquired after closing.
During fiscal 1997, the Company purchased an interest rate cap agreement to
reduce the impact of changes in interest rates. The cap agreement entitles the
Company to receive from the counterparty (a major bank) the notional amount
multiplied by the differences between the variable 1-month LIBOR and cap rates
when the 1-month LIBOR exceeds the quoted cap rate of 10%. The above agreement
matured on June 30, 1998 and the related premium was fully amortized at June 27,
1998.
Anticipated maturities of long-term debt subsequent to June 27, 1998, pursuant
to the new credit facility, and future minimum payments under finance leases are
as follows (in thousands):
AMOUNTS
1999 $ 2,034
2000 2,449
2001 2,694
2002 2,755
2003 2,753
Thereafter 17,221
------
Total $29,906
=======
F-9
<PAGE>
5. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in
thousands):
JUNE 27 JUNE 28 JUNE 29
1998 1997 1996
Current:
Federal $ 50 $ 478 $ 30
State 364 31 85
Deferred (1,849) 50 551
------- ------- -------
($1,435) $ 559 $ 666
======= ======= =======
The following represents a reconciliation between the actual income tax expense
and income taxes computed by applying the statutory federal income tax rate to
income (loss) before income taxes:
JUNE 27 JUNE 28 JUNE 29
1998 1997 1996
Statutory rate ($6,341) $ 303 $ 465
State income tax effect (84) 33 81
Reduction of valuation allowance - - (119)
Disallowed losses with respect
to impaired asset writedown 4,788 - -
Amortization of excess of purchase price over
net assets acquired 199 199 199
Other - net 3 24 40
------- ------- ------
Total ($1,435) $ 559 $ 666
------- ------- -------
Deferred income tax (liabilities) assets result from reporting income and
expenses in different periods for tax and financial reporting purposes. The
deferred tax liabilities and assets are comprised of the following (in
thousands):
JUNE 27 JUNE 28
1998 1997
Deferred income tax assets:
Difference in basis of amortizable assets $ 836 $ 846
Non-deductible accrued liabilities 1,058 330
Net operating loss carryforwards of
a subsidiary company 699 699
State net operating loss carryforwards 684 590
State tax credits carryforward 763 615
Federal net operating loss carryforward 1,812 760
AMT credit carryforward 385 385
Differences in the basis of inventory
for tax purposes 241 370
Other - net 188 223
------- --------
Total 6,666 4,818
Deferred tax asset valuation allowance (147) (147)
------- --------
Net 6,519 4,671
------- --------
Deferred tax liabilities:
Difference in basis of property, plant
and equipment (7,064) (7,210)
Other (222) (77)
------- --------
Total (7,286) (7,287)
------- --------
Net deferred income tax liability ($767) ($2,616)
======= ========
F-10
<PAGE>
At June 27, 1998, the Company had the following tax net operating loss
carryfowards for federal income tax purposes (in thousands):
EXPIRATION AMOUNTS
2010 $ 2,729
2011 2,083
2012 267
2013 2,559
--------
Total $ 7,638
========
Approximately $2.3 million of such losses relate to a subsidiary company, which
are available to be utilized only against future taxable income of such
subsidiary.
At June 27, 1998, the Company had a state investment tax credit carryforward of
approximately $0.7 million which expires if unutilized by the year 2005. These
credits are available to offset both Nebraska state income tax and Nebraska
sales tax on qualifying purchases.
On October 7, 1997, the Company agreed to settle the Internal Revenue Services
examination of the Company's income tax returns for the years 1992 through 1995.
The settlement amount was fully reserved for by the Company as of June 28, 1997.
6. EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory defined benefit pension plan (the
benefit plan) covering substantially all of the RidgePak Corporation hourly
employees fulfilling participation requirements. Benefits are based on the
employee's years of credited service. The Company's funding policy is to
contribute annually the minimum amount required under ERISA. Plan assets are
held by an independent trustee and consist of U.S. Government securities, time
deposits, common stocks, corporate bonds and collective investment funds.
The net periodic pension cost and assumptions used for the years presented
included the following components (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
JUNE 27 JUNE 28 JUNE 29
1998 1997 1996
Service cost-benefits earned during the period $ 49 $ 43 $ 36
Interest cost on projected benefit obligation 34 30 27
Actual return on plan assets (98) (25) (53)
Net amortization and deferral 66 (3) 33
-------- ------- --------
Net periodic pension cost $ 51 $ 45 $ 43
======== ======= ========
Discount rate used to calculate expense 6.50% 7.75% 7.50%
Expected long-term rate of return on plan assets 8.00% 8.00% 8.00%
</TABLE>
F-11
<PAGE>
The following table sets forth the benefit plans' funded status and the amounts
recognized in the Company's consolidated balance sheets (in thousands):
JUNE 27 JUNE 28
1998 1997
Actuarial present value of benefit obligations:
Vested benefit obligation $ 413 $ 371
======= ========
Accumulated benefit obligation $ 536 $ 467
======= ========
Projected benefit obligation for
service rendered to date $ (536) $ (467)
Plan assets at fair value 593 428
------- --------
Plan assets in excess of (less than)
projected benefit obligation 57 (39)
Unrecognized loss 117 131
------- --------
Prepaid pension cost $ 174 $ 92
======= ========
As is required by SFAS No. 87, "Employers' Accounting for Pensions," for plans
where the accumulated benefit obligation exceeds the fair value of plan assets,
the Company recognized in the June 28, 1997 consolidated balance sheet a minimum
liability of the unfunded accumulated benefit obligation as an accrued liability
with an offsetting equity adjustment. As of June 28, 1997, the minimum liability
amounted to $131,000, and no such provision was required for the period ended
June 27, 1998.
The Company also sponsors a defined contribution 401(k) plan (the Gibraltar
Plan). Employees are eligible to participate in the Gibraltar Plan upon
completion of six months of credited service. Participants fully vest in Company
contributions after five years with partial vesting after one year. An employee
may contribute up to 15% of his or her earnings on a pre-tax basis subject to
IRS limitations. The Company matches 25% of an employee's contribution up to a
maximum of 4% of eligible compensation. The Company also makes a quarterly
profit sharing contribution when the earnings per share of Gibraltar stock is
$0.15 per share or higher in any fiscal quarter. The profit sharing portion of
each participant's account is invested in Gibraltar stock.
The Company's contributions to the Gibraltar Plan for the years ended June 27,
1998, June 28, 1997, and June 29, 1996 were approximately $94,000, $77,000 and
$76,000, respectively.
7. STOCK OPTION PLANS
The 1992 Incentive Stock Option Plan (the 1992 Plan) provides for grants to key
employees of the Company of options to purchase in the aggregate up to 300,000
shares of the Company's common stock with exercise prices equal to or greater
than the market price at the date of grant. Options granted under the 1992 Plan
are exercisable no earlier than six months and no later than ten years from the
grant date.
The Director Stock Option Plan (the Directors Plan) provides for each
independent director to receive a grant of an option to purchase 3,000 shares of
the Company's common stock at an exercise price equal to the market price at the
date such person is elected to the board. Options granted under the Directors
Plan are exercisable no earlier than six months and no later than ten years from
the grant date.
The 1996 Non-Qualified Stock Option Plan (the 1996 Plan) is administered by the
Compensation Committee (the Committee) of the Board of Directors of the Company,
which determines the exercise price of options awarded on the grant date. The
Company may grant to key employees options to purchase in the aggregate up to
300,000 shares of the Company's common stock. Options granted under the 1996
Plan are exercisable no earlier than six months and no later than ten years from
the grant date. The Committee may further limit the exercisability of the
options in such manner as the Committee deems appropriate, including, without
limitation, the achievement
F-12
<PAGE>
of specified performance goals or other criteria.
Of the 225,000 shares granted August 1, 1996, all shares were granted at an
exercise price equal to the market price on that date. Any exercise of options
must be for a minimum of 500 shares of Stock and shall only be exercisable in
accordance with the following vesting schedule:
Date Shares of Stock May Be Purchased Percentage of Shares of Stock
------------------------------------- -----------------------------
Six months from Grant Date 20%
1 year from Grant Date 20%
2 years from Grant Date 20%
3 years from Grant Date 20%
4 years from Grant Date 20%
The specific performance criteria which must be met before these shares can
become vested are as follows:
Shares Vesting Performance Criteria
-------------- --------------------
1 year from Grant Date Fair Market Value of Stock equal to or greater
than $6.00 per share
2 years from Grant Date Fair Market Value of Stock equal to or greater
than $7.00 per share
3 years from Grant Date Fair Market Value of Stock equal to or greater
than $8.00 per share
4 years from Grant Date Fair Market Value of Stock equal to or greater
than $9.00 per share
The 225,000 options shall become immediately fully exercisable if any of the
following occurs:
1. If there occurs any transaction that has the result that stockholders
of the Company cease to own at least 51% of the voting stock of the
Company.
2. The stockholders of the Company approve a plan of merger,
consolidation, reorganization, liquidation or dissolution in which the
Company does not survive.
3. The stockholders of the Company approve a plan for the sale, lease,
exchange, transfer, assignment or other disposition of all or
substantially all the property and assets of the Company.
F-13
<PAGE>
A summary of stock option transactions under the Company's employee option plans
and the Director's stock plan for each of the three years in the period ended
June 27, 1998 is as follows:
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ --------------
Outstanding at July 1, 1995 250,334 $ 7.57
--------------------------
Granted - -
Exercised - -
Canceled or Lapsed (111,000) 7.62
--------------------------
Outstanding at June 29, 1996 139,334 7.54
--------------------------
Granted 225,000 4.00
Exercised - -
Canceled or Lapsed (47,500) 7.91
--------------------------
Outstanding at June 28, 1997 316,834 4.97
--------------------------
Granted - -
Exercised - -
Canceled or Lapsed (36,000) 6.85
--------------------------
Outstanding at June 27, 1998 280,834 $ 4.73
-----------------------------------------------------------------------
Shares exercisable at June 29, 1996 98,336 $ 7.04
Shares exercisable at June 28, 1997 127,334 6.04
Shares exercisable at June 27, 1998 100,834 $ 6.03
The following table summarizes information about stock options outstanding at
June 27, 1998:
<TABLE>
<CAPTION>
<S> <C>
Weighted
Range of Avg. Remaining Weighted Weighted
Exercise Number Contractual Average Number Average
Prices Outstanding Life Exercise Price Exercisable Exercisable
------------------------------------------------------------------------------------
$4.00 225,000 8.1 years $ 4.00 45,000 $ 4.00
$6.00 - $6.50 22,334 4.0 years 6.02 22,334 6.02
$8.00 - $9.00 33,500 5.8 years 8.76 33,500 8.76
----------------------------------------------------------------------
280,834 7.5 Years $ 4.73 100,834 $ 6.03
------------------------------------------------------------------------------------
</TABLE>
The Company accounts for its stock-based compensation under the provisions of
APB Opion 25, "Accounting for Stock Issued to Employees," which utilizes the
intrinsic value method. No compensation cost has been recognized related to the
Company's stock option plans. Had compensation cost been determined based on the
fair value of the options at the date of grant consistent with the requirements
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," the Company's net income (loss) and earnings per
share would have been reduced to the pro forma amounts indicated below:
JUNE 27 JUNE 28
1998 1997
Net income (loss) applicable to common shareholders
As reported ($17,213) $ 225
Pro forma (17,242) 199
Net income (loss) per basic and diluted common share
As reported ($3.41) $ 0.05
Pro forma (3.42) 0.04
F-14
<PAGE>
The fair value of stock options granted in fiscal 1997 was estimated at the date
of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
JUNE 28
1997
Risk free interest rate 6.1%
Expected life of option grants 4
Expected volatility 32.0%
Expected dividend yield 0
At June 27, 1998, the stock option exercise prices for all three plans exceeded
the market value of the Company's common stock and are therefore excluded from
the Company's earnings per share calculation.
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES - The Company leases office space, manufacturing equipment,
computer equipment, vehicles and warehouse space under non-cancelable operating
leases. Rent expense for the years ended June 27, 1998, June 28, 1997, and June
29, 1996 under such lease agreements was approximately $1,396,000, $960,000 and
$933,000, respectively. In addition, rental income related to sub-leases on
office space for the year ended June 29, 1996 approximated $139,000. Due to the
relocation of the Corporate office as described in Note 10, all sub-leases were
terminated during fiscal year 1996. As of June 27, 1998, approximate minimum
future lease commitments were as follows (in thousands):
AMOUNTS
1999 $1511
2000 1191
2001 1050
2002 727
2003 365
Thereafter 478
---------
Total $5322
=========
LEGAL PROCEEDINGS - From time to time, the Company is a party to certain
lawsuits and administrative proceedings that arise in the conduct of its
business. While the outcome of these lawsuits and proceedings cannot be
predicted with certainty, management believes that, if adversely determined, the
lawsuits and proceedings, either singularly or in the aggregate, would not have
a material adverse effect on the financial condition, results of operations, or
net cash flows of the Company.
ENVIRONMENTAL MATTER - In May 1995, the Company discovered groundwater
contamination at its Burlington, North Carolina facility. Based on work
performed by its environmental consultants, the Company established a reserve of
$750,000 for such remediation costs in fiscal 1995. The Company's accrual for
such remediation costs included in other long-term liabilities on the
Consolidated Balance Sheet approximates $578,000 and $598,000 as of June 27,
1998 and June 28, 1997, respectively. Incurred expenses as of June 27, 1998
related to remediation totaled $172,000. In June of 1998, the Company completed
a follow-up assessment of the facility which was then filed with the Division of
Water Quality (DWQ). The Company is awaiting a reply from the DWQ and is unable
to determine whether amounts in excess of the established accrual will be
incurred as a result of the remediation efforts or other related claims, if any.
Management believes that the ultimate resolution of this and other environmental
matters will not materially affect the financial position or results of future
operations and cash flows of the Company.
EMPLOYMENT AGREEMENTS - The Company has employment agreements with certain
officers and management personnel. The terms of these agreements are specific to
each employee.
F-15
<PAGE>
9. RELATED PARTY TRANSACTIONS
Certain officers of the Company hold an equity interest in Rostra Technologies,
Inc. (Rostra), a related party. During fiscal years 1998, 1997 and 1996, the
Company paid $452,433, $389,423 and $228,834, respectively, to Rostra in
management fees for services provided by the Company's CEO and CFO. At June 27,
1998 and June 28, 1997, the Company owed Rostra $66,029 and $179,190,
respectively, for unpaid fees.
In January of 1997, the Company entered into a note receivable with an officer
of the Company with interest at 5.63% accruing monthly. The balance at June 27,
1998 and June 28, 1997 was $0 and $111,605, respectively.
10. SEVERANCE, OFFICE MOVING AND RESTRUCTURING CHARGES
In fiscal 1996, the Company recorded a pre-tax charge of $1,038,000 for
severance of nine members of senior management ($937,000) and other costs with
no future benefits resulting from the move of the corporate office ($101,000)
from Charlotte, North Carolina to Westport, Connecticut. The charge was largely
recorded in the second ($249,000) and third ($745,000) quarters of the fiscal
year. The costs related to the office move included amounts for lease
terminations and the write-off of leasehold improvements.
The move was completed by June 29, 1996.
At June 27, 1998 and June 27, 1997, accrued liabilities and other long-term
liabilities included approximately $222,000 and $300,000, respectively, of
severance costs associated with the Company's fiscal 1996 restructuring. The
majority of the cash outlays related to the fiscal 1996 restructuring charges
were made in the fourth quarter of fiscal 1996 and during fiscal 1997.
In the second quarter of fiscal 1998, the Company approved a plan to reduce
costs through a series of organizational and facility consolidations. A
restructuring charge of $170,000 was recorded relating to severance costs for
divisional personnel. Other costs of approximately $500,000 relating to the
reorganization are included in general and administrative expenses and consist
of severance and relocation costs. At. June 27, 1998, the remaining liability of
approximately $245,000 relates to severance costs. The majority of the fiscal
1998 accrued termination charges will be paid during fiscal 1999.
11. CUSTOMER CONCENTRATION
Sales to one customer, Smead Manufacturing, represented approximately 11.1%,
11.0% and 10.6% of net sales in fiscal years 1998, 1997 and 1996, respectively.
12. FINANCIAL INSTRUMENTS AND OFF BALANCE SHEET RISK
CONCENTRATION OF CREDIT RISK - Financial instruments that potentially subject
the Company to credit risk consist principally of receivables. The Company
believes the concentration of credit risk in its accounts receivables is
substantially mitigated by the Company's ongoing credit evaluation process and
due to the large number of customers comprising the Company's customer base. The
Company does not generally require collateral from customers. The Company
evaluates the need for an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends and other
information.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount of cash, accounts
receivable and accounts payable approximates fair value because of the
short-term maturity of these instruments.
F-16
<PAGE>
The carrying value of the Company's borrowings under its long-term revolving
credit agreement and other long-term borrowings approximates fair value based on
quoted market prices for the same or similar instruments.
The fair value of the Company's letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate or settle
the obligations. As of June 27, 1998, the fair value of the letters of credit
was $222,000.
The fair value of the Company's interest rate cap agreement is based on the
estimated cost to terminate or settle the obligation. As of June 27, 1998 the
fair value of the agreement was zero.
DERIVATIVES - The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate risks. (see Note 4).
13. SUBSEQUENT EVENT
On July 16, 1998, the Company's Board of Directors approved a plan to close the
Westport Connecticut office and relocate the corporate office functions to
Hastings, Nebraska. The Company has estimated the costs to complete the move
will be between $200,000 and $300,000. These costs will be incurred during the
fiscal year ending July 3, 1999.
F-17
<PAGE>
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended June 27, 1998 and June 28, 1997 (in thousands, except per share data):
<TABLE>
<CAPTION>
<S> <C>
QUARTER ENDED
-----------------------------------------------------
1998 SEPTEMBER 30 DECEMBER 31(1) MARCH 31 JUNE 27(2) YEAR
Net Sales $ 19,328 $ 18,619 $ 18,954 $ 18,989 $ 75,890
Gross Profit 3,547 2,224 3,164 2,817 11,752
Net Income (Loss) 14 (1,877) (137) (15,213) (17,213)
Per Common Share Amounts:
(basic and diluted)
Income (Loss) before
Extraordinary Item $ - $ (0.37) $ (0.03) $ (3.01) $ (3.41)
Net Income (Loss) $ - $ (0.37) $ (0.03) $ (3.01) $ (3.41)
QUARTER ENDED
-----------------------------------------------------
1997 SEPTEMBER 30(3) DECEMBER 31 MARCH 31 JUNE 28 YEAR
Net Sales $ 18,472 $ 17,829 $ 18,817 $ 19,592 $ 74,710
Gross Profit 3,570 3,600 4,092 4,052 15,314
Income (Loss) before
Extraordinary Item (66) 39 235 124 332
Net Income (Loss) (173) 39 235 124 225
Per Common Share Amounts:
(basic and diluted)
Income (Loss) before
Extraordinary Item $ (0.02) $ 0.01 $ 0.05 $ 0.03 $ 0.07
Net Income (Loss) $ (0.04) $ 0.01 $ 0.05 $ 0.03 $ 0.05
</TABLE>
(1) Included in the second quarter of fiscal 1998 net income (loss) is an
increase in receivable, inventory and other reserves of approximately
$600,000, a charge for severance and relocation costs of approximately
$500,000 and a restructuring charge of $170,000 consisting of severance
costs for divisional personnel.
(2) The fourth quarter of fiscal 1998 net income (loss) includes an impairment
write down of long-lived assets related to Niemand Industries, Inc. of
approximately $14,083,000, and a write-off of unamortized finance costs
related to the Harris Bank refinancing of approximately $854,000.
(3) The first quarter of fiscal 1997 net income (loss) includes an
extraordinary after-tax loss of $107,000 reflecting the write-off of
unamortized finance costs of a previous refinancing.
GIBRALTAR
PACKAGING GROUP, INC.
December 18, 1997
TO: Richard Hinrichs
FROM: Deke C. Abbott, Jr.
RE: Salary and Employment Agreement
Your employment Agreement, dated December 1, 1992 is hereby amended to modify
paragraph 6.3.2ii to increase your salary continuation from nine (9) months to
twelve (12) months, to be paid under the terms of said Agreement. All other
terms and conditions remain unchanged.
Also, this is your authorization to increase your current compensation from
$149,350 per annum to $160,000 per annum effective January 1, 1998. Please have
Mr. Halstead direct any questions regarding this compensation authorization to
Ms. Rebecca Couturier at the Corporate Office.
Please sign and date below, return one copy, and keep one for your records.
Your performance and individual initiative for Gibraltar Packaging has been very
helpful and much appreciated. Keep up the good work!
Respectfully,
/s/ D.C. Abbott, Jr.
D. C. Abbott, Jr.
Executive Vice President and COO
xc: J.W. Lloyd CFO
Name: /s/ Richards Hinrichs Date: /s/ Jan. 8, 1998
-------------------------------- ----------------
Richard Hinrichs
274 Riverside Avenue o Westport, CT 06880
Phone (203) 227-0400 o Fax (203) 227-0887
EXECUTION
COPY
SECURED CREDIT AGREEMENT
BY AND AMONG
GIBRALTAR PACKAGING GROUP, INC.,
as Borrower,
THE LENDERS NAMED HEREIN,
as Lenders,
AND
FIRST SOURCE FINANCIAL LLP,
as Agent and a Lender
Dated as of
July 31, 1998
<PAGE>
TABLE OF CONTENTS
SECTION 1 CERTAIN DEFINITIONS..............................................1
SECTION 1.1 Certain Definitions....................................1
SECTION 1.2 Accounting and Financial Determinations...............22
SECTION 1.3 Cross References; Headings............................22
SECTION 2 COMMITMENTS OF LENDERS; LOAN REQUESTS; REDUCTION
OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS; MAKING OF PAYMENTS;
SETOFF................................................................23
SECTION 2.1 Commitments...........................................23
SECTION 2.2 Revolving Loan Termination Date.......................24
SECTION 2.3 Loan Requests.........................................24
SECTION 2.4 Certain Waivers.......................................26
SECTION 2.5 Mandatory and Permitted Prepayments of the Term Loans.27
SECTION 2.6 Voluntary Reduction or Termination of the
Revolving Commitment..................................28
SECTION 2.7 Mandatory Prepayments on Revolving Loans..............28
SECTION 2.8 Prepayment Premium....................................28
SECTION 2.9 Making of Payments....................................29
SECTION 2.10 Due Date Extension....................................29
SECTION 2.11 Set Off and Sharing of Payments.......................29
SECTION 2.12 Certain Matters Relating to Letters of Credit.........30
2.12.1 Issuance of Letters of Credit.........................30
2.12.2 Terms of Letters of Credit............................31
2.12.3 Lenders' Participation................................31
2.12.4 Notice of Issuance....................................31
2.12.5 Payment of Amounts Drawn Under Letters of Credit......32
2.12.6 Payment by Lenders....................................33
2.12.7 Issuing Bank..........................................33
2.12.8 Obligations Absolute..................................34
2.12.9 Agent's Execution of Applications and Other
Issuing Bank Documentation; Reliance on Credit
Agreement by Issuing Bank.............................35
2.12.10 Cash Collateral.......................................35
2.12.11. Indemnification.......................................35
SECTION 2.13 Loan Account..........................................36
SECTION 2.14 Statements............................................36
SECTION 3 NOTES; RECORDKEEPING............................................37
SECTION 3.1 Term Note.............................................37
SECTION 3.2 Revolving Note........................................37
SECTION 4 INTEREST........................................................37
<PAGE>
SECTION 4.1 Interest Rates........................................37
SECTION 4.2 Default Interest......................................38
SECTION 4.3 Conversion or Continuation............................38
SECTION 4.4 Special Provisions Governing LIBOR Rate Loans.........39
SECTION 4.5 Interest Payment Dates................................41
SECTION 4.6 Setting of Rates......................................41
SECTION 4.7 Computation of Interest...............................41
SECTION 5 FEES............................................................42
SECTION 5.1 Non-Use Fees..........................................42
SECTION 5.2 Commitment Fee........................................42
SECTION 5.3 Closing Fee...........................................42
SECTION 5.4 Letter of Credit Fees.................................42
SECTION 5.5 Audit Fees............................................42
SECTION 5.6 Computation of Fees...................................43
SECTION 6 ACCOUNT AGREEMENTS; ACCOUNTS; LIST OF ACCOUNTS AND ACCOUNT
STATEMENTS............................................................43
SECTION 6.1 Account Agreements....................................43
SECTION 6.2 Bank Accounts.........................................44
SECTION 6.3 List of Accounts and Account Statements...............44
SECTION 7 PROCEEDS OF COLLATERAL; APPLICATION OF FUNDS; DEEMED LOANS .......44
SECTION 7.1 Proceeds of Collateral; Notices to Account Debtors;
Lockbox...............................................44
SECTION 7.2 Application of Master Account Funds...................45
SECTION 7.3 Application of Funds Available for Loan Repayments....45
SECTION 7.4 Application Upon an Event of Default..................45
SECTION 7.5 Deemed Loans..........................................46
SECTION 7.6 Application of Proceeds...............................46
SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS....................48
SECTION 8.1 Increased Costs.......................................48
SECTION 8.2 Funding Losses........................................48
SECTION 8.3 Discretion of the Lenders as to Manner of Funding.....49
SECTION 8.4 Conclusiveness of Statements; Survival of Provisions..49
SECTION 9 COLLATERAL AND ELIGIBILITY REQUIREMENTS.........................49
SECTION 9.1 Eligible Accounts.....................................49
SECTION 9.2 Account Warranties....................................50
SECTION 9.3 Verification of Accounts..............................51
SECTION 9.4 Eligible Inventory....................................51
SECTION 9.5 Inventory Warranties..................................52
<PAGE>
SECTION 9.6 Security Interest.....................................52
SECTION 9.7 Consigned Inventory...................................52
SECTION 9.8 Collateral Documents..................................52
SECTION 9.9 Subsequently Acquired Property........................53
SECTION 9.10 Change of Location or Name............................53
SECTION 9.11 Deliveries; Further Assurances........................54
SECTION 10 REPRESENTATIONS AND WARRANTIES..................................54
SECTION 10.1 Due Organization, Authorization, Etc..................54
SECTION 10.2 Certain Agreements....................................55
SECTION 10.3 Financial Information; Financial Condition............55
SECTION 10.4 Litigation and Contingent Obligations.................56
SECTION 10.5 Liens.................................................56
SECTION 10.6 Contracts; Absence of Default.........................56
SECTION 10.7 Employee Benefit Plans................................57
SECTION 10.8 Investment Company Act; Public Utility Holding
Company Act...........................................58
SECTION 10.9 Regulations U and X...................................58
SECTION 10.10 Proceeds..............................................58
SECTION 10.11 Confirmation of Warranties............................58
SECTION 10.12 Insurance.............................................58
SECTION 10.13 Material Disruptions..................................58
SECTION 10.14 Patents, Trademarks, Etc..............................58
SECTION 10.15 Ownership of Properties; Property Schedule............59
SECTION 10.16 Business Locations; Trade Names.......................59
SECTION 10.17 Accuracy of Information...............................59
SECTION 10.18 Subsidiaries..........................................60
SECTION 10.19 Hazardous Materials...................................60
SECTION 10.20 Agent's Fees..........................................61
SECTION 10.21 Taxes.................................................61
SECTION 10.22 Securities Laws.......................................61
SECTION 10.23 Governmental Authorizations...........................61
SECTION 10.24 Compliance with Laws..................................61
SECTION 10.25 Employees and Labor...................................62
SECTION 10.26 Year 2000.............................................62
SECTION 10.27 Solvency..............................................62
SECTION 10.28 Collateral............................................62
SECTION 11 COVENANTS.......................................................63
SECTION 11.1 Reports, Certificates and Other Information...........63
SECTION 11.2 Corporate Existence; Foreign Qualification............67
SECTION 11.3 Books, Records and Inspections........................67
SECTION 11.4 Insurance.............................................67
SECTION 11.5 Taxes and Liabilities.................................68
<PAGE>
SECTION 11.6 Employee Benefit Plans................................68
SECTION 11.7 Collateral Documents..................................68
SECTION 11.8 Compliance with Laws..................................69
SECTION 11.9 Maintenance of Permits................................69
SECTION 11.10 Purchase, Redemption, Distribution, Interest and
Payment Restrictions..................................69
SECTION 11.11 Loans, Advances or Investments........................69
SECTION 11.12 Mergers, Consolidations, Sales.......................69
SECTION 11.13 Unconditional Purchase Obligations....................69
SECTION 11.14 Regulations U and X...................................70
SECTION 11.15 Subsidiaries..........................................70
SECTION 11.16 No Amendment of Organization Documents................70
SECTION 11.17 Other Agreements......................................70
SECTION 11.18 Business Activities; Name.............................70
SECTION 11.19 Transactions with Affiliates..........................70
SECTION 11.20 Environmental Liabilities.............................70
SECTION 11.21 Indebtedness..........................................71
SECTION 11.22 Liens.................................................71
SECTION 11.23 Fiscal Year...........................................71
SECTION 11.24 Landlord and Warehouseman Agreements..................71
SECTION 11.25 Maintenance of Real Estate............................72
SECTION 11.26 Account Records.......................................72
SECTION 11.27 Instruments and Chattel Paper.........................72
SECTION 11.28 Inventory Records.....................................73
SECTION 11.29 Collateral Locations..................................73
SECTION 11.30 Disposal of Property..................................73
SECTION 11.31 Corporate Accounts....................................74
SECTION 11.32 Financial Covenants...................................74
SECTION 11.33 Intercompany Loans....................................76
SECTION 12 CONDITIONS......................................................77
SECTION 12.1 Term Loans............................................77
SECTION 12.2 All Loans; LC Guaranties..............................79
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT....................80
SECTION 13.1 Events of Default.....................................82
SECTION 13.2 Effect of Event of Default............................82
SECTION 13.3 Rights and Remedies Generally.........................83
SECTION 13.4 Entry Upon Premises and Access to Information.........83
SECTION 13.5 Sale or Other Disposition of Collateral by Agent......84
SECTION 13.6 Notice to Account Debtors.............................84
SECTION 13.7 Waiver of Demand......................................84
SECTION 13.8 Waiver of Notice......................................84
<PAGE>
SECTION 14 GENERAL.........................................................85
SECTION 14.1 Waiver; Amendments....................................85
SECTION 14.2 Confirmations.........................................85
SECTION 14.3 Notices...............................................85
SECTION 14.4 Costs, Expenses and Taxes.............................86
SECTION 14.5 Indemnification.......................................86
SECTION 14.6 Submission To Jurisdiction............................88
SECTION 14.7 Governing Law.........................................88
SECTION 14.8 Sale of Notes; Participations.........................88
SECTION 14.9 Entry Into Agreement..................................89
SECTION 14.10 Legal Opinions........................................89
SECTION 14.11 Jury Trial; Damage Waiver.............................89
SECTION 14.12 Successors and Assigns................................89
SECTION 14.13 Marshaling............................................89
SECTION 14.14 Waivers With Respect to Other Instruments.............90
SECTION 14.15 Retention of Borrower's Documents.....................90
SECTION 14.16 Survival of Warranties................................90
SECTION 14.17 Counterparts..........................................90
SECTION 14.18 Exceptions to Covenants...............................90
SECTION 14.19 Construction..........................................90
SECTION 14.20 Reinstatement.........................................91
SECTION 14.21 Entire Agreement......................................91
SECTION 14.22 Acknowledgment........................................91
SECTION 14.23 Confidentiality.......................................91
SECTION 14.24 Several Obligations; Nature of Lender's Rights........92
SECTION 15 ASSIGNMENT AND PARTICIPATION; AGENT.............................92
SECTION 15.1 Assignments and Participations in Loans and Notes.......92
SECTION 15.2 Agent...................................................94
15.2.1 Appointment of Agent....................................94
15.2.2 Nature of Duties of Agent...............................94
15.2.3 Lack of Reliance on Agent...............................94
15.2.4 Certain Rights of Agent.................................95
15.2.5 Reliance by Agent.......................................95
15.2.6 Indemnification of Agent................................95
15.2.7 Agent in its Individual Capacity........................96
15.2.8 Holders of Notes........................................96
15.2.9 Successor Agent.........................................96
15.2.10 Collateral Matters......................................97
15.2.11 Actions with Respect to Defaults........................98
15.2.12 Delivery of Information.................................98
SECTION 15.3 Disbursement of Funds...................................98
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SECTION 15.4 Agent's Discretion.......................................99
<PAGE>
(vii)
<PAGE>
(viii)
<PAGE>
(ix)
<PAGE>
(x)
<PAGE>
(xi)
<PAGE>
Exhibits
Exhibit 1.2 - Form of Borrowing Base Certificate
Exhibit 2.3(b) - Notice of LIBOR Activity
Exhibit 3.1 - Form of Term Note
Exhibit 3.2 - Form of Revolving Note
Exhibit 9.8.1 - Form of Security Agreement
Exhibit 9.8.2 - Form of Mortgage
Exhibit 9.8.3 - Form of Stock Pledge Agreement
Exhibit 11.1(e) - Form of Compliance Certificate
Exhibit 11.1(m) - Form of Monthly Report Certificate
Exhibit 12.2(c)-1 - Form of Borrowing Certificate
Exhibit 12.2(c)-2 - LC Guaranty Request
Schedules
Schedule 1 - Financial Institutions
Schedule 2.8 - Potential Acquirers
Schedule 6.3 - Accounts
Schedule 10.1 - Jurisdictions
Schedule 10.4 - Litigation
Schedule 10.5 - Liens
Schedule 10.6 - Material Contracts
Schedule 10.7 - Terminated Pension Plans
Schedule 10.12 - Insurance
Schedule 10.14 - Intellectual Property
Schedule 10.15 - Real and Personal Property
Schedule 10.16 - Business Locations and Trade Names
Schedule 10.18 - Subsidiaries
Schedule 10.19 - Hazardous Materials
Schedule 10.20 - Fees
Schedule 10.21 - Taxes
Schedule 10.25 - Collective Bargaining Agreements
Schedule 10.26 - Year 2000
Schedule 11.18 - Business Activities
Schedule 11.19 - Affiliate Transactions
Schedule 11.20 - Remedial Actions
Schedule 11.21 - Indebtedness
Schedule 11.29 - Collateral Locations
Schedule 12.1(h) - Indebtedness to be Refinanced
(xii)
<PAGE>
SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT (this "AGREEMENT") dated as of July
31, 1998 is entered into among, Gibraltar Packaging Group, Inc., a Delaware
corporation ("BORROWER"), the financial institutions identified on Schedule 1
hereto (together with each of their successors and assigns, hereinafter referred
to individually as a "LENDER" and collectively as the "LENDERS"), and First
Source Financial LLP, an Illinois registered limited liability partnership,
acting as agent for Lenders.
RECITAL:
Borrower desires to borrow from Lenders and Lenders desire to lend
to Borrower on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto agree
as follows:
SECTION 1 CERTAIN DEFINITIONS.
-------------------
SECTION 1.1 CERTAIN DEFINITIONS When used herein, the following
terms shall have the following meanings:
"ACCOUNT DEBTOR" shall mean any Person who is or may become
obligated on or under an Account.
"ACCOUNTS" shall mean all presently existing and hereafter arising
or acquired accounts, accounts receivable, contracts, notes, drafts,
acceptances, and other forms of obligations (including forms of
obligations evidenced by Chattel Paper, Documents or Instruments) now or
hereafter owned or held by or payable to a Person relating in any way to
Inventory or arising from the sale or lease of Inventory or the rendering
of services by such Person or howsoever otherwise arising, including the
right to payment of any interest or finance charges with respect thereto;
all such merchandise that may be reclaimed or repossessed or returned to
such Person, all of Such Person's rights as an unpaid vendor, including
stoppage in transit, reclamation, rescission, replevin, and sequestration;
all pledged assets and all letters of credit, guaranty claims, Liens held
by or granted to such Person to secure payment of any Accounts; all
proceeds and products of all of the foregoing described properties and
interests in properties; and all proceeds of insurance with respect
thereto; and all customer lists, ledgers, books of account, records,
computer programs, computer disks or tape files (including all microfilm),
computer printouts, computer runs, and other computer prepared information
relating to any of the foregoing.
"ACCOUNTS TRIAL BALANCE" - see Section 11.1(m).
<PAGE>
"AFFILIATE" of any Person shall mean (a) any director (or Person
holding the equivalent position) or officer (or Person holding the
equivalent position) of such Person or of any Person described in clause
(b) with respect to such Person, and (b) any other Person which, directly
or indirectly, controls or is controlled by or under common control with
such Person (excluding any trustee under, or any committee with
responsibility for administering, any Pension Plan). None of the Lenders
and Agent shall be deemed to be an Affiliate of Borrower or any such
Person. A Person shall be deemed to be (x) "controlled by" any other
Person if such other Person possesses, directly or indirectly, power (i)
to vote 30% or more of the securities or Equity Interests having at the
time of any determination hereunder voting power for the election of
directors of such Person (or Persons holding equivalent positions); or
(ii) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise; or (y) "controlled by" or
"under common control with" such other Person if such other Person is a
member of the immediate family of such Person or is the executor,
administrator, or other personal representative of such Person.
"AGENT" shall mean FSFP as agent for the benefit of the Lenders, and
not in its individual capacity as a Lender, and any successor appointed
pursuant to Section 15.2.9.
"ASSET SALE" shall mean any sale, assignment, conveyance, transfer
or other disposition of any Property of Borrower in excess of $5,000 for
any one item other than (i) any sale or lease of inventory in the ordinary
course of business , (ii) any sale of obsolete or unusable items of
equipment so long as the aggregate proceeds of all such sales do not
exceed $100,000 in any Fiscal Year and (iii) any sale or trade-in of
obsolete or unusable items of equipment which are promptly replaced with
new items of equipment of like function and comparable value to the
obsolete or unusable items of equipment when the same were new or not
obsolete or unusable.
"ASSET SALE PROCEEDS" shall mean the aggregate cash proceeds payable
to Borrower in connection with any Asset Sale after deduction of all
reasonable, customary and documented costs and expenses of such Asset
Sale.
"ASSIGNMENT AND ACCEPTANCE" - see Section 15.1.
"AUDIT FEE" shall have the meaning ascribed thereto in Section 5.5.
"BANK ACCOUNTS" - see Section 6.1.
"BANK AGENCY AGREEMENT" - see Section 6.1.
"BANKRUPTCY CODE" shall mean Title 11, United States Code, as
amended from time to time.
"BORROWER" - see Preamble.
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<PAGE>
"BORROWING AVAILABILITY" shall mean, at any date of determination,
the excess of (a) the lesser of (i) the Revolving Commitment or (ii) the
Borrowing Base over (b) Total Revolving and L/C Exposure.
"BORROWING BASE" shall mean an amount equal to: (i) eighty-five
percent (85%) of the face amount (less maximum discounts, credits and
allowances which may have been taken by or granted to Account Debtors in
connection therewith) then outstanding of existing Eligible Accounts, plus
(ii) sixty percent (60%) of the book value of Borrower's then existing
Eligible Inventory (the book value of Eligible Inventory to be determined
at the lower of cost (determined on a first-in-first-out ("FIFO") basis)
or market).
"BORROWING BASE CERTIFICATE" shall mean a certificate in
substantially the form of Exhibit 1.2, duly certified by the president,
chief financial officer, treasurer or controller of Borrower.
"BUSINESS DAY" shall mean any day of the year (other than any
Saturday or Sunday) on which the Federal Reserve Bank of Chicago, Illinois
is open for business in Chicago, Illinois and when used in connection with
LIBOR Rate Loans, this definition will also exclude any day on which
commercial banks are not open for dealing in United States dollar deposits
in the London (U.K.) interbank market.
"CAP AMOUNT" shall mean, at any time, the sum of the reimbursement
obligations of Borrower guaranteed by each LC Guaranty at the time of its
issuance (such amount, with respect to any LC Guaranty, being herein
called the "RELEVANT CAP"); it being understood that:
(a) the Relevant Cap with respect to any LC Guaranty shall be
reduced from time to time by the Stated Amount of a
Permitted LC covered thereby if Agent shall have received
evidence satisfactory to the Lender that the following
conditions have been satisfied: (i) such Permitted LC shall
have terminated or expired in accordance with its terms, or
(ii) such Permitted LC shall have been surrendered to the
Issuer thereof and canceled, or (iii) if such Permitted LC
shall have been drawn upon, the Issuer thereof shall have
been fully reimbursed for the amount of such draw or (iv)
such Issuer shall have consented in writing to a reduction,
equal to such Stated Amount in such Relevant Cap; and
(b) the Relevant Cap with respect to any LC Guaranty may be
increased from time to time by the Stated Amount of a
Permitted LC to be covered thereby if Lender shall have
received evidence satisfactory to the Lender that such
Permitted LC shall be issued in a manner permitted by this
Agreement concurrently with such increase;
3
<PAGE>
provided, however, that in no event shall the Cap Amount exceed at any
time $2,000,000; and provided, further, that for purposes of determining
the Cap Amount, each LC Guaranty issued hereunder shall be included unless
the applicable Issuer shall have acknowledged in writing that the Lenders
shall have no further obligations thereunder or the Lenders shall have
received other assurances from the applicable Issuer that the Lenders
shall have no further obligations thereunder.
"CAPITALIZED LEASES" shall mean as to any Person at any time any
lease which, in accordance with GAAP, is required to be capitalized on the
balance sheet of such Person at such time, and "CAPITALIZED LEASE
OBLIGATIONS" of such Person at any time shall mean the aggregate amount
which, in accordance with GAAP, is required to be reported as a liability
on the balance sheet of such Person at such time as lessee under
Capitalized Leases.
"CASH EQUIVALENTS" shall mean any or all of the following:
obligations of, or guaranteed as to interest and principal by, the United
States Government maturing within 90 days after the date on which such
obligations are purchased; open market commercial paper of any corporation
(other than Borrower or any of its Affiliates) incorporated under the laws
of the United States of America or any State thereof or the District of
Columbia rated "Prime-1" or its equivalent by Moody's Investors Service
Inc. and "A-1" or its equivalent by Standard & Poor's Corporation; or
certificates of deposit maturing within 90 days after the issuance thereof
issued by commercial banks organized under the laws of the United States
of America or of any political subdivision thereof and either having a
combined capital and surplus in excess of $500,000,000.
"CASH INSTRUMENTS" shall mean all cash, checks, drafts and other
similar writings for the payment of money.
"CHANGE OF CONTROL" shall mean (a) Richard D. Hinrichs shall cease
to be employed by Borrower either in the capacity in which (and with
substantially the responsibility for which) such Person is employed on the
date hereof or as president of Borrower with the responsibilities accorded
to the president in the by-laws of Borrower, (b) either John W. Lloyd or
Walter E. Rose shall cease to be employed by Borrower in the capacity in
which (and with substantially the responsibility for which) such Person is
employed on the date hereof or (c) the failure of Borrower to own, free
and clear of all Liens (other than Liens in favor of Agent for the benefit
of the Lenders) one hundred percent (100%) of the outstanding Stock of
each of its Subsidiaries which shall become a borrower hereunder or a
guarantor of the Liabilities hereunder; provided, that no Change of
Control shall result from the occurrence of any event set forth in (a) or
(b) above if Borrower replaces such Person with another Person acceptable
to Agent within ninety (90) days after the occurrence of such event.
"CHATTEL PAPER" shall mean any "chattel paper," as such term is
defined in the Code, now owned or hereafter acquired by Borrower, wherever
located.
4
<PAGE>
"CLOSING DATE" shall mean the date on which the initial Loans
hereunder are made.
"CODE" - see Section 1.2.
"COLLATERAL" shall mean all property and/or rights on or in which a
Lien or security interest is granted to any one or more of Agent and the
Lenders (or to any agent, trustee or other party acting on behalf of any
one or more of Agent and the Lenders) to secure all or any of the
Liabilities, including any such Lien or security interest pursuant to this
Agreement or any of the Collateral Documents or any other agreements,
instruments or documents provided for herein or therein or delivered or to
be delivered hereunder or thereunder or in connection herewith or
therewith.
"COLLATERAL ACCESS AGREEMENTS" shall mean any landlord waivers,
mortgagee waivers, bailee letters or any similar acknowledgment agreements
of any warehouseman or processor in possession of Inventory, in each case
in a form reasonably acceptable to Agent.
"COLLATERAL DOCUMENTS" shall mean, collectively, the Security
Agreements, the Stock Pledge Agreements, the Mortgages, the Guaranty, the
Collateral Access Agreements, the Bank Agency Agreement, LC Guaranties,
any Uniform Commercial Code financing statements, and any and all other
documents provided for in Section 9 or otherwise pursuant to which a Lien
is granted to any one or more of Agent and the Lenders (or to any agent,
trustee, or other party acting on behalf of any one or more of Agent and
the Lenders) as security for any of the Liabilities, and all agreements,
instruments and documents, including, without limitation, this Agreement
and any security agreements, loan agreements, notes, guarantees,
mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust,
subordination agreements, pledges, powers of attorney, consents,
assignments, intercreditor agreements, mortgagee waivers, reimbursement
agreements, contracts, notices, leases, financing statements, whether
heretofore, now or hereafter executed by or on behalf of Borrower or any
Subsidiary, in connection with the Liabilities, in each case as the same
may be amended, modified, continued or supplemented from time to time.
"COMMITMENTS" shall mean the Letter of Credit Commitments, the Term
Commitments and the Revolving Commitments, and "COMMITMENT" shall mean any
thereof.
"COMPLIANCE CERTIFICATE" - see Section 11.1(e).
"CONTINGENT OBLIGATION" as to any Person shall mean the undrawn face
amount of any letters of credit issued for the account of such Person and
shall also mean any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends, letters of credit or
other obligations ("PRIMARY OBLIGATIONS") of any other Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or
not contingent, (a) to purchase any such primary
5
<PAGE>
obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment
of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the
financial condition or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
obligee under any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (d) otherwise to
assure or hold harmless the obligee under such primary obligation against
loss in respect thereof; provided, however, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated
or determinable amount of the primary obligation or, where such Contingent
Obligation is specifically limited to a portion of any such primary
obligation, that portion to which it is limited or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"CONTRACT" shall mean each agreement of Borrower with respect to the
sale of goods or services by Borrower.
"CONTRACTUAL OBLIGATION" of any Person shall mean any provision of
any security issued by such Person or of any agreement, document,
instrument or undertaking to which such Person is a party or by which it
or any of its property is bound.
"CONTROLLED GROUP" shall mean Borrower and any corporation, trade,
business or other Person that is, along with Borrower, a member of a
controlled group of Persons or a controlled group of trades or businesses
or an affiliated service group as described in Sections 414(b), 414(c) and
414(m), respectively, of the IRC or in Section 4001 of ERISA.
"CURRENT ASSETS" shall mean, at any date, the amount which, in
conformity with GAAP, would be set forth opposite the caption "total
current assets" (or any like caption) on a balance sheet of Borrower and
its Subsidiaries on a consolidated basis at such date, less (without
duplication) Cash Instruments and Cash Equivalents.
"CURRENT LIABILITIES" shall mean, at any date, the amount which, in
conformity with GAAP, would be set forth opposite the caption "total
current liabilities" (or any like caption) on a balance sheet of Borrower
and its Subsidiaries on a consolidated basis at such date, less any
portion thereof attributable to the Notes, bank overdrafts (but only to
the extent repaid in full on the Business Day following creation thereof),
or any other Indebtedness incurred hereunder.
"DEBT TO EBITDA RATIO" shall mean, for any calendar quarter, the
ratio of (a) Indebtedness of Borrower and its Subsidiaries on a
consolidated basis at the end of such calendar quarter, as determined in
accordance with GAAP, to (b) EBITDA of Borrower for
6
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the four calendar quarters ending with the last day of such calendar
quarter, provided that, with respect to any calendar quarter ending before
July 3, 1999, EBITDA shall be equal to EBITDA for the period from and
including the Closing Date to and including the last day of such calendar
quarter, multiplied by the quotient determined by dividing 365 by the
number of days in such period.
"DEFAULT INTEREST PERIOD" - see Section 4.2(b).
"DEFAULT RATE" - see Section 4.2(a).
"DOCUMENTS" shall mean any "documents" as such term is defined in
the Code, now owned or hereafter acquired by Borrower, wherever located.
"DOLLAR(S)" and the sign "$" shall mean lawful money of the United
States of America.
"EBITDA" shall mean, for any period, the Net Income for such period,
plus, to the extent deducted in computing such Net Income, the sum of (a)
all Federal, state, local and foreign income tax expense, (b) Interest
Expense, (c) depreciation and amortization expenses, and (d) any
extraordinary, unusual or non-recurring pre-tax losses approved by Lender,
minus, to the extent added in computing such Net Income, (i) any interest
income and (ii) any extraordinary, unusual or non-recurring pre-tax gains
approved by Lender, all as determined for Borrower and its Subsidiaries on
a consolidated basis in accordance with GAAP.
"ELECTRONIC NOTICE" - see Section 2.3(c).
"ELIGIBLE ACCOUNTS" shall have the meaning ascribed thereto in
Section 9.1.
"ELIGIBLE INVENTORY" shall have the meaning ascribed thereto in
Section 9.4.
"EMPLOYEE BENEFIT PLAN" shall mean any "employee benefit plan," as
defined under Section 3(3) of ERISA or any other plan, policy, program,
arrangement or agreement, whether or not written, with respect to current
employees, former employees, independent contractors or leased employees,
as defined in IRC ss. 414(n), or the beneficiaries or dependents thereof,
which is or has been maintained by Borrower or a current or past member of
its Controlled Group or as to which Borrower or any current or past member
of its Controlled Group otherwise has or could have any liability.
"ENVIRONMENTAL LAWS" means any and all applicable federal, state or
local laws, statutes, common law, policies, ordinances, codes, rules,
regulations, orders, decrees, directives and standards or relating to the
protection of health, safety or the environment, or to the regulation of
Hazardous Material, including, but not limited to, the following statutes
7
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as now written and amended, and as amended hereafter: the Federal Water
Pollution Control Act, 33 U.S.C. ss. 1251 et seq., the Clear Air Act, 42
U.S.C. ss. 7401 et. seq., the ToxiC Substances Control Act, 15 U.S.C. ss.
2601 et set., the OccupationaL Safety and Health Act, 29 U.S.C. ss. 651 et
seq., the Solid WastE Disposal Act, 42 U.S.C. ss. 6901 et seq., the
Comprehensive EnvironmentaL Response, Compensation and Liability Act, 42
U.S.C. ss. 9601 et seq., thE Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. ss. 11001 et seq., and the Safe Drinking Water Act,
42 U.S.C. ss. 300f et seq.
"EQUIPMENT" shall mean all of Borrower's machinery, equipment and
furniture of every kind and nature, trade fixtures and fixtures not
forming a part of real property, all whether now owned or hereafter
acquired, and wherever situated, together with all appurtenances,
additions and accessions thereto, replacements therefor, all parts
therefor, all substitutes for any of the foregoing, and all manuals,
drawings, instructions, warranties and rights with respect thereto, and
all products and proceeds thereof and condemnation awards and insurance
proceeds with respect thereto.
"EQUITY INTERESTS" shall mean the capital stock of any class of
Borrower and options, warrants and other rights to acquire capital stock
or other equity interests of Borrower.
"EQUITY SALE" shall mean any issuance, sale, give away, conveyance,
transfer or other disposition of any Equity Interests by Borrower or any
other change in the capital structure of Borrower.
"EQUITY SALE PROCEEDS" shall mean the aggregate cash proceeds paid
or payable to Borrower in connection with any Equity Sale, after deduction
of all reasonable, customary and documented costs and expenses of such
Equity Sale.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any Subsidiary or any Person, trade or
business (whether or not incorporated) that is, or was at any time during
the previous six (6) years, along with Borrower or any Subsidiary, in the
same controlled group of corporations, under common control, or otherwise,
treated as a single employer for any purpose under Section 414 of the IRC.
"EVENT OF DEFAULT" shall mean any of the events or conditions
described in Section 13.1.
"EXCESS CASH FLOW" - See Section 2.5(b).
"EXCESS CASH FLOW PAYMENT" - See Section 2.5(b).
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"FACILITY" shall mean each of Borrower's facilities listed on
Schedule 10.31.
"FEDERAL FUNDS RATE" shall mean, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers,
as published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by
Agent or any Lender from three Federal Funds brokers of recognized
standing selected by it, or if any such quotations are not received as
reasonably determined by Agent.
"FEE LETTER" - see Section 5.2.
"FINAL MATURITY DATE" shall mean July 31, 2003.
"FINANCIALS" - see Section 10.3(a).
"FISCAL QUARTER" shall mean each of Borrower's and its Subsidiaries'
fiscal quarters for financial accounting purposes, which ends on the last
day of March, the Saturday nearest June 30, the last day of September and
the last day of December, respectively.
"FISCAL YEAR" shall mean Borrower's and its Subsidiaries' fiscal
year for financial accounting purposes, which ends on the Saturday nearest
June 30 of each calendar year.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any period, the ratio
for such period of (i) an amount equal to (a) EBITDA for such period, less
(b) Net Capital Expenditures incurred during such period, to (ii) Total
Fixed Charges, all as determined for Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"FIXTURES" shall mean all "fixtures" as such term is defined in the
Code, now owned or hereafter acquired by Borrower, wherever located.
"FORCE MAJEURE" shall mean acts of God, acts of public enemies,
insurrections, riots, civil disturbances, strikes, boycotts, other direct
consequences of a labor dispute, other industrial disturbances, fires,
explosions, floods, epidemics, quarantine restrictions, shortages of
materials, equipment or transportation, freight embargoes, power or
utility failures, orders or acts, or failures to act, of civil or military
authority or other similar causes beyond the control of Borrower.
"FSFP" shall mean First Source Financial LLP, an Illinois registered
limited liability partnership.
9
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"FUNDING DATE" shall mean the date of funding of a Loan and each
continuation or conversion of Prime Rate Loans and LIBOR Rate Loans or
issuance of a Letter of Credit or a LC Guaranty therefor, which date in
all cases shall be a Business Day.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time consistently
applied with those used in preparation of Borrower's audited financial
statements for the Fiscal Year ending June 28, 1997.
"GENERAL INTANGIBLES" shall mean all of Borrower's presently owned
or hereafter acquired general intangibles, including Intellectual
Property, goodwill, chooses in action, causes of action, franchises,
customer lists, contract rights, confidential information, employment
agreements, engineering contracts, leasehold interests in real and
personal property, insurance policies (including business interruption
insurance), licenses, permits, and such other Property which uniquely
reflect the goodwill of the business of Borrower; deposit accounts,
letters of credit, and General Intangibles relating to other items of
Collateral, including rights to refunds or indemnification; reversionary
or other rights of Borrower to excess Employee Benefit Plan assets upon
termination or amendment thereof; and proceeds of all of the foregoing,
including insurance proceeds, including proceeds of business interruption
insurance, income tax refunds, and claims for tax or other refunds against
any Governmental Authority.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government or any
other political subdivision thereof, any state or other political
subdivision thereof, and any agency, authority, court, central bank,
instrumentality, department or other law, regulation or rulemaking entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government.
"GUARANTY" shall mean the joint and several guaranty of the
Liabilities executed by the Guarantors in favor of the Agent and the
Lenders, as such Guaranty may be amended, supplemented or otherwise
modified from time to time.
"GROSS CAPITAL EXPENDITURES" shall mean, for any period, the total
of all expenditures incurred by Borrower or any Subsidiary in respect of
the purchase or other acquisition of fixed or capital assets during such
period, without any deduction for trade-ins, salvage values, resales or
similar recoveries, including the amount which, in accordance with GAAP,
is or should be initially posted to Borrower's or such Subsidiary's
balance sheet with respect to leases entered into during such period which
have been, or, in accordance with GAAP, should be, recorded as Capitalized
Leases.
"GUARANTOR" shall mean each of RidgePak Corporation, Niemand
Holdings, Inc., Niemand Industries, Inc., GB Labels, Inc., Standard
Packaging and Printing Corp., and "Guarantors" shall mean all such Persons
collectively.
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"HAZARDOUS MATERIAL" shall mean: (a) any "hazardous substance" as
now defined pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.A. ss. 9601(14), aS
amended by the Superfund Amendments and Reauthorization Act ("SARA"), and
including any judicial interpretations thereof; (b) any "pollutant or
contaminant" as defined in 42 U.S.C.A. ss. 9601(33); (c) any materiaL now
defined as "hazardous waste" pursuant to 40 C.F.R. Part 261; (d) any
petroleum, including crude oil and any fraction thereof; (e) natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas usable for
fuel; (f) any "hazardous chemical" as defined pursuant to 29 C.F.R. Part
1910; (g) any asbestos, polychlorinated biphenyl (PCB), or isomer of
dioxin, or any material or thing containing or composed of such substance
or substances; and (h) any other substance, regardless of physical form,
that is subject to any past, present or future Federal, state or local
governmental statute, rule or regulation relating to the protection of
human health, plant life, animal life, natural resources, property or the
reasonable enjoyment of life or property from the presence in the
environment of any solid, liquid, gas, odor or any form of energy, from
whatever source.
"INDEBTEDNESS" of a Person means, without duplication, (a)
indebtedness for borrowed money or for the deferred purchase price of
property or services (other than deferred compensation to employees and
trade liabilities incurred in the ordinary course of business and payable
in accordance with customary practices), whether on open account or
evidenced by a note, bond, debenture or similar instrument, (b)
obligations under Capitalized Leases, (c) reimbursement obligations for
letters of credit, banker's acceptances or other credit accommodations,
whether drawn or undrawn, (d) liabilities, as determined by Agent, under
any interest rate agreement, (e) Contingent Obligations and (f)
Indebtedness secured by any Lien on any property of that Person, even if
that Person has not assumed such Indebtedness.
"INDEBTEDNESS TO BE REFINANCED" - see Section 12.1(h).
"INITIAL TERM" - See Section 2.2.
"INTANGIBLE ASSETS" shall mean licenses, franchises, patents, patent
applications, trademarks, trademark applications, trade names, copyrights,
copyright applications, computer software rights, goodwill and research
and development expense or other intangibles shown on the balance sheet of
Borrower and its Subsidiaries on a consolidated basis.
"INSTRUMENT" shall mean any "instrument," as such term is defined in
the Code, now owned or hereafter acquired by Borrower, wherever located,
other than instruments that constitute, or are a part of a group of
writings that constitute, Chattel Paper.
"INTELLECTUAL PROPERTY" of a Person shall mean all of such Person's
present and future designs, patents, patent rights and applications
therefor, technology, trademarks
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and registrations or applications therefor, service marks, trade names,
inventions, copyrights and all applications and registrations therefor,
advertising matter, software or computer programs, license rights, trade
secrets, methods, processes, logos, knowhow, drawings, specifications,
descriptions and licenses with respect thereto, and all memoranda, notes,
and records with respect to any research and development, whether now
owned or hereafter acquired by such Person, and proceeds of all of the
foregoing, including proceeds of insurance policies thereon.
"INTERCOMPANY NOTES" - see Section 11.33.
"INTEREST COVERAGE RATIO" shall mean, for any period, the ratio for
such period of (i) EBITDA to (ii) Interest Expense, but excluding interest
on any Indebtedness permitted by Section 11.33, all as determined for
Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP.
"INTEREST EXPENSE" shall mean, for any period, the gross interest
expense accrued or paid by Borrower and its Subsidiaries on a consolidated
basis during such period, determined in accordance with GAAP. For the
purposes of the foregoing, gross interest expense shall be determined
after giving effect to any net payments made or received by Borrower or
any such Subsidiary with respect to interest rate protection agreements.
"INTEREST PERIOD" shall mean with respect to any LIBOR Rate Loan, a
period of one, three or six months commencing on a Business Day selected
by a Borrower pursuant to this Agreement. Each such Interest Period shall
end on (but exclude) the date which numerically corresponds to such date
one, three or six months thereafter; provided, however, that if there is
no such numerically corresponding day in such next, third or sixth
succeeding month, such Interest Period shall end on the first Business Day
of the month next succeeding such next, third or sixth succeeding month.
If any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding
Business Day.
"INVENTORY" shall mean all of the inventory of a Person of every
kind and description, now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of such Person, wherever
located, including all merchandise, raw materials, parts, supplies,
work-in-process and finished goods intended for sale, together with all
the containers, packing, packaging, shipping and similar materials related
thereto, and including such inventory as is temporarily out of such
Person's custody or possession, including inventory on the premises of
other Persons and items in transit, and including any goods reclaimed,
returned or repossessed upon any Accounts, Documents, Instruments or
Chattel Paper relating to or arising from the sale of inventory, and all
substitutions and replacements therefor, and all additions and accessions
thereto, and all ledgers, books of account, records, computer printouts,
computer runs, microfilm, microfiche and other computer-prepared
information relating to any of the foregoing, and any and all proceeds of
any of the foregoing, including proceeds of insurance policies thereon.
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"INVESTMENT PROPERTY" of a Person shall have the meaning ascribed
thereto in Section 9-115 of the Code in those jurisdictions in which such
definition has been adopted and shall include (i) all securities, whether
certificated or uncertificated, including stocks, bonds, interests in
limited liability companies, partnership interests, treasuries,
certificates of deposit, and mutual fund shares; (ii) all securities
entitlement of such Person, including the rights of such Person to any
securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or
other money owing by any securities intermediary with respect to that
account; (iii) all securities accounts held by such Person; (iv) all
commodity contracts held by such Person; and (v) all commodity accounts
held by such Person.
"IRC" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any replacements thereof.
"ISSUING BANK" shall mean any bank or financial institution selected
by Borrower (which may be a Lender) which is approved by Agent and which
issues one or more Letters of Credit for the account of Borrower as to
which Agent or the Lenders have issued an LC Guaranty.
"ISSUING BANK FEES" - see Section 5.4.
"LC EXPOSURE" shall mean, at any time, the sum of (a) the Cap Amount
at such time less the amount of outstanding Letters of Credit included in
Reimbursement Obligations for the purposes of clause (b) of this
definition, plus (b) the then aggregate amount of outstanding
Reimbursement Obligations.
"LC GUARANTY" shall mean any document, instrument or agreement
pursuant to which Agent or the Lenders request or apply for the issuance
of Letter of Credit at Borrower's request or Agent or the Lenders assure
an Issuing Bank of Borrower's payment or performance of some or all of its
obligations in connection with such letter of credit (including without
limitation any obligations of reimbursement), which term shall include (i)
any reimbursement agreement or application entered into by Agent or the
Lenders (whether with or without Borrower as a co-signer, joint or primary
obligor or otherwise), or any guaranty entered into by Agent or the
Lenders, and (ii) this Agreement if a Lender is the Issuing Bank.
"LC GUARANTY REQUEST" - see Section 12.2(c).
"LC LIABILITY" shall mean, as to each LC Guaranty, all liabilities
of the Lenders with respect to each LC Guaranty or the transaction for
which any Letter of Credit was issued, whether contingent or otherwise,
including: (a) the amount available to be drawn or which may become
available to be drawn on a Letter of Credit; (b) all amounts which have
been
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paid or made available by the Issuing Bank or the Lenders to the extent
not reimbursed by Borrower; and (c) all unpaid interest, fees and expenses
with respect thereto.
"LEASE OBLIGATIONS" shall mean, at any date, the rental commitments
of Borrower under leases for real and/or personal property (including
taxes, insurance, maintenance and similar expenses which Borrower is
obligated to pay under the terms of said leases) on such date, whether or
not such obligations are reflected as liabilities or commitments on a
balance sheet of Borrower or in the notes thereto, excluding, however,
Capitalized Lease Obligations.
"LENDERS" shall mean, collectively, FSFP and all other financial
institutions parties to this Agreement, together with their respective
successors and permitted assigns pursuant to Section 15.1, and "LENDER"
shall mean any of such Persons.
"LENDER PARTY" - see Section 14.5.
"LETTER OF CREDIT" shall mean a letter of credit issued by an
Issuing Bank for the account of Borrower as to which Agent or the Lenders
have issued an LC Guaranty.
"LETTER OF CREDIT COMMITMENT" - see Section 2.1(c).
"LIABILITIES" shall mean all of the following, in each case
howsoever created, arising or evidenced, whether direct or indirect, joint
or several, absolute or contingent, or now or hereafter existing or
arising, or due or to become due: (i) all liabilities, obligations and
indebtedness of Borrower and its successors and assigns to any one or more
of Agent and the Lenders under or in connection with this Agreement, any
Note, any Letter of Credit, any LC Guaranty or any of the other Related
Documents and (ii) all other obligations of Borrower or its successors and
assigns to any one or more of Agent and the Lenders in connection with the
Related Transactions.
"LIBOR INTEREST PAYMENT DATE" shall mean, with respect to any LIBOR
Rate Loan, the fifteenth day of each month and the last day of each
Interest Period applicable thereto, commencing with the first of such
dates to occur after the making of such Loan.
"LIBOR INTEREST RATE DETERMINATION DATE" shall mean each date of
determining the LIBOR Rate with respect to an Interest Period which date
shall be the first Business Day prior to the first day of the applicable
Interest Period for any LIBOR Rate Loan.
"LIBOR RATE" shall mean, for any Interest Period, an interest rate
per annum obtained by dividing (i) the rate of interest published in The
Wall Street Journal on the LIBOR Interest Rate Determination Date in the
column captioned "Money Rates" under the heading "London Interbank Offered
Rates (LIBOR)," with respect to a time period equal to such Interest
Period, by (ii) a percentage equal to 100% minus the LIBOR Reserve
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<PAGE>
Percentage, if any, in effect on the applicable LIBOR Interest Rate
Determination Date; provided, however, that if such publication is not
available or such rate is not set forth therein, the LIBOR Rate shall be
determined on the basis of any other source determined by Agent in its
reasonable discretion. The LIBOR Rate shall be adjusted to the nearest
one-sixteenth percent (1/16%) or, if there is no nearest one-sixteenth
percent (1/16%), to the next higher one-sixteenth percent (1/16%).
"LIBOR RATE LOANS" shall mean, collectively, LIBOR Rate Term
Loans and LIBOR Rate Revolving Loans.
"LIBOR RATE REVOLVING LOAN" shall mean that portion of a Revolving
Loan which bears interest for a specific Interest Period based on the
LIBOR Rate.
"LIBOR RATE TERM LOAN" shall mean that portion of a Term Loan which
bears interest for a specific Interest Period based on the LIBOR Rate.
"LIBOR RESERVE PERCENTAGE" shall mean, for any day, the aggregate of
the rates (expressed as a decimal) of any reserve requirements current on
such day (including, without limitation, basic, supplemental, marginal and
emergency reserves) under any regulation promulgated by the Board of
Governors of the Federal Reserve System (or any successor thereto) as in
effect from time to time dealing with reserve requirements prescribed for
eurocurrency funding, including any reserve requirements with respect to
"eurocurrency liabilities" under Regulation D of the Board of Governors of
the Federal Reserve System. As of the Closing Date, the LIBOR Reserve
Percentage is 0%.
"LIBOR REVOLVING MARGIN" - see Section 4.1.
"LIEN" shall mean, when used with respect to any Person, any
interest in any real or personal property, asset or other right held,
owned or being purchased or acquired by such Person which secures payment
or performance of any obligation and shall include any security interest,
mortgage, lien, pledge, encumbrance, charge, retained security title of a
conditional vendor or lessor, or other security interest of any kind,
whether arising under a security agreement, mortgage, deed of trust,
chattel mortgage, assignment, pledge, retention of security title,
financing or similar statement or notice or arising as a matter of law,
judicial process or otherwise.
"LOAN ACCOUNT" - see Section 2.13.
"LOANS" shall mean, collectively, all Revolving Loans and Term
Loans, and "LOAN" shall mean any thereof.
"LOCKBOX" - see Section 6.2(a).
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"LOSS PROPERTY" - see Section 7.6.
"LOSS PROCEEDS" - see Section 7.6.
"MANAGER" shall mean First Source Financial, Inc., a Delaware
corporation, and its successors and assigns, as manager of FSFP.
"MASTER ACCOUNT" - see Section 6.2(a).
"MASTER ACCOUNT BANK" shall mean each bank and other entity serving
in the capacity of agent for Agent under the Bank Agency Agreement
(including any successor Bank Agency Agreement). Initially Master Account
Bank shall mean Harris Trust and Savings Bank.
"MASTER ACCOUNT COLLECTED BALANCES" - see Section 7.2.
"MASTER AGENT" - see Section 14.23.
"MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse effect
on the financial condition, operations, assets, business or prospects of
Borrower or of Borrower and its Subsidiaries taken as a whole or (b) a
material impairment of the ability of Borrower or any Subsidiary to
perform its obligations in connection with this Agreement or any of the
Related Documents to which it is a party or of Agent or any Lender to
enforce or collect any of the Liabilities.
"MATERIAL CONTRACT" - see Section 10.6.
"MATERIAL INTELLECTUAL PROPERTY RIGHT" - see Section 10.14.
"MONTHLY REPORT" shall have the meaning ascribed thereto in
Section 11.1(m).
"MORTGAGES" - see Section 9.8.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan" within the
meaning of Section 3(37) or 4001(a)(3) of ERISA to which Borrower or a
current or past member of its Controlled Group is making or has made
contributions to or as to which Borrower or any current or past member of
its Controlled Group otherwise has or could have any liability.
"NET CAPITAL EXPENDITURES" shall mean for any period Gross
Capital Expenditures minus proceeds from Permitted Purchase Money Debt
used to finance Gross Capital Expenditures.
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"NET INCOME" shall mean, for any period, net income or loss of
Borrower and its Subsidiaries on a consolidated basis as it would appear
on an income statement of Borrower and its Subsidiaries for such period
prepared in accordance with GAAP.
"NET WORTH" shall mean the net worth of Borrower and its
Subsidiaries on a consolidated basis as it would appear on a consolidated
balance sheet of Borrower prepared in accordance with GAAP.
"NIEMAND SALE" - See Section 11.12.
"NON-USE FEE" - See Section 5.1.
"NOTE" and "NOTES" shall mean the Term Notes and the Revolving
Notes, or any of them.
"NOTICE OF LIBOR ACTIVITY" - see Section 2.3(b).
"OPERATING ACCOUNTS" - see Section 6.2(b).
"ORGANIZATION DOCUMENTS" of a Person shall mean, as applicable, the
articles of incorporation, articles of organization, operating agreement,
bylaws, partnerships agreement and all other organization documents of
such Person.
"PBGC" shall mean Pension Benefit Guaranty Corporation, and any
entity succeeding to any or all of its functions under ERISA.
"PENSION PLAN" shall mean any "employee pension benefit plan", as
such term is defined in Section 3(2) of ERISA (other than a Multiemployer
Plan), which is (a) subject to Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the IRC or Section 302 of ERISA and
(b) is or has been maintained by Borrower or a current or past member of
its Controlled Group, or as to which Borrower or any member of its
Controlled Group otherwise has or could have any liability.
"PERMITTED LC" shall mean a Letter of Credit issued with Agent's
prior written consent; provided, however, that (a) each such Letter of
Credit shall expire pursuant to its terms on or before the Revolving Loan
Termination Date, (b) at no time shall Total Revolving and LC Exposure
exceed the lesser of the amount of the Revolving Commitment in effect or
the Borrowing Base at such time, (c) Borrower's reimbursement obligations
with respect to each such Letter of Credit shall be secured by an LC
Guaranty and (d) Agent and the respective Issuing Bank shall have agreed
in writing that the Relevant Cap for such LC Guaranty shall be increased
by an amount equal to the stated amount of such Letter of Credit.
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<PAGE>
"PERMITTED LIENS" shall mean any of the following Liens: (a) Liens
in favor of Agent granted pursuant to the Collateral Documents; (b) Liens
(i) in connection with the acquisition of fixed assets after the date
hereof and attaching only to the Property being acquired, if the
Indebtedness secured thereby is incurred in connection with the
acquisition and does not exceed the fair market value of such Property at
the time of acquisition thereof, and (ii) Liens on property being leased
pursuant to leases which are Capitalized Lease Obligations permitted under
this Agreement, provided that the aggregate outstanding amount of all such
Indebtedness and Capitalized Lease Obligations described in the preceding
clauses (i) and (ii) does not at any time exceed $500,000; (c) Liens for
current taxes or other governmental charges or levies which are not
delinquent or are being contested in good faith and by appropriate
proceedings, and with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP; (d)
mechanic's, worker's, materialmen's and other like Liens arising in the
ordinary course of business in respect of obligations which are not
delinquent or which are being contested in good faith and by appropriate
proceedings, and with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP; (e) Liens
arising in the ordinary course of business for sums being contested in
good faith and by appropriate proceedings, and with respect to which
adequate reserves have been established, and are being maintained, in
accordance with GAAP, or for sums not due, and in any case not involving
any deposits or advances for borrowed money or the deferred purchase price
of Property or services; (f) zoning ordinances, easements, licenses,
reservations, covenants, conditions or restrictions on the use of real
property which, in Agent's determination, are not violated by existing
uses or improvements, do not in the aggregate interfere with the use of
the related real property and do not adversely affect the marketability of
the title to the related real property; (g) Liens incurred in the ordinary
course of business in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or benefits; (h) Liens
shown on Schedule 10.5; (i) Liens in the form of cash securing letter of
credit reimbursement obligations existing on the Closing Date in an
aggregate amount not exceeding $230,000; provided, that the Liens
permitted in this clause (i) shall cease to be Permitted Liens sixty (60)
days after the Closing Date; and (j) Liens securing Property located at
1410 South Washington Street, Marion, Alabama, in favor of the Alabama
Department of Economic and Community Affairs existing on the Closing Date;
provided, that the Liens permitted in this clause (j) shall cease to be
Permitted Liens fifteen (15) days after the Closing Date.
"PERMITTED PURCHASE MONEY DEBT" see Section 11.21.
"PERSON" shall mean any natural person, corporation, firm,
partnership, limited liability company, limited liability partnership,
firm, trust, association, government, governmental agency, Employee
Benefit Plan or other entity, whether acting in an individual, fiduciary
or other capacity.
"PREPAYMENT PREMIUM" - see Section 2.8.
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"PRIME RATE" shall mean the highest "prime rate" of interest
reported, from time to time, by The Wall Street Journal; provided,
however, that in the event that The Wall Street Journal ceases reporting a
"prime rate," the "Prime Rate" shall be determined from a comparable index
chosen Agent in good faith. The "Prime Rate" shall change effective on the
date of the publication of any change in the applicable index by which
such "Prime Rate" is determined.
"PRIME RATE LOANS" shall mean Loans or the portion thereof which
bear interest determined by reference to the Prime Rate.
"PRIME RATE REVOLVING LOAN" shall mean a Revolving Loan which bears
interest based on Prime Rate.
"PRIME RATE TERM LOAN" shall mean that portion of a Term Loan which
bears interest based on the Prime Rate.
"PRO FORMA" - see Section 10.3(c).
"PRO RATA SHARE" shall mean, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the amount of all of
the Commitments.
"PROPERTY" of a Person shall mean all types of real, personal or
mixed property and all types of tangible or intangible property of such
Person
"REAL ESTATE" of a Person shall mean the real property, mineral
rights, leasehold or other interests in real property together with any
purchase options and other rights related to such leaseholds or other
interests owned, leased, used or operated now or hereafter by such Person,
all Fixtures and personal property used in conjunction therewith and such
Person's rights to leases, rents and profits with respect thereto.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the sum of (i)
the aggregate undrawn amount of all Letters of Credit outstanding at such
time, plus (ii) the aggregate amount of all drawings under Letters of
Credit for which the Issuing Bank has not at such time been reimbursed
(either by Borrower, Agent or the Lenders), plus (iii) the aggregate
amount of all payments made by each Lender to the Issuing Bank with
respect to such Lender's participation in Letters of Credit as provided in
Section 2.12 hereof for which Borrower have not at such time reimbursed
the Lenders, whether by way of a Revolving Loan or otherwise.
"RELATED DOCUMENTS" shall mean, collectively, the Notes, this
Agreement and the Collateral Documents, in each case as the same may be
amended, modified or supplemented from time to time pursuant to the terms
hereof or thereof.
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"RELATED TRANSACTIONS" shall mean all transactions contemplated by
this Agreement and the Related Documents, including, without limitation,
the Loans and the granting by Borrower of Liens on the Collateral to
secure the Liabilities.
"RENEWAL TERM" - See Section 2.2.
"REPORTABLE EVENT" shall have the meaning given to such term under
Section 4043 of ERISA or the regulations issued thereunder.
"REQUIRED LENDERS" shall mean (i) Lenders having sixty-six and
two-thirds percent (66_%) or more of the total Commitments then in effect
or (ii) if the Revolving Commitment has been terminated, Lenders having in
the aggregate sixty-six percent (66_%) or more of the aggregate
outstanding amount of the Loans.
"REQUIREMENT OF LAW" for any Person shall mean the corporate charter
and by-laws or other organizational or governing documents of such Person,
and any law, treaty, rule, ordinance or regulation or determination of an
arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its Property is subject.
"REVOLVING COMMITMENT" - see Section 2.1(b).
"REVOLVING LOANS" - see Section 2.1(b).
"REVOLVING LOAN TERMINATION DATE" - see Section 2.1(b).
"REVOLVING NOTES" - see Section 3.2.
"SECURITY AGREEMENTS" - see Section 9.8.
"SOLVENCY AFFIDAVIT" shall mean the Affidavit of Solvency, dated as
of the Closing Date, executed and delivered by the chief financial officer
of Borrower in favor of Lender.
"SOLVENT" with respect to any Person on any date of determination,
shall mean that (i) the fair saleable value of such Person's Property is
in excess of the total amount of the present value of its Liabilities
(including for purposes of this definition all liabilities, whether or not
reflected on a balance sheet prepared in accordance with GAAP, and whether
direct or indirect, fixed or contingent, liquidated or unliquidated,
secured or unsecured, disputed or undisputed), (ii) such Person is able to
pay its debts or obligations in the ordinary course as they mature, and
(iii) such Person has capital sufficient to carry on its business as
conducted and as proposed to be conducted. In computing the amount of
contingent, unliquidated or disputed liabilities at any time, such
liabilities will be computed at the amount which, in light of all of the
facts and circumstances existing at such time, represents
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the amount that can reasonably be expected to become an actual or matured
liability. "SOLVENCY" shall have a correlative meaning.
"STOCK PLEDGE AGREEMENT" - See Section 9.8.
"SUBSIDIARY" shall mean, with respect to any Person (herein referred
to as the "parent"), any corporation, association or other business entity
(whether now existing or hereafter organized) of which at least a majority
of the securities or other ownership interests having ordinary voting
power for the election of directors (or their equivalent under the laws of
the jurisdiction of organization of such person) is, at the time any
determination is being made, owned or controlled by the parent or one or
more subsidiaries of the parent or by parent and one or more subsidiaries
of the parent. Unless otherwise expressly provided or the context requires
otherwise, all references herein to a "Subsidiary" shall mean a direct or
indirect Subsidiary of Borrower.
"TERM LOANS" - see Section 2.1(a).
"TERM COMMITMENT" - see Section 2.1(a).
"TERM NOTES" - see Section 3.1.
"TOTAL FIXED CHARGES" shall mean, for any period, the sum of (i) all
scheduled payments of interest or principal on account of Indebtedness of
Borrower and its Subsidiaries on a consolidated basis, including any and
all penalties, premiums, prepayment fees or the like thereon (including
without limitation any scheduled payments on the Term Loans) with respect
to such period, plus (ii) income taxes paid or payable with respect to
such period directly by Borrower or any Subsidiary to any Governmental
Authority, plus (iii) to the extent not subtracted in determining Net
Income and without double counting, all amounts paid by Borrower with
respect to such period (A) to purchase, redeem or otherwise acquire any of
Borrower's Equity Interests, or (B) in respect of the purchase of or
satisfaction of any principal installment or any Indebtedness of any
Affiliate of Borrower. For purposes of the foregoing, "scheduled payments"
shall not include repayments of Revolving Loans pursuant to Section 7.3.
"TOTAL REVOLVING AND LC EXPOSURE" shall mean, at any time, the sum
of (a) the LC Exposure, if any, at such time and (b) the then aggregate
outstanding principal amount of all Revolving Loans.
"UNAPPLIED INSURANCE OR CONDEMNATION PROCEEDS" - shall mean Loss
Proceeds which Lender may apply against the Liabilities in accordance with
Section 7.6.
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"UNMATURED EVENT OF DEFAULT" shall mean any event or condition which
if it continues uncured will, with lapse of time or notice or lapse of
time and notice, constitute an Event of Default.
"WELFARE PLAN" shall mean any "employee welfare benefit plan", as
such term is defined in Section 3(1) of ERISA.
"WORKING CAPITAL" shall mean, at any date, the excess of Current
Assets over Current Liabilities as at said date.
SECTION 1.2 ACCOUNTING AND FINANCIAL DETERMINATIONS. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined, or any accounting computation is required to be made,
for the purpose of this Agreement or the Related Documents, such determination
or calculation shall be made, to the extent applicable and except as otherwise
specified in this Agreement or such Related Document, in accordance with GAAP;
provided, however, that if any change in generally accepted accounting
principles from those applied in the preparation of the financial statements
referred to in Section 10.3 hereof is occasioned by the promulgation of rules,
regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions), the
initial announcement of which change is made after the Closing Date, results in
a change in the method of calculation of financial covenants, standards or terms
found in Sections 1 or 11 hereof, the parties hereto agree to enter into good
faith negotiations in order to amend such provisions so as to reflect such
changes with the desired result that the criteria for evaluating Borrower's
financial condition shall be the same after such changes as if such changes had
not been made; and provided, further, that until such time as the parties hereto
agree upon such amendments, such financial covenants, standards and terms shall
be construed and calculated as though such change had not taken place. When used
herein, the term "financial statement" shall include the notes and schedules
thereto, if any. All other terms contained in this Agreement (and which are not
otherwise specifically defined herein) shall have the meanings provided in
Article 9 of the Uniform Commercial Code of the State of Illinois (the "Code")
to the extent the same are used or defined therein. All determinations of the
book value of Inventory contemplated hereby shall be at the lower of cost (on a
first-in, first-out basis) or market.
SECTION 1.3 CROSS REFERENCES; HEADINGS. The words "hereof",
"herein" and "hereunder" and words of a similar import when used in this
Agreement or in any of the Related Documents shall refer to this Agreement or
such Related Document as a whole and not to any particular provision of this
Agreement or such Related Document. Section, Schedule and Exhibit references
contained in this Agreement are references to Sections, Schedules and Exhibits
in or to this Agreement unless otherwise specified. Any reference in any Section
or definition to any clause is, unless otherwise specified, to such clause of
such Section or definition. The various headings in this Agreement and the
Related Documents are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such Related Document or any
provision hereof or thereof.
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SECTION 2 COMMITMENTS OF LENDERS; LOAN REQUESTS; REDUCTION OR
TERMINATION OF THE COMMITMENTS; PREPAYMENTS; MAKING OF PAYMENTS; SETOFF
SECTION 2.1 COMMITMENTS Subject to the terms and conditions of
this Agreement, each Lender agrees to, severally on its own behalf and not
jointly with any other Lender:
(a) Term Commitment. Make a loan (each such loan is herein called a
"TERM LOAN" and all such loans are herein collectively called the "TERM LOANS")
to Borrower on the Closing Date in the amount set forth opposite such Lender's
name on Schedule I under the heading "Term Commitment". The foregoing commitment
of the Lenders is herein called the "TERM COMMITMENT."
(b) Revolving Commitment. Make loans to Borrower (each such loan is
herein called a "REVOLVING LOAN" and all such loans are herein collectively
called the "REVOLVING LOANS") on a revolving basis from time to time before July
31, 2003 or such later date as may be established pursuant to Section 2.2
(herein called the "REVOLVING LOAN TERMINATION DATE") in such amounts as
Borrower from time to time may request up to the amount set forth opposite such
Lender's name in Schedule I under the heading "Revolving Commitment" (the
foregoing commitment of the Lenders, as it may be reduced in accordance with the
terms hereof from time to time, is herein called the "REVOLVING COMMITMENT"),
less all reductions in the amount of the Revolving Commitment pursuant to
Section 2.6 of this Agreement; provided, however, that the Lenders shall not be
required to make any Revolving Loan if, after giving effect to such Revolving
Loan, Total Revolving and LC Exposure would exceed the lesser of (i) the amount
of the Revolving Commitment then in effect or (ii) the Borrowing Base at such
time. Agent reserves the right in its reasonable business judgment with respect
to the Borrowing Base to (x) adjust any eligibility criteria or establish new
eligibility criteria, (y) modify the advance rates against Eligible Accounts and
Eligible Inventory and (z) establish reserves against Borrowing Availability.
(c) Letter of Credit Commitment. To the extent of Borrowing
Availability, upon the request of Borrower, Agent (on behalf of each Lender
according to such Lender's Pro Rata Share) may issue LC Guaranties for the
account of Borrower. Each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from Agent, without recourse,
representation or warranty, an individual participation interest equal to its
Pro Rata Share of the amount of such LC Guaranty and each draw paid by the
Issuing Bank under the Letter of Credit issued in connection therewith. Each
Lender's obligation to pay its Pro Rata Share of all draws under the Letters of
Credit issued in connection with each LC Guaranty shall be absolute,
unconditional and irrevocable and in each case shall be made without
counterclaim or set-off by such Lender and shall be made irrespective of whether
a Unmatured Event of Default or Event of Default shall have occurred and be
continuing at the time. The aggregate maximum amount of Letters of Credit
subject to LC Guaranties shall not at any time exceed $2,000,000. The foregoing
commitment of the Lenders is herein called the "LETTER OF CREDIT COMMITMENT."
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SECTION 2.2 REVOLVING LOAN TERMINATION DATE. This Agreement shall
be effective from the Closing Date until the Revolving Loan Termination Date;
provided, that all of the Lenders' and Agent's rights and remedies under this
Agreement shall survive such termination until all of the Liabilities have been
finally paid in full in cash. In addition, this Agreement may be terminated as
set forth in Section 13.2. Upon the effective date of termination, all of the
Liabilities shall become immediately due and payable without notice or demand
notwithstanding any terms contained herein or in any Note to the contrary.
Notwithstanding any termination of this Agreement, until (i) all of the
Liabilities except unmatured contingent Liabilities (other than those
Liabilities described in clauses (ii) and (iii) below) for which no claim has
been asserted shall have been paid in full in cash, (ii) each LC Guaranty shall
have been terminated and (iii) Borrower shall have provided to Agent security on
terms satisfactory to the Required Lenders with respect to any pending or
overtly threatened action against any Person which could result in a claim
against Borrower by any Lender Party for indemnification under Section 14.5,
Borrower shall remain bound by the terms of this Agreement and Agent shall be
entitled to retain its Liens on the Collateral.
SECTION 2.3 LOAN REQUESTS
(a) With respect to borrowings consisting of Prime Rate Loans,
Borrower shall give notice to Agent of each proposed borrowing by 10:00 A.M.
Chicago time on the proposed Funding Date. Prime Rate Loans made on any Funding
Date shall be in an aggregate minimum amount of $100,000 and integral multiples
of $5,000 in excess thereof.
(b) With respect to borrowings consisting of LIBOR Rate Loans,
Borrower shall give notice to Agent of each proposed borrowing by 10:00 A.M.
Chicago time no later than three (3) Business Days and no more than five (5)
Business Days prior to the proposed date of such borrowing. With respect to
borrowings comprised of LIBOR Rate Loans, Borrower shall deliver to Agent
written notice of each such proposed borrowing substantially in the form set
forth in Exhibit 2.3(b) (each a "NOTICE OF LIBOR ACTIVITY") by 10:00 A.M.
Chicago time at least three (3) Business Days prior to, but in any event no more
than five (5) Business Days prior to, the proposed date of such borrowing. LIBOR
Rate Loans shall be in an aggregate minimum amount of $100,000 and integral
multiples of $100,000 in excess thereof (or in such other amount as Agent shall
permit as shall be evidenced by the making of such LIBOR Rate Loan by the
Lenders).
(c) Each notice given pursuant to this Section 2.3 shall be
irrevocable and Borrower shall be bound to make a borrowing in accordance
therewith. Subject to receipt by Agent of the documents required under Section
12 with respect to a borrowing and the satisfaction of all other conditions
precedent to such borrowing set forth in this Agreement, on the requested
Funding Date each Lender shall pay over its Pro Rata Share of such funds by wire
transfer to the Operating Account (except that, with respect to the initial
Loans, disbursement shall be according to instructions to be agreed upon by
Agent and Borrower on or prior to the Closing Date). Such notice shall be in
writing or by "Electronic Notice" and, if by Electronic Notice, shall be
confirmed in writing on or before the fifteenth Business Day of the first
calendar month following the date of such borrowing by delivery of a Borrowing
Certificate to Lender. Each such notice shall specify the date,
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amount and type of borrowing. "ELECTRONIC NOTICE" shall mean notice sent via
facsimile. No Lender Party shall incur any liability to Borrower in acting upon
any Electronic Notice referred to above which such Lender Party believes in good
faith to have been given by a duly authorized officer or other persons
authorized to borrow on behalf of Borrower or for otherwise acting in good faith
under this Section 2.3 and, upon funding of any Loans by a Lender in accordance
with this Agreement pursuant to any such Electronic Notice, Borrower shall have
effected a Loan hereunder.
(d) Except as provided in Section 2.3(e) (which provides for the
settlement by Agent of Revolving Loans made, and payments thereon on a weekly
basis at Agent's discretion to avoid daily settlements between Lenders), on or
prior to 11:00 a.m. (Chicago time) on each Business Day on which it is asked to
make an advance with respect to Loans, Agent shall advise each Lender by
telephone or facsimile transmission of the requested Funding Date, the amount of
such advance and the amount of such Lender's Pro Rata Share thereof. Each Lender
shall pay to Agent the amount of such Lender's Pro Rata Share of such advance
prior to 11:00 a.m. (Chicago time) on the proposed Funding Date. Except as
provided in Section 2.3(e) and provided that each Lender has made all payments
required to be made by it hereunder, on or prior to 11:00 a.m. (Chicago time) on
the next Business Day after receipt by Agent of any payments of principal with
respect to the Loans and interest, fees and other amounts with respect to the
Liabilities (the "DAILY SETTLEMENT DATE"), Agent shall pay to each Lender the
amount of such Lender's Pro Rata Share of such payments. If any payment from any
Lender to Agent or from Agent to any Lender is not, in fact, made by the party
from whom payment is due, the other party shall be entitled to recover such
corresponding amount on demand (which demand shall be promptly made) together
with interest thereon at the Federal Funds Rate, for each day from the Funding
Date or Daily Settlement Date on which such amount was due until such amount is
paid.
(e) Agent on behalf of the Lenders may (but shall not be obligated
to) make Revolving Loans and receive and retain payments on the Revolving Loans
in accordance with this Section 2.3(e) without notice to, or settlement with,
the Lenders; provided, Agent shall settle the amount of the Revolving Loans with
the Lenders at least once a week as follows:
The amount of each Lender's Pro Rata Share of outstanding Revolving Loans
shall be computed weekly (or more frequently in Agent's discretion) and
shall be adjusted upward or downward on the basis of the amount of
outstanding Revolving Loans as of 3:00 P.M. Chicago time on the last
Business Day of the period specified by Agent (such date being referred to
as the "SETTLEMENT DATE"). Agent shall deliver to each of the Lenders
promptly after any Settlement Date a summary statement of the amount of
outstanding Revolving Loans for such period. The Lenders shall transfer to
Agent, or, subject to [SECTION 12.6(C)], Agent shall transfer to the
Lenders, such amounts as are necessary so that (after giving effect to all
such transfers) the amount of the Revolving Loans made by each Lender
shall be equal to such Lender's Pro Rata Share of the aggregate amount of
the Revolving Loans outstanding as of such Settlement Date. If the summary
statement is received by the Lenders prior to 10:00 A.M. Chicago time on
any Business Day, each Lender shall make the transfers described above in
immediately available funds no later than 12:00 noon Chicago time on the
day such summary statement was received; and if such summary statement is
received by the Lenders after 10:00 A.M. Chicago time on such day, each
Lender shall make such transfers no later than 12:00 noon Chicago time on
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the next succeeding Business Day. The obligation of each of the Lenders to
transfer such funds shall be irrevocable and unconditional and without
recourse to or warranty by Agent. Each of Agent and the Lenders agree to
mark their respective books and records on the Settlement Date to show at
all times the dollar amount of their respective Pro Rata Shares of the
outstanding Revolving Loans. To the extent that the settlement described
above shall not yet have occurred, upon repayment of any part of the
Revolving Loans by any Borrower, Agent may first apply such amounts repaid
directly to the amounts made available by Agent pursuant to this Section
2.3(e).
Because Agent on behalf of the Lenders may be advancing and/or may be repaid all
or a portion of the Revolving Loans prior to the time when the Lenders will
actually advance and/or be repaid all or a portion of Revolving Loans, interest
with respect to the Revolving Loans shall be allocated by Agent to each Lender
and Agent in accordance with the amount of the Revolving Loans actually advanced
by and repaid to each Lender and Agent and shall accrue from and including the
date such Revolving Loans are so advanced to but excluding the date such
Revolving Loans are either repaid by any Borrower in accordance with Section 7.3
or actually settled by the applicable Lender as described in this Section
2.3(e).
SECTION 2.4 CERTAIN WAIVERS. Borrower waives notice of the
creation of any of the Liabilities and all other notices whatsoever to Borrower
with respect to the Liabilities except statements required under Section 2.14
and notices required under Section 13.1.
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SECTION 2.5 MANDATORY AND PERMITTED PREPAYMENTS OF THE TERM
LOANS
(a) The aggregate principal balance of the Term Loans shall be
payable to the Agent, for the benefit of the Lenders, in twenty (20) quarterly
installments on the 15th day of January, April, July and October of each year,
commencing October 15, 1998, and in the Final Maturity Date as follows:
Payment Date Installment Amount
October 15, 1998 through
July 15, 1999 $ 562,500
October 15, 1999 through
July 15, 2000 $ 625,000
October 15, 2000 through
April 15, 2003 $ 687,500
July 31, 2003 $ 12,687,500
(b) In addition, on the date as to each Fiscal Year of Borrower
which is ninety (90) days after the end of such Fiscal Year, commencing with the
first such date with respect to a Fiscal Year ending after the date hereof,
Borrower shall make a payment (the "EXCESS CASH FLOW PAYMENT") of principal on
the Term Loans in addition to the other payments on the Term Loans required to
be made pursuant to this Agreement or the Term Notes in an amount equal to 75%
of the Excess Cash Flow of Borrower for such Fiscal Year. As used herein, the
term "EXCESS CASH FLOW" shall mean EBITDA minus Total Fixed Charges minus Net
Capital Expenditures plus any decrease in Working Capital minus any increase in
Working Capital. Each Excess Cash Flow Payment shall be applied to reduce the
remaining regularly scheduled principal installments of the Term Loans in
inverse order of their maturity. No Prepayment Premium shall be due and payable
as a result of the making of any Excess Cash Flow Payment.
(c) Additionally, upon receipt by Borrower of any Unapplied
Insurance or Condemnation Proceeds except as to Inventory, Asset Sale Proceeds,
or Equity Sale Proceeds or proceeds of any refinancing of the Liabilities or
other source of funds (other than revenue derived in the ordinary course of
business) of the Borrower and its Subsidiaries, Borrower shall make a mandatory
prepayment of the Term Loans in the amount thereof, subject to Agent's right to
otherwise apply such payments after the occurrence and during the continuance of
an Event of Default. Each such payment shall be accompanied by accrued interest
on such principal amount, amounts payable under Section 4.4(f), if any, and,
with respect to reductions as a result of any prepayment described in Section
2.8, the Prepayment Premium required under such Section. Each
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such payment shall be applied to reduce the remaining regularly scheduled
principal installments of the Term Loans in inverse order of their maturities.
(d) In addition to the mandatory repayments of the Term Loans under
clauses (a), (b) and (c) above, Borrower may voluntarily from time to time on at
least five Business Days' prior written irrevocable notice to the Lenders prepay
the Term Loans in whole or in part. Each such voluntary prepayment of the Term
Loans, if in part, shall be in an aggregate amount of at least $100,000 and an
integral multiple of $50,000. Each such partial prepayment shall be applied to
reduce the remaining regularly scheduled principal installments of the Term
Loans to be prepaid in inverse order of their maturity. Each such payment shall
be accompanied by accrued interest on such principal amount, amounts payable
under Section 4.4(f), if any, and, with respect to reductions as a result of any
prepayment described in Section 2.8, the Prepayment Premium required under such
Section.
SECTION 2.6 VOLUNTARY REDUCTION OR TERMINATION OF THE REVOLVING
COMMITMENT. Borrower may voluntarily from time to time on at least five
Business Days' prior written irrevocable notice to the Lenders permanently
reduce the Revolving Commitment in whole or in part. If in part, any such
reduction to be in an aggregate amount of at least $100,000 and an integral
multiple of $50,000; provided, that concurrently with such reduction Borrower
pay the Prepayment Premium required by Section 2.8 of this Agreement.
SECTION 2.7 MANDATORY PREPAYMENTS ON REVOLVING LOANS
(a) Concurrently with each reduction (including any termination) of
the Revolving Commitment (whether pursuant to Section 2.6 or otherwise),
Borrower shall make a mandatory prepayment of Revolving Loans outstanding in the
amount, if any, by which (i) the Total Revolving and LC Exposure exceeds (ii)
the then reduced amount of the Revolving Commitment. In addition, if at any time
(i) the Total Revolving and LC Exposure shall exceed (ii) the Borrowing Base,
Borrower shall make a mandatory prepayment of the Revolving Loans in the
aggregate amount of such excess. Each such payment shall be accompanied by
accrued interest on such principal amount, and amounts payable under Section
4.4(f), if any.
(b) If at any time after the making of a deemed Revolving Loan
pursuant to the first sentence of Section 7.5(b), the Total Revolving and LC
Exposure exceeds the lesser of (i) the Revolving Commitment, or (ii) the
Borrowing Base, then Borrower immediately shall make a mandatory prepayment of
Revolving Loans outstanding in the aggregate amount of such excess and each such
payment shall be accompanied by accrued interest on such principal amount and
amounts payable under Section 4.4(f), if any.
SECTION 2.8 PREPAYMENT PREMIUM. Each voluntary reduction of the
Revolving Commitment pursuant to Section 2.6, and (without duplication) each
prepayment of all or any portion of the outstanding principal balance of the
Term Loans made (i) from the proceeds of any refinancing of the Liabilities,
(ii) from Asset Sale Proceeds, (iii) from Equity Sale Proceeds (other than the
issuance of Equity Interests as part of an employee stock incentive or benefit
plan
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approved by the board of directors of Borrower) or (iv) from any other
source of funds (other than revenue derived in the ordinary course of Borrower's
business operations) shall be accompanied in each case by a prepayment premium
("PREPAYMENT PREMIUM") paid to Agent for the benefit of the Lenders in an amount
equal to: (a) if such Commitment reduction or prepayment is made at any time
during the period from and including the Closing Date to and including the first
anniversary of the Closing Date, 1.5% of such prepayment or Commitment
reduction; (b) if such Commitment reduction or prepayment is made at any time
during the period from and after the first anniversary of the Closing Date
through and including the second anniversary of the Closing Date, 1.0% of such
prepayment or Commitment reduction; and (c) if such Commitment reduction or
prepayment is made at any time during the period from and after the second
anniversary of the Closing Date through and including the third anniversary of
the Closing Date, 0.5% of such prepayment or Commitment reduction; provided,
however, that if, on or before December 31, 1998, such a Commitment reduction or
prepayment is made from the proceeds of a sale of all or substantially all of
the assets of the Company to an acquirer disclosed by Borrower to Agent in
writing on or prior to the Closing Date and set forth on Schedule 2.8, then the
Prepayment Premium with respect to such prepayment or reduction shall be an
amount equal to 0.75% of such prepayment or Commitment Reduction; provided,
further, that no Prepayment Premium shall be paid in connection with the Niemand
Sale.
SECTION 2.9 MAKING OF PAYMENTS. All payments of principal of, or
interest on, the Notes and of all fees and other Liabilities shall be made by
Borrower to Agent in immediately available Dollars. All such payments shall be
made to Agent's Account No. 2358874 at LaSalle National Bank, ABA #071000505 (or
such other account as Agent may from time to time specify), not later than 11:30
A.M. Chicago time, on the date due; and funds received after that hour shall be
deemed to have been received by Agent on the next following Business Day.
Anything in this Agreement to the contrary notwithstanding, under no
circumstances shall receipt by Master Account Bank of funds of Borrower into the
Master Account or the holding of funds therein constitute repayment of Loans, or
entitle Borrower to interest thereon.
SECTION 2.10 DUE DATE EXTENSIONS. If any payment of principal,
interest or fees with respect to any of the Loans falls due on a Saturday,
Sunday or other day which is not a Business Day, then such due date shall be
extended to the next following Business Day, and additional interest and fees
shall accrue and be payable for the period of such extension.
SECTION 2.11 SET OFF AND SHARING OF PAYMENTS. In addition to any
rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, at any time (i) any payment or amount owing by
Borrower under or in connection with this Agreement or the Related Documents is
then due to any one or more of Agent and the Lenders or any such holder of a
Note, and (ii) upon the occurrence and during the continuance of any Event of
Default, Agent, each Lender, Master Account Bank (as agent of Agent and each
Lender), and each holder of any Note is hereby authorized by Borrower at any
time or from time to time, without notice to Borrower or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate and
to apply any and all balances held by it at any of its offices for the account
of Borrower
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(regardless of whether such balances are then due to Borrower) and any other
property at any time held or owing by Agent, that Lender, Master Account Bank
(as agent of Agent and each Lender) or that holder to or for the credit or for
the account of Borrower against and on account of any of the Liabilities which
are not paid when due; provided that no Agent or Lender shall exercise any such
right without giving prior written notice to Agent. Any Lender or holder of any
Note having a right to set off shall, to the extent the amount of any such set
off exceeds its Pro Rata Share of the Liabilities, purchase for cash (and the
other Lenders or holders shall sell) participations in each such other Lender's
or holder's Pro Rata Share of the Liabilities as would be necessary to cause
such Lender to share such excess with each other Lender or holder in accordance
with their respective Pro Rata Shares. Borrower agrees, to the fullest extent
permitted by law, that (a) any Lender or holder may exercise its right to set
off with respect to amounts in excess of its Pro Rata Share of the Liabilities
and may sell participations in such excess to other Lenders and holders and (b)
any Lender or holder so purchasing a participation in the Loans made or other
Liabilities held by other Lenders or holders may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender or holder were a direct holder of Loans and other
Liabilities in the amount of such participation.
SECTION 2.12 CERTAIN MATTERS RELATING TO LETTERS OF CREDIT.
2.12.1 ISSUANCE OF LETTERS OF CREDIT. Agent and the Lenders shall not
be obligated to issue an LC Guaranty or cause an Issuing Bank to issue any
Letter of Credit for the account of Borrower if at the time of such
requested issuance:
(a) The face amount of such requested Letter of Credit, when
added to the Reimbursement Obligations then outstanding, (i) would
cause LC Exposure to exceed $2,000,000, (ii) when added to the
aggregate outstanding principal amount of Revolving Loans and all
Reimbursement Obligations then outstanding would cause Total
Revolving and LC Exposure to exceed the Borrowing Base then in
effect, or (iii) when added to the aggregate outstanding principal
amount of Revolving Loans and all Reimbursement Obligations then
outstanding, would cause Total Revolving and LC Exposure to exceed
the Revolving Commitment; or
(b) Any order, judgment or decree of any Governmental
Authority or arbitrator shall purport by its terms to enjoin or
restrain the Issuing Bank from issuing such Letter of Credit or
Agent or the Lenders from issuing an LC Guaranty or any Requirement
of Law applicable to Agent, any Lender or the Issuing Bank or any
request or directive (whether or not having the force of law) from
any Governmental Authority with jurisdiction over Agent, any Lender
or the Issuing Bank shall prohibit, or request that Agent or the
Issuing Bank refrain from, the issuance of guaranties or letters of
credit generally or such Letter of Credit or LC Guaranty in
particular or shall impose upon Agent, any Lender or the Issuing
Bank with respect to such Letter of Credit or LC Guaranty any
restriction or reserve or capital requirement (for which Agent or
such Lender or the Issuing Bank is not
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otherwise compensated) not in effect as of the date of this
Agreement, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to Agent, the Lenders or the Issuing
Bank as of the Closing Date; or
(c) A default of any Lender's obligations to fund exists,
unless Agent and the Issuing Bank have entered into satisfactory
arrangements with Borrower to eliminate Agent's and the Issuing
Bank's risk with respect to such Lender, including cash
collateralization of such Lender's Pro Rata Share of the
Reimbursement Obligations; or
(d) Any of the conditions set forth in Section 12 shall not be
satisfied.
2.12.2 TERMS OF LETTERS OF CREDIT. The Letters of Credit shall be in a
form satisfactory to the Issuing Bank and the Lenders. At the time of
issuance, the amount and the terms and conditions of each Letter of Credit,
and of any drafts or acceptances thereunder, shall be subject to approval
by Agent and Borrower. In no event may the term of any standby Letter of
Credit issued hereunder exceed 360 days nor the term of any documentary
Letter of Credit exceed 120 days, and all Letters of Credit issued
hereunder shall expire no later than the date that is five (5) Business
Days prior to the Revolving Loan Termination Date. No Letter of Credit
shall contain an automatic renewal provision. In addition to all other
terms and conditions set forth in this Agreement, the issuance by Agent of
any LC Guaranty shall be subject to the conditions precedent that the
Issuing Bank be satisfactory to Agent and that the Letter of Credit for
which Borrower requests a LC Guaranty be in such form, contain such terms
and support such transactions as are reasonably satisfactory to Agent.
Borrower shall comply with all such terms and conditions imposed by any
Issuing Bank or by Agent with respect to the issuance of any Letter of
Credit, whether such terms and conditions are imposed in the application
for such Letter of Credit, the LC Guaranty with respect to such Letter of
Credit or otherwise.
2.12.3 LENDERS' PARTICIPATION. Immediately upon issuance or amendment
by Agent of any LC Guaranty in accordance with the procedures set forth in
this Agreement, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from Agent, without recourse or
warranty, an undivided interest and participation to the extent of such
Lender's Pro Rata Share in the liability with respect to such LC Guaranty
and the related Letter of Credit (including, without limitation, all
obligations of Borrower with respect thereto to Agent, other than amounts
owing to the Issuing Bank consisting of Issuing Bank Fees) and any security
therefor or guaranty pertaining thereto.
2.12.4 NOTICE OF ISSUANCE. Whenever Borrower desires the issuance of a
Letter of Credit, Borrower shall deliver to Agent a written notice no later
than 1:00 P.M. Chicago time at least five (5) Business Days in advance of
the proposed date of issuance of any Letter of Credit, which written notice
shall be in such form as may be required from time to time by Agent (a
"LETTER OF CREDIT REQUEST"). The transmittal by Borrower of each Letter of
Credit
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Request shall be deemed to be a representation and warranty by Borrower
that the Letter of Credit may be issued in accordance with and will not
violate any of the requirements of Section 12. Prior to the date of
issuance of each Letter of Credit, Borrower shall provide to Agent a
precise description of the documents and the text of any certificate to be
presented by the beneficiary of such Letter of Credit which if presented by
such beneficiary on or prior to the expiration date of the Letter of Credit
would require the Issuing Bank to make payment under the Letter of Credit.
Agent, in its reasonable judgment, may require changes in any such
documents and certificates. No Letter of Credit shall require payment
against a conforming draft to be made thereunder prior to the second
business day after the date on which such draft is presented, together with
all documents and/or certificates required to be presented in connection
therewith under the terms of the applicable Letter of Credit. A Letter of
Credit Request may be given to Agent in writing or by Electronic Notice
and, if requested by Agent, with prompt confirmation in writing. Any Letter
of Credit Request given to Agent by Electronic Notice shall be deemed to
have been prepared by, or under the supervision of, the chief financial
officer of Borrower.
2.12.5 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. Borrower
shall be irrevocably and unconditionally obligated forthwith without
presentment, demand, protest or other formalities of any kind, to reimburse
Agent, on behalf of the Lenders, for any amounts paid by the Lenders with
respect to each LC Guaranty including all amounts paid by the Lenders upon
any draw with respect to a Letter of Credit, any guaranty or reimbursement
obligation paid by the Lenders to any Person upon any draw upon a Letter of
Credit and all fees, costs and expenses paid by the Lenders to any Issuing
Bank. All such reimbursement obligations shall be due and payable on
demand. In the event of any drawing under any Letter of Credit by the
beneficiary thereof, Borrower shall give notice to be received by Agent on
the Business Day prior to the Business Day on which such drawing is payable
if Borrower intends to reimburse the Issuing Bank for the amount of such
drawing with funds other than the proceeds of Loans. Such notice from
Borrower shall be irrevocable and, if given, Borrower shall reimburse the
Issuing Bank not later than the close of business Chicago time on the day
on which such drawing is honored in an amount in immediately available
funds equal to the amount of such drawing. If Agent shall not have timely
received such notice (i) Borrower shall be deemed to have timely requested
the making of Revolving Loans on the date on which such drawing is honored
in an amount equal to the amount of such drawing and (ii) subject to
satisfaction or waiver of the conditions specified in Section 12 hereof and
the other terms and conditions of Revolving Loans contained herein, Agent
shall notify the Lenders thereof, and the Lenders shall, on the date of
such drawing, make Revolving Loans in the amount of their Pro Rata Share of
such drawing, the proceeds of which shall be applied directly by Agent to
reimburse the Issuing Bank for the amount of such drawing or payment. If
for any reason, proceeds of such Loans are not received by Agent on such
date in an amount equal to the amount of such drawing, Borrower shall be
obligated to and shall reimburse Agent, on the business day (under the laws
of the jurisdiction of the Issuing Bank) immediately following the date of
such drawing, in an amount in immediately available funds equal to the
excess of the amount of such drawing
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over the amount of such Loans, if any, which are so received, plus accrued
interest on such amount at the rate set forth in Section 4.2 hereof. Each
Lender acknowledges and agrees that its obligation to reimburse Agent
pursuant to this Section 2.12.5 is absolute and unconditional and shall not
be affected by any circumstance whatsoever including the occurrence or
continuance of an Unmatured Event of Default or an Event of Default, and
further acknowledges and agrees that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.
2.12.6 PAYMENT BY LENDERS. In the event that Borrower does not
reimburse Agent for the full amount of any drawing pursuant to Section
2.12.5 , Agent shall promptly notify each Lender of the unreimbursed amount
of such drawing and of such Lender's respective participation therein.
Unless Agent shall have so elected, each Lender shall make available to
Agent an amount equal to such Lender's respective participation in
immediately available funds, not later than 1:00 P.M. Chicago time on the
Business Day after the date notified by Agent. In addition, in the event
that any Lender fails to make available to Agent the amount of any such
Lender's participation in such LC Guaranty as provided in this Section
2.12.6, Agent may, but shall not be obligated to, fund the amount of such
Lender's participation in such LC Guaranty and recover such amount on
demand from such Lender. In the event that any Lender fails to make
available to Agent the amount of such Lender's participation in such LC
Guaranty as provided in this Section 2.12.6, and Agent does not elect to
fund to the Issuing Bank such defaulting Lender's participation in such LC
Guaranty as provided in the immediately preceding sentence, Agent shall be
entitled to recover such amount on demand from such Lender together with
interest at the Prime Rate. Agent shall distribute to each other Lender
which has paid all amounts payable by it under this Section 2.12.6 with
respect to any Letter of Credit such other Lender's Pro Rata Share of all
payments subsequently received by Agent from Borrower in reimbursement of
payments made by Agent under such Letter of Credit when such payments are
received.
2.12.7 ISSUING BANK. As between Borrower, the Issuing Bank, Agent and
each Lender, Borrower assumes all risks of the acts and omissions of the
Issuing Bank, or misuse of the LC Guaranties or Letters of Credit by the
respective beneficiaries of such LC Guaranties and Letters of Credit. In
furtherance and not in limitation of the foregoing, neither Agent nor any
of the Lenders shall be responsible (i) for the form, validity,
sufficiency, accuracy, genuineness or legal effects of any document
submitted by any party in connection with the application for and issuance
of or any drawing honored under such LC Guaranties or Letters of Credit
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged, (ii) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such LC Guaranty or Letter of Credit, or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason, (iii) for failure of the
beneficiary of any such Letter of Credit to strictly comply with conditions
required in order to draw upon such Letter of Credit, (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, telecopy or
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otherwise, whether or not they be in cipher, (v) for errors in
interpretation of technical terms, (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing or request a payment under any such LC Guaranty or Letter of
Credit, or of the proceeds thereof, (vii) for the misapplication by the
beneficiary of any such LC Guaranty or Letter of Credit, of the proceeds of
any drawing honored or payment under such LC Guaranty or Letter of Credit,
and (viii) for any consequences arising from causes beyond the control of
the Issuing Bank, Agent or the Lenders, except, in each case, as the result
of the gross negligence or willful misconduct of the Issuing Bank. None of
the above shall affect, impair, or prevent the vesting of any of the
Agent's rights or powers hereunder. In furtherance and extension of, and
not in limitation of, the specific provisions hereinabove set forth,
Borrower hereby agrees that any action taken or omitted by Agent or any
Lender or any Issuing Bank under or in connection with any LC Guaranty or
Letter of Credit or any related certificates, or the Collateral relating
thereto, if taken or omitted in good faith, shall be binding on Borrower
and shall not impose any resulting liability on Agent or any Lender or
relieve Borrower of any of its obligations hereunder to any such Person.
2.12.8 OBLIGATIONS ABSOLUTE. The obligations of Borrower to reimburse
Agent and the Lenders for payments made by the Lenders under the LC
Guaranty or in connection with any Letter of Credit and the obligations of
the Lenders under Section 2.12 hereof shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the
following circumstances:
(a) any lack of validity or enforceability of any Letter
of Credit;
(b) the existence of any claim, set-off, defense or other
right which Borrower or any Affiliate of Borrower may have at any
time against a beneficiary or any transferee of any Letter of Credit
or LC Guaranty (or any Persons or entities for whom any such
beneficiary or transferee may be acting), the Issuing Bank, Agent
any Lender or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Borrower
or any of its Affiliates and the beneficiary for which such LC
Guaranty was procured);
(c) any draft, demand, certificate or any other documents
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(d) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the
Related Documents;
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(e) payment by the Issuing Bank under any Letter of Credit
against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of
Credit;
(f) failure of any drawing under a Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds
of any drawing;
(g) any draft, demand, certificate or any other document
presented under any LC Guaranty proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(h) payment by Agent or any Lender under any LC Guaranty
against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such LC Guaranty;
provided, that in the case of any payment by Agent or any Lender
under such LC Guaranty, such Person has not acted with gross
negligence or wilful misconduct as determined by a final judgment,
not subject to review on appeal, of a court of competent
jurisdiction in determining that the demand for payment under any LC
Guaranty complies on its face with any applicable requirements for a
demand for payment under such LC Guaranty;
(i) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(j) the fact that an Unmatured Event of Default or an Event of
Default shall have occurred and be continuing;
provided, however, that Borrower shall have no obligation to reimburse the
Issuing Bank, and the Lenders shall have no obligation under Section 2.12
hereof, in the event of the Issuing Bank's willful misconduct or gross
negligence in determining whether documents presented under the Letter of
Credit comply with the terms of such Letter of Credit.
2.12.9 AGENT'S EXECUTION OF APPLICATIONS AND OTHER ISSUING BANK
DOCUMENTAION; RELIANCE ON CREDIT AGREEMENT BY ISSUING BANK. Agent shall be
authorized to execute, deliver and perform on behalf of the Lenders such LC
Guaranties, letter of credit applications, shipping indemnities, letter of
credit modifications and consents and other undertakings for the benefit of
the Issuing Bank as may be reasonably necessary or appropriate in
connection with the issuance or modification of Letters of Credit requested
by Borrower hereunder.
2.12.10 CASH COLLATERAL. Upon demand by Agent or the Required
Lenders after the occurrence of any Event of Default, Borrower shall
deposit with Agent for the benefit of the Lenders with respect to each
Letter of Credit then outstanding, promptly upon such demand, cash or Cash
Equivalents in an amount equal to 110% of the greatest amount
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for which such Letter of Credit may be drawn. Such deposit shall be held by
Agent for the benefit of the Issuing Bank and the other Lenders as security
for, and to provide for the payment of, outstanding Letters of Credit.
2.12.11. INDEMNIFICATION. In addition to amounts payable as elsewhere
provided herein and to the provisions of Section 14.5 hereof, Borrower
hereby agrees to indemnify, exonerate and hold each Lender Party free and
harmless from and against any and all claims, demands, actions, causes of
action, suits, losses, costs (including attorneys' fees and disbursements),
charges, liabilities and damages, and expenses in connection therewith
(irrespective of whether such Person is a party to the action for which
indemnification hereunder is sought) which such Lender Party incurs or is
subject to as a consequence, directly or indirectly, of (i) the issuance of
any LC Guaranty or Letter of Credit, other than as a result of the gross
negligence or willful misconduct of such Person as determined by a court of
competent jurisdiction, or (ii) the failure of any Lender or Agent to honor
a demand under a Letter of Credit or LC Guaranty as a result of any act or
omission relating to a Letter of Credit or LC Guaranty, whether rightful or
wrongful, of any present or future de jure or de facto government or
Governmental Authority. Borrower's unconditional obligations to Agent and
the Lenders hereunder shall not be modified or diminished for any reason or
in any manner whatsoever. Borrower agrees that any charges made to Agent or
the Lenders for Borrower's account by any Issuing Bank shall be conclusive
as between such Persons and Borrower and may be charged to the Loan
Account. All obligations under this Section 2.12.11 shall survive
termination of this Agreement.
The Issuing Bank shall not be liable for any error, negligence, or
mistake, whether omission or commission, in following Borrower's
instructions or those contained in any Letter of Credit or of any
modifications, amendments or supplements thereto or in issuing or paying
any Letter of Credit, except for the Issuing Bank's gross negligence or
wilful misconduct.
SECTION 2.13 LOAN ACCCOUNT. Agent shall maintain a loan account
("LOAN ACCOUNT") on its books in which shall be recorded (i) all Loans and
advances made to Borrower pursuant to this Agreement, (ii) the issuance of all
LC Guaranties, (iii) all payments made by Borrower on all Loans and (iv) all
other appropriate debits and credits as provided in this Agreement including all
fees, charges, expenses and interest. The failure so to record any such
information or any error in so recording any such information shall not,
however, limit or otherwise affect the actual obligations of Borrower hereunder
or under the Notes to repay the principal amount of all Loans together with all
interest accruing thereon. All entries in the Loan Account shall be made in
accordance with Agent's customary accounting practices as in effect from time to
time. Borrower shall pay the Liabilities reflected as owing by it under the Loan
Account and all other Liabilities hereunder as such amounts become due or are
declared due pursuant to the terms of this Agreement. So long as an Unmatured
Event of Default or an Event of Default shall have occurred and be continuing,
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times thereafter received by Agent or any Lender from or
on behalf of Borrower, and
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Borrower does hereby irrevocably agree that each Lender shall have the
continuing exclusive right to apply and to reapply any and all payments received
at any time or times hereafter against the Liabilities in such manner as such
Lender may deem advisable notwithstanding any previous entry by Agent upon the
Loan Account or by Agent or such Lender on any other books and records.
SECTION 2.14 STATEMENTS. All Loans and advances to Borrower, and
all other debits and credits provided for in this Agreement, shall be evidenced
by entries made by Agent in the Loan Account and in Agent's books and records
showing the date, amount and character for each such debit or credit. Until such
time as Agent shall have rendered to Borrower written statements of account as
provided herein, the balance in the Loan Account, as set forth on Agent's most
recent printout or other written statement, shall be rebuttably presumptive
evidence of the amounts due and owing to each Lender by Borrower; provided, that
any failure to so record or any error in so recording shall not limit or
otherwise affect Borrower's obligations to pay the Liabilities. Not more than
twenty (20) days after the last day of each calendar month, Agent shall render
to Borrower a statement setting forth the principal balance of the Loan Account
and the calculation of interest and fees due thereon. Each such statement shall
be subject to subsequent adjustment by Agent but shall, absent manifest errors
or omissions, be presumed correct and binding upon Borrower, and shall
constitute an account stated unless, within thirty (30) days after receipt of
any statement from Agent, Borrower shall deliver to Agent in accordance with
Section 14.3 written objection thereto specifying the error or errors, if any,
contained in such statement. In the absence of a written objection delivered to
Agent as set forth in this Section 2.14, Agent's statement of the Loan Account
shall be conclusive evidence of the amount of the Liabilities.
SECTION 3 NOTES; RECORDKEEPING.
SECTION 3.1 TERM NOTE. The Term Loans of each Lender shall be
evidenced by a promissory note (herein, as from time to time supplemented,
extended or replaced, called the "TERM NOTE") substantially in the form set
forth in Exhibit 3.1, with appropriate insertions, dated the date hereof,
payable to the order of such Lender in the maximum principal amount of such
Lender's Pro Rata Share of the Term Commitment.
SECTION 3.2 REVOVLING NOTE. The Revolving Loans of each Lender
shall be evidenced, in part, by a promissory Note (herein, as such Note may be
from time to time supplemented, extended or replaced, called the "REVOLVING
NOTE") substantially in the form set forth in Exhibit 3.2, with appropriate
insertions, dated the date hereof, payable to the order of such Lender in the
amount of such Lender's Pro Rata Share of the maximum principal amount of the
initial amount of the Revolving Commitment.
SECTION 4 INTEREST.
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SECTION 4.1 INTEREST RATES. Subject to Section 4.3, Borrower
hereby promises to pay interest on the outstanding principal amount of each Loan
for the period commencing on the date thereof until such Loan is paid in full,
at a rate per annum determined by reference to the Prime Rate or the LIBOR Rate,
respectively. The applicable basis for determining the rate of interest shall be
selected by Borrower at the time a borrowing is requested pursuant to Section
2.3 or at the time a Notice of LIBOR Activity is given pursuant to Section 4.4,
as the case may be. If on any day any portion of any Loan is outstanding with
respect to which notice has not been given to Agent in accordance with the terms
of this Agreement specifying the basis for determining the rate of interest
thereon, then for that day, such portion of such Loan shall be a Prime Rate Loan
and shall bear interest at a rate determined by reference to the Prime Rate.
Subject to Section 4.3, (i) each Prime Rate Revolving Loan and LIBOR Rate
Revolving Loan shall bear interest at a rate per annum determined as follows:
(a) if it is a Prime Rate Revolving Loan, then at the sum of the Prime Rate in
effect from time to time plus three-quarters of one percent (0.75%); or (b) if
it is a LIBOR Rate Revolving Loan, then at the sum of the LIBOR Rate for the
applicable Interest Period plus two and three-quarters of one percent (2.75%)
(the "LIBOR REVOLVING MARGIN"); and (ii) each Prime Rate Term Loan and LIBOR
Rate Term Loan shall bear interest at a rate per annum determined as follows:
(a) if it is a Prime Rate Term Loan, then at the sum of the Prime Rate in effect
from time to time plus one and one-quarter of one percent (1.25%); or (b) if it
is a LIBOR Rate Term Loan, then at the sum of the LIBOR Rate for the applicable
Interest Period plus three and one-quarter of one percent (3.25%).
SECTION 4.2 DEFAULT INTEREST.
(a) During any Default Interest Period, the unpaid principal amount
of (i) all Loans shall bear interest at the rate per annum set forth in Section
4.1 as to such Liabilities, and (ii) all other Liabilities shall bear interest
at the rate per annum applicable to Prime Rate Term Loans in each case plus 2.0%
per annum (the rate described in this clause (a) being herein called the
"DEFAULT RATE").
(b) For purposes of this Section 4.2, the term "DEFAULT INTEREST
PERIOD" shall mean a period of time (i) if an Event of Default under Section
13.1(a) or 13.1(e) occurs, commencing on the date on which such Event of Default
occurs and ending on the date on which such Event of Default is waived, or (ii)
if an Event of Default (other than under Section 13.1(a) or 13.1(e)) occurs,
commencing on the date of written notice to Borrower from Agent of such
occurrence and ending on the date such Event of Default is waived by the
Required Lenders.
SECTION 4.3 CONVERSION OR CONTINUATION
(a) Subject to the provisions of Section 4.4, Borrower shall have
the option (i) to convert at any time all or any part of its outstanding Loans
equal to $100,000 and integral multiples of $100,000 in excess of that amount
(or in such other amount as Agent shall permit as shall be evidenced by the
conversion of such Loan by Agent) from a Prime Rate Loan to a LIBOR Rate Loan
for a specified Interest Period; (ii) to convert all or any part of its
outstanding Loans equal to
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$100,000 and integral multiples of $100,000 in excess of that amount (or in such
other amount as Agent shall permit as shall be evidenced by the conversion of
such Loan by Agent) from LIBOR Rate Loans to Prime Rate Loans on the expiration
date of any Interest Period applicable thereto; or (iii) upon the expiration of
the Interest Period with respect to any LIBOR Rate Loans, to continue all or any
portion of such Loans equal to $100,000 and integral multiples of $100,000 in
excess of that amount (or in such other amount as Agent shall permit as shall be
evidenced by the continuation of such Loan by Agent) as LIBOR Rate Loans for a
specified Interest Period, and the succeeding Interest Period(s) of such
continued Loans shall commence on the expiration date of the Interest Period
applicable thereto; provided, however, that, notwithstanding the foregoing,
pursuant to Section 4.4(h), no outstanding Loan may be continued as, or be
converted into, a LIBOR Rate Loan when any Event of Default or Unmatured Event
of Default has occurred and is continuing.
(b) In the event Borrower shall elect to convert or continue a Loan
under Section 4.3(a), Borrower shall deliver to Agent a written Notice of LIBOR
Activity which shall set forth the details of such proposed conversion or
continuation, as the case may be, by 10:00 A.M., Chicago time three (3) Business
Days prior to, but in any event not more than five (5) Business Days prior to,
the proposed conversion/continuation date. Upon conversion or continuation by
Agent in accordance with this Agreement pursuant to any Notice of LIBOR
Activity, Borrower shall have effected the conversion/continuation of Loans
hereunder.
(c) The officers and employees of Borrower authorized to request a
Loan on behalf of Borrower are also authorized to request a
conversion/continuation on behalf of Borrower. Neither Agent nor any Lender
shall incur any liability to Borrower in acting upon any notice referred to
above which Agent believes in good faith to have been given by a duly authorized
officer or other person authorized to act on behalf of Borrower or for otherwise
acting in good faith under this Section 4.3.
(d) Each Notice of LIBOR Activity shall be irrevocable and Borrower
shall be bound to convert or continue in accordance therewith.
SECTION 4.4 SPECIAL PROVISIONS GOVERNING LIBOR RATE LOANS.
Notwithstanding anything to the contrary contained in this Agreement, the
following provisions shall govern with respect to LIBOR Rate Loans as to the
matters covered:
(a) Determination of Interest Period. By giving notice as set forth
in Sections 2.3 or 4.3(b), as the case may be, Borrower shall, subject to the
other provisions of this Section 4.4 specify whether the Interest Period
applicable to any requested LIBOR Rate Loan shall be a one-month, three-month or
six-month period. The determination of Interest Periods shall be further subject
to the following provisions: (i) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on which the
immediately preceding Interest Period expires; (ii) if any Interest Period would
otherwise expire on a day which is not a Business Day, the Interest Period shall
be extended to expire on the next succeeding Business Day; (iii) Borrower may
not select an Interest Period for any Term Loan which terminates later than the
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Final Maturity Date or for any Revolving Loan which terminates later than the
Revolving Loan Termination Date then in effect; (iv) Borrower may not select an
Interest Period with respect to any portion of principal of a Loan which extends
beyond a date on which Borrower could reasonably be expected to be required to
make a mandatory payment or prepayment of that portion of principal; (v) any
Interest Period which begins on a day for which there is no numerically
corresponding day in the calendar month during which such Interest Period is to
end shall (subject to clause (ii) above) end on the first Business Day following
the last day of such calendar month; and (vi) there shall be no more than two
(2) LIBOR Rate Loans in effect at any one time.
(b) Determination of Interest Rate. As soon as practicable on the
LIBOR Interest Rate Determination Date, Agent shall determine (which
determination shall, absent manifest error, be presumptively correct) the
interest rate which shall apply to such Loans for such Interest Period and shall
promptly give notice thereof (in writing or by telephone) to Borrower.
(c) Substituted Rate of Borrowing. In the event that on any LIBOR
Interest Rate Determination Date with respect to any Loans, Agent shall have
determined (which determination shall be presumptively correct and binding upon
all parties) that, by reason of any changes arising after the date of this
Agreement affecting the London interbank market, adequate and fair means do not
exist for ascertaining the LIBOR Rate on a basis consistent with the essential
intent of the parties hereto, then, and in each such event, the right of
Borrower to select the LIBOR Rate with respect to such Loans shall be suspended
until Agent shall notify Borrower that the circumstances causing such suspension
no longer exist, and such Loans shall be Prime Rate Loans.
(d) Illegality. Notwithstanding anything to the contrary contained
in this Agreement, in the event that on any date any Lender shall have
reasonably determined (which determination shall be final and conclusive and
binding upon all parties) that the making or continuation of its LIBOR Rate
Loans violates any applicable law, treaty, governmental rule, regulation or
order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, and in any such event, such Lender
shall promptly give notice (by telephone confirmed in writing) to Borrower of
that determination. Subject to the prior withdrawal of a Notice of LIBOR
Activity or prepayment of the LIBOR Rate Loans of the Lenders as contemplated by
the following Section 4.4(e), the obligation of the Lenders to make or maintain
its LIBOR Rate Loans during any such period shall be terminated at the earlier
of the termination of the Interest Period then in effect or when required by
law, and Borrower shall no later than the termination of the Interest Period in
effect at the time any such determination pursuant to this Section 4.4(d) is
made or, earlier, when required by law, repay the LIBOR Rate Loans of the
Lenders, together with all interest accrued thereon and amounts payable under
Section 4.4(f).
(e) Options of Borrower. In lieu of prepaying the Lenders as
required by Section 4.4(d) above, Borrower may, by giving notice (by telephone
confirmed immediately by telecopy) to Agent and subject to the other terms of
this Agreement, request the Lenders to make the LIBOR Rate Loan then being
requested as a Prime Rate Loan or to continue to maintain its outstanding Prime
Rate Loan then the subject of a Notice of LIBOR Activity as a Prime Rate Loan
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or to convert its LIBOR Rate Loans then outstanding that are so affected into
Prime Rate Loans at the end of the then current Interest Period (or at such
earlier time as prepayment is otherwise required) in the manner contemplated by
Section 4.4 but without satisfying the advance notice requirements therein.
(f) Compensation. In addition to (but without duplication of) such
amounts as are required to be paid by Borrower pursuant to Sections 4.1, 4.2,
8.1, 8.2, 8.3 and 8.4, Borrower shall compensate each Lender for all losses,
costs, expenses and liabilities and all customary administrative charges and
fees, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Lender's LIBOR Rate Loans to Borrower and
all customary administrative charges and fees, which such Lender may sustain (i)
if for any reason a borrowing of any LIBOR Rate Loan does not occur on a date
specified therefor in a Notice of LIBOR Activity , or if a successive Interest
Period does not commence after notice therefor is given pursuant to Section
4.3(b), (ii) if any voluntary or mandatory prepayment of any LIBOR Rate Loan
occurs for any reason on a date which is not the last day of an Interest Period,
(iii) as a consequence of any required conversion of a LIBOR Rate Loan to a
Prime Rate Loan as a result of any of the events indicated in Sections 4.4(d) or
4.4(e), or (iv) as a consequence of any other default by Borrower to repay any
LIBOR Rate Loan when required by the terms of this Agreement. In addition,
Borrower shall pay the Lenders their customary administrative charges and fees
incurred in connection with any of the foregoing.
(g) Manner of Funding of LIBOR Rate Loans. Each Lender shall be
entitled to fund and maintain its funding of all or any part of any LIBOR Rate
Loan requested by Borrower hereunder in any manner it sees fit, it being
understood and agreed, however, that for the purposes of this Agreement, all
determinations hereunder shall be made as if such Lender had actually funded and
maintained each LIBOR Rate Loan during each Interest Period for such Loan
through the purchase of deposits in the London interbank market having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the LIBOR Rate for such Interest Period.
(h) LIBOR Rate Loans After Default. Unless the Required Lenders
shall otherwise agree in writing, after occurrence and during the continuance of
an Unmatured Event of Default or an Event of Default, Borrower may not elect to
have a Loan be made or continued as, or converted to, a LIBOR Rate Loan after
the expiration of any Interest Period then in effect for that Loan.
SECTION 4.5 INTEREST PAYMENT DATES. Accrued interest on each
Prime Rate Loan shall be payable in arrears on the fifteenth day of each month,
and at maturity, commencing with August 15, 1998. Accrued interest on each LIBOR
Rate Loan shall be payable in arrears on each LIBOR Interest Payment Date
applicable to such Loan and, in any event, at maturity. After maturity (whether
by acceleration or otherwise), accrued interest on all Loans shall be payable on
demand.
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SECTION 4.6 SETTING OF RATES. Interest rates hereunder shall be
calculated from time to time by Agent and each such calculation of an interest
rate shall be conclusive and binding on Borrower in the absence of demonstrable
error.
SECTION 4.7 COMPUTATION OF INTEREST. Interest on each Loan shall
be computed for the actual number of days elapsed on the basis of a year
consisting of 360 days. In computing interest on any Loan, the date of the
making of the Loan or the first day of an Interest Period, as the case may be,
shall be included and the date of payment of the Loan or the expiration date of
an Interest Period, as the case may be, shall be excluded; provided, however,
that if a Loan is repaid on the same day on which it is made, one day's interest
shall in any event be paid on that Loan. The interest rate applicable to each
Prime Rate Loan shall change simultaneously with each change in the Prime Rate.
SECTION 5 FEES
SECTION 5.1 NON-USE FEES. Borrower shall pay to Agent for the
benefit of each Lender, on a quarterly basis, a non-use fee (the "NON-USE FEE")
for the period from and including the date hereof to but excluding the Revolving
Loan Termination Date (or such earlier date on which the Revolving Loan
Commitment shall be terminated pursuant to Section 2.6 or 13.2 hereof) of
one-half of one percent (0.5%) per annum on the excess of (i) the daily average
of such Lender's Pro Rata Share of the then applicable Revolving Commitment over
(ii) the daily average of such Lender's Pro Rata Share of the aggregate
principal amount of the Total Revolving and LC Exposure. Such Non-Use Fees shall
be payable in arrears on the fifteenth day of each January, April, July and
October (commencing on October 15, 1998) and on the Revolving Loan Termination
Date (or such earlier date on which the Revolving Loan Commitment shall
terminate) for any period then ending for which such Non-Use Fees shall not have
been theretofore paid.
SECTION 5.2 COMMITMENT FEE. If not previously paid to Agent,
Borrower shall pay to Agent on the date of the initial Loan a non-refundable
commitment fee as set forth in the fee letter between Borrower and Agent dated
July 2, 1998 (the "FEE LETTER").
SECTION 5.3 CLOSING FEE. On the date of the initial Loan,
Borrower shall pay to Agent a non-refundable closing fee as set forth in the Fee
Letter.
SECTION 5.4 LETTER OF CREDIT FEES. (a) Borrower shall pay to
Agent for the benefit of the Lenders a fee (the "LETTER OF CREDIT FEE") for the
period from and including the first date on which any Permitted LC is
outstanding to but excluding the Revolving Loan Termination Date (or such
earlier date on which all of the LC Guaranties shall no longer be of any force
or effect and the originals thereof are returned by the appropriate Issuing Bank
to the Lenders and the applicable Issuing Bank shall have acknowledged in
writing that the Lenders shall have no further obligations thereunder) in an
amount equal to the LIBOR Revolving Margin per annum on the daily average of the
LC Exposure. Such fees shall be payable in arrears on the fifteenth day of
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each January, April, July and October (commencing on October 15, 1998) and on
the date on which all of the LC Guaranties shall no longer be of any force or
effect.
(b) Agent shall also be entitled to charge to the account of
Borrower as and when incurred by Agent or any Lender, any charges, fees, costs
and expenses charged to Agent or any Lender for Borrower's account by any
Issuing Bank (other than any fees charged to Agent or any Lender which would be
duplicative of the Letter of Credit Fee paid to Agent for the benefit of the
Lenders) (the "ISSUING BANK FEES") in connection with the issuance of any
Letters of Credit by the Issuing Bank. In addition, Borrower agrees to pay to
the Issuing Bank or the Issuing Bank's customary issuing, administrative and
negotiating fees and Agent shall pay the charges owing to such Issuing Bank upon
receipt of such amounts from Borrower.
SECTION 5.5 AUDIT FEES. Borrower shall pay to Agent a collateral
audit fee (the "Audit Fee") in an amount equal to (i) Agent's reasonable
out-of-pocket costs per audit for each field audit conducted by Agent or its
agents pursuant to Section 11.3; provided that so long as no Unmatured Event of
Default or Event of Default shall have occurred and be continuing, Borrower
shall not be liable for reimbursing Agent for the costs and expenses of more
than three (3) field audits in any Fiscal Year plus (ii) so long as any Term
Loan remains outstanding, Agent's reasonable out-of-pocket costs of performing
annual "desk-top" appraisal updates of the Equipment and the Real Estate.
SECTION 5.6 COMPUTATION OF FEES. All fees shall be computed for
the actual number of days elapsed on the basis of a year consisting of 360 days.
SECTION 6 ACCOUNT AGREEMENTS; ACCOUNTS; LIST OF ACCOUNTS AND
ACCOUNT STATEMENTS.
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SECTION 6.1 ACCOUNT AGREEMENTS. Prior to the date of the initial
Loan, Borrower, Master Account Bank and such other Persons as are designated by
Agent shall enter into a Bank Agency Agreement (herein, as the same may be
amended, modified or supplemented from time to time, called the "BANK AGENCY
AGREEMENT"). Pursuant to the Collateral Documents, including the Bank Agency
Agreement, Borrower shall grant to Agent a continuing first priority lien upon,
and security interest in, the Master Account and the Operating Account, each
described below (the Master Account and the Operating Account are collectively
referred to herein as the "BANK ACCOUNTS"), all funds, items, instruments,
investments, securities and other things of value at any time paid, deposited,
credited or held to or in the Lockbox or the Bank Accounts (whether for
collection, provisionally or otherwise), and all other Property of Borrower from
time to time in the possession or under the control of, or in transit to, Agent,
any Lender, Master Account Bank or any agent, bailee or custodian therefor, and
all proceeds of all of the foregoing. The Bank Agency Agreement shall specify
that throughout the term of this Agreement, Master Account Bank, to the extent
any such Person is a party to the Bank Agency Agreement, (i) shall be
pledgee-in-possession (for the benefit of the Lenders) of the Bank Accounts
described therein, all Cash Instruments of Borrower held by Master Account Bank,
and all such funds, items, instruments, investments, securities, other things of
value, Property and proceeds, (ii) shall take such action as shall be specified
in written notice from Agent to enable Agent to exercise its rights with respect
to such lien and security interest, (iii) shall be entitled to exercise all and
any rights which Agent or any Lender may have under this Agreement and the
Related Documents or applicable law with respect to the Bank Accounts described
therein and such other Property and (iv) shall provide Agent with copies of all
statements relating to the Bank Accounts provided by Master Account Bank to
Borrower. Notwithstanding any provision of this Section 6.1, Agent and the
Lenders shall have no obligation to reconcile or verify, at any time or for any
purpose, any balance in any Account or any other account maintained by Master
Account Bank as agent for Agent and the Lenders.
SECTION 6.2 BANK ACCOUNTS
(a) MASTER ACCOUNT AND LOCKBOX. Agent shall maintain at Master
Account Bank the account identified as the "Master Account" in the Bank Agency
Agreement (herein called the "MASTER ACCOUNT") and Borrower shall maintain one
or more lockboxes with Master Account Bank (herein called the "LOCKBOX"). The
Master Account and the Lockbox shall be under the sole dominion and control of
Agent, and Borrower shall not have any right of withdrawal therefrom.
(b) OPERATING ACCOUNTS. Borrower shall maintain one or more
operating accounts at Master Account Bank described in the Bank Agency Agreement
(such accounts being herein called the "OPERATING ACCOUNT").
(c) OTHER ACCOUNTS. Borrower shall not maintain any operating
account (other than the Operating Account), and agrees that it will not maintain
any bank, investment or other account of any kind whatsoever with any other
brokerage house or financial institution; provided, however, that so long as no
Event of Default shall have occurred and be continuing, Borrower may maintain
the petty cash and payroll accounts listed on Schedule 6.3 hereto at the
financial institutions
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indicated thereon, provided that the aggregate amount of funds on deposit in
each such (x) petty cash account shall not exceed $5,000, and (y) payroll
account shall not at any time exceed the sum of all accrued payroll and payroll
taxes then payable by Borrower on account of payroll obligations payable from
such account; and provided, further, that (i) Borrower shall have irrevocably
instructed the relevant financial institution, at the request of Agent, to
provide Agent with information concerning such accounts, (ii) such financial
institution shall have acknowledged such instructions in writing for the benefit
of Agent, and (iii) at any time when an Event of Default or Unmatured Event of
Default has occurred and is continuing Borrower shall, at Agent's request,
promptly cause each such financial institution to provide Agent with daily
reports of the balance in each such account.
SECTION 6.3 LIST OF ACCOUNTS AND ACCOUNT STATEMENTS. All
accounts of Borrower and all payroll and petty cash accounts of Borrower are
described on Schedule 6.3. In the event Borrower opens any new accounts or
closes any account, Borrower shall deliver to Agent a revised version of
Schedule 6.3 showing any changes thereto within three (3) Business Days of any
such change. Borrower shall instruct all banks listed on Schedule 6.3 to provide
Agent with copies of all statements issued by such banks with respect to the
accounts described on Schedule 6.3.
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SECTION 7 PROCEEDS OF COLLATERAL; APPLICATION OF FUNDS; DEEMED
LOANS.
SECTION 7.1 PROCEEDS OF COLLATERAL; NOTICES TO ACCOUNT DEBTORS;
LOCKBOX. Borrower shall direct all Account Debtors to pay all Accounts and other
proceeds of Collateral directly to the Lockbox for deposit into the Master
Account. In addition, Borrower shall take all such actions as Agent in good
faith deems necessary or appropriate to ensure that at all times on and after
the date hereof all proceeds of Collateral (including, without limitation, all
Cash Instruments) are sent directly to the Lockbox. If, notwithstanding the
actions provided for in the preceding sentences of this Section 7.1, Borrower
shall receive, or any financial institution shall receive for the account of
Borrower, any Cash Instruments, Borrower shall, or shall cause such financial
institution to, transmit in the form received, before the close of business on
the next succeeding Business Day, all such Cash Instruments (properly endorsed,
where required, so that all items delivered may be collected by Master Account
Bank) to Master Account Bank for deposit in the Master Account. Borrower shall
not, and Borrower shall not permit or cause any such financial institution to,
commingle any Cash Instrument so received except in the Master Account, and
Borrower shall hold separate and apart from all other Property, all such Cash
Instruments in express trust for the benefit of the Lenders until delivery
thereof is made to Master Account Bank. Pursuant to, and subject to the terms
and conditions of the Bank Agency Agreement, items deposited in the Lockbox
shall be credited to the Master Account. Borrower, and any of its Affiliates,
employees, the Lenders or other Persons acting for or in concert with Borrower,
shall, acting as trustee for the Lenders, receive, as the sole and exclusive
property of the Lenders any monies, checks, notes, drafts or any other payments
relating to and/or proceeds of Accounts or other Collateral which come into the
possession or under the control of Borrower or any Affiliates, employees, the
Lenders or other Persons acting for or in concert with Borrower, and immediately
upon receipt thereof, Borrower or such other Persons shall remit the same or
cause the same to be deposited, in kind, into a Master Account or, at the
direction of Agent, shall remit the same, or cause the same to be remitted, in
kind, to Agent at Agent's address set forth in Section 14.3.
SECTION 7.2 APPLICATION OF MASTER ACCOUNT FUNDS. At the opening
of business on each Business Day, Master Account Bank shall calculate the amount
of collected funds on deposit in the Master Account (herein the "MASTER ACCOUNT
COLLECTED BALANCES" for such day). Thereafter on such Business Day Master
Account Bank shall transfer from the Master Account to Agent the Master Account
Collected Balances in minimum amounts of $50,000 and in integral multiples of
$5,000 in excess thereof for such day.
SECTION 7.3 APPLICATION OF FUNDS AVAILABLE FOR LOAN REPAYMENTS.
Any amounts received by Agent from the Master Account pursuant to Section 7.2
shall be applied to the outstanding obligations of Borrower in the following
order of priority: first, to principal of the Reimbursement Obligations and the
Revolving Loans then due and payable in such order as Agent shall determine
(provided, however, that application on account of Liabilities constituting
Revolving Loans shall be made by Agent (i) first to all Prime Rate Revolving
Loans and (ii) only when no Prime Rate Revolving Loans are outstanding to LIBOR
Rate Revolving Loans); second,
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to interest then due and payable on the Reimbursement Obligations and the
Revolving Loans in such order as Agent shall determine; third, to interest on
the Term Loans; fourth, to any fees hereunder then due and payable, in such
order as Agent may elect; and fifth, to the payment of any other Liabilities
then due and payable to Agent and the Lenders in such order as Agent may
determine. Immediately available funds received by Agent or deposited in the
Master Account shall be deemed to have been received two Business Days after the
date of receipt thereof.
SECTION 7.4 APPLICATION UPON AN EVENT OF DEFAULT. If an Event of
Default shall have occurred and be continuing, and notwithstanding the foregoing
Sections 7.2 and 7.3, at the request of Agent, and Master Account Bank from time
to time shall transfer all Master Account Collected Balances in the Master
Account to Agent for application to the Liabilities in such order as Agent, in
its sole discretion, shall elect. Master Account Bank shall be entitled to rely
on a written statement of Agent to the effect that an Event of Default has
occurred and is continuing.
SECTION 7.5 DEEMED LOANS. Notwithstanding any provision
contained herein to the contrary, and in addition to, and not in limitation of,
any of the other rights or remedies of Agent and the Lenders set forth herein,
including, without limitation, pursuant to Section 7.4, at the sole option of
Agent, in order to facilitate timely payment hereunder of all Liabilities in
respect of (i) payments of interest due on any Loans, (ii) payments of principal
due on the Term Loans, (iii) payments of cash, fees, expenses and other
Liabilities due and payable by Borrower to Agent and the Lenders hereunder or
under any of the Related Documents and (iv) payments by Agent and the Lenders of
any amount due and payable under the Bank Agency Agreement or any other
agreement entered into by any one or more of Agent and the Lenders and Master
Account Bank in connection with this Agreement (including, without limitation,
any amount resulting from the return, dishonor or other non-payment of items
deposited with Master Account Bank by or on behalf of Borrower), then, whether
or not there is Borrowing Availability under the Revolving Commitment, Borrower
shall be deemed automatically to have made a request for, and upon such payment
the Lenders shall be deemed to have made, a Prime Rate Revolving Loan, in the
full amount of such payment. Borrower acknowledges that such Loan may cause
Borrower to have exceeded the lesser of the Revolving Commitment or the
Borrowing Base, in which event Borrower shall be obligated to immediately make a
prepayment pursuant to Section 2.7(b).
SECTION 7.6 APPLICATION OF PROCEEDS. In the event Borrower shall
suffer any loss covered by insurance, Borrower shall immediately notify Agent in
writing, and Borrower hereby authorizes and directs each and every insurance
company concerned to make payments for such loss directly and solely to Agent
(who may, but need not, make proof of loss) and Agent is hereby authorized to
adjust, collect and compromise in its discretion all claims under all such
policies, and Borrower shall sign, upon demand by Agent, all receipts, vouchers
and releases required by such insurance companies; provided, however, that other
than after the occurrence and during the continuance of an Event of Default,
Borrower may adjust, collect and compromise insurance claims upon notice to and
with Agent's consent (which shall be exercised reasonably and in good faith) so
long as Borrower is acting reasonably and diligently. In the event Borrower
shall be awarded any amount pursuant to any condemnation proceeding or the
taking or injury to any
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property for public use, Borrower shall immediately notify Agent in writing and
Borrower agrees that the proceeds of all such awards shall be paid to Agent and
authorizes Agent, on behalf and in the name of Borrower to execute and deliver
valid acquittances for and to appeal from any such award. Borrower shall also
immediately notify Agent of any actual or threatened condemnation or eminent
domain proceedings and shall give Agent at any time any additional instruments
requested by Agent for the purpose of validly and sufficiently assigning all
awards or appealing any such award. Insurance proceeds and awards described in
this Section 7.6 (collectively, "LOSS PROCEEDS"), or any part thereof, received
by Agent, after deducting therefrom any expenses incurred, may be applied by
Agent at its option (i) to the repair or restoration of the property suffering
any loss, condemnation or taking ("LOSS PROPERTY"), (ii) to the payment of the
Liabilities, whether or not due and in whatever order Agent elects, or (iii) to
any other purpose or objects for which Agent or the Lenders are entitled to
advance funds under this Agreement, all without affecting the lien or security
interest created by the Collateral Documents, and any balance of such monies
shall be paid to Borrower or the Person lawfully entitled thereto. None of Agent
and the Lenders shall be held responsible for any failure to collect any
insurance proceeds due under the terms of any policy regardless of the cause of
such failure unless due to the gross negligence or wilful misconduct of Agent.
Notwithstanding the foregoing, Agent and the Lenders agree that any Loss
Proceeds shall be applied as follows:
(a) If no Unmatured Event of Default or Event of Default has
occurred and is continuing at the time of the insured loss, condemnation or
taking and the amount of such Loss Proceeds together with all other Loss
Proceeds previously or contemporaneously paid to Agent for the benefit of the
Lenders hereunder is less than $100,000, then such Loss Proceeds shall be paid
into the Master Account for application pursuant to this Agreement.
(b) If no Unmatured Event of Default or Event of Default has
occurred and is continuing at the time of the insured loss, condemnation or
taking and the amount of such Loss Proceeds, together with all other Loss
Proceeds previously or contemporaneously paid to Agent for the benefit of the
Lenders hereunder is $100,000 or greater, then Agent will permit the Loss
Proceeds to be utilized toward the restoration of the Loss Property, provided
that (i) business interruption loss insurance will be payable to Borrower during
the period necessary to restore the Loss Property, (ii) the proceeds of such
business interruption insurance together with other funds available to Borrower
will be sufficient to pay all of Borrower's obligations during such period,
(iii) after giving effect to such proposed restoration no Event of Default or
Unmatured Event of Default will be in existence and (iv) prior to such
utilization of the Loss Proceeds, Agent shall be provided with (A) a full and
complete set of plans and specifications for the restoration of the Loss
Property, and (B) a current appraisal indicating that the value of the Loss
Property following the restoration as contemplated by such plans and
specifications will be of a value at least equal to the greater of (I) the Loss
Property prior to the loss or (II) the then outstanding principal balance of the
Liabilities, and (C) all other items that may be reasonably requested by Agent
in form and substance satisfactory to Agent. The plans and specifications and
the appraisal must be in a form and content fully satisfactory to Agent. Agent
shall disburse such Loss Proceeds for the purpose of restoration of the Loss
Property on a monthly basis upon receipt of satisfactory draw requests and
inspection
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reports of an architect approved by Agent certifying as to the percentage of
completion of the restoration project. Agent shall retain a ten percent (10%)
retainage of all Loss Proceeds disbursed hereunder pending the issuance of a
final certificate of substantial completion issued by the inspecting architect
certifying the completion of the restoration of the Loss Property in accordance
with the approved plans and specifications. In the event of an Unmatured Event
of Default or Event of Default at any time following an insurance loss,
condemnation or taking, the Lenders may apply all Loss Proceeds then in Agent's
possession as a reduction against the Liabilities. No interest shall be payable
by any Lender or Agent on account of any Loss Proceeds at any time held by any
Lender or Agent.
SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS.
SECTION 8.1 INCREASED COSTS. If, after the date hereof, the
adoption of any applicable "law" (which expression, as used in this Section 8.1,
includes statutes, rules and regulations thereunder and interpretations thereof
by any competent court or by any governmental authority or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Lender by any central bank or
other fiscal, monetary or other authority (whether or not having the force of
law)) adopted, becoming effective, or any change in the interpretation or
administration thereof, or compliance by any Lender with any request or
directive (whether or not having the force of law) of any such authority or
agency, shall subject any Lender to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature (other than taxes imposed on or measured
by the overall net income of any Lender) or capital adequacy requirement with
respect to, or shall impose or increase or render applicable any special
deposit, assessment, insurance charge, reserve or liquidity or other similar
requirement (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans made by any Lender, or shall
otherwise increase the effective cost of, the Loans, or any Lender's obligation
to make, issue or maintain the Loans, or shall change the basis of taxation of
payments to any Lender of the principal of or interest on the Loans or any other
amounts due under this Agreement in respect of the Loans, or any Lender's
obligation to make, issue or maintain the Loans (except for changes in the rate
of tax on the overall net income of any Lender), or shall impose on any Lender
any other condition or requirement affecting the Loans or any Lender's
obligation to make the Loans, and the result of any of the foregoing is to
increase the cost to such Lender of making, funding, issuing or maintaining the
Loans, to require such Lender to make any payment or to forego any interest or
other sum payable under this Agreement, or to reduce the amount of any rate of
return or any sum received or receivable by such Lender under this Agreement or
under the Notes with respect thereto, then upon written notice of such
occurrence to Borrower by such Lender (which notice shall contain a statement
setting forth a description of such occurrence) at any time and from time to
time and as often as the occasion therefor may arise, Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
increased cost, payment, sum or such reduction.
SECTION 8.2 FUNDING LOSSES. Borrower hereby agrees that if any
Lender receives a notice (whether written or oral) of borrowing or repayment
pursuant to this Agreement
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and Borrower fails to borrow or repay strictly in accordance therewith, then,
upon demand by such Lender (which demand shall be accompanied by a statement
setting forth the basis for the calculations of the amount being claimed)
Borrower will indemnify such Lender against any net loss or expense which such
Lender may sustain or incur (including, without limitation, any net loss or
expense incurred by reason of the liquidation or reemployment of funds acquired
by such Lender to fund or maintain Loans), as reasonably determined by such
Lender, as a result of any failure of Borrower to borrow or repay any Loan on a
date specified therefor in a notice (whether written or oral) of borrowing or
repayment pursuant to this Agreement. For this purpose, all notices to Agent and
the Lenders pursuant to this Agreement shall be deemed to be irrevocable.
SECTION 8.3 DISCRETION OF THE LENDERS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the DING contrary, each
Lender shall be entitled to internally fund and maintain its funding of all or
any part of the Loans in any manner it sees fit.
SECTION 8.4 CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF
PROVISIONS. In making the determinations contemplated by this Section 8, each
Lender may make such reasonable estimates, assumptions, allocations and the like
that such Lender in good faith determines to be appropriate; and, subject to the
foregoing clause, determinations and statements of the Lenders pursuant to this
Section 8 shall be conclusive absent demonstrable error. The provisions of this
Section 8 shall survive termination of this Agreement.
SECTION 9 COLLATERAL AND ELIGIBILITY REQUIREMENTS
SECTION 9.1 ELIGIBLE ACCOUNTS. "ELIGIBLE ACCOUNTS" shall mean
all Accounts other than the following: (i) Accounts which remain unpaid as of
the earlier to occur of ninety (90) days after the due date specified in the
original invoice with respect thereto or one hundred twenty (120) days after the
date of the original invoice with respect thereto; (ii) all Accounts owing by a
single Account Debtor, including a currently scheduled Account, if twenty-five
percent (25%) or more of the balance owing by such Account Debtor is ineligible
by reason of the criterion set forth in clause (i) of this Section 9.1; (iii)
Accounts with respect to which the Account Debtor is an Affiliate of either
Borrower or a Guarantor or a director, officer or employee of Borrower, any
Guarantor or its Affiliates; (iv) Accounts with respect to which the Account
Debtor is a Governmental Authority or prime contractor thereof unless Borrower
or any Guarantor has complied in a manner satisfactory to Agent with the Federal
Assignment of Claims Act of 1940, as amended, or similar law or statute of the
relevant state, province, municipality or other jurisdiction and any amendments
thereto, relative to the assignment of such Accounts; (v) Accounts with respect
to which the Account Debtor is not a resident of the United States or Canada
(other than the provinces of Prince Edward Island, Newfoundland and Nova Scotia
and the Northwest Territories) unless such Account is payable in United States
Dollars and the Account Debtor has supplied Borrower or any Guarantor with an
irrevocable letter of credit, issued by a financial institution satisfactory to
the Required Lenders, in an amount sufficient to cover such Account and in form
and substance satisfactory to the Required Lenders and without right of setoff;
(vi) Accounts arising with respect to goods which have not been shipped and
delivered to and accepted as satisfactory by the Account
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Debtor or arising with respect to services which have not been fully performed
and accepted as satisfactory by the Account Debtor; (vii) Accounts for which the
prospect of payment in full or performance in a timely manner by the Account
Debtor is or is likely to become impaired as determined by Agent in the exercise
of its discretion; (viii) Accounts which are not invoiced (and dated as of the
date of such invoice) and sent to the Account Debtor within five (5) days after
delivery of the underlying goods to or performance of the underlying services
for the Account Debtor; (ix) Accounts with respect to which Agent, on behalf of
the Lenders, does not have a first and valid fully perfected Lien free and clear
of any other Lien; (x) Accounts with respect to which the Account Debtor is the
subject of bankruptcy or a similar insolvency proceeding or has made an
assignment for the benefit of creditors or whose assets have been conveyed to a
receiver or trustee; (xi) Accounts with respect to which the Account Debtor's
obligation to pay the Account is conditional upon the Account Debtor's approval
or is otherwise subject to any repurchase obligation or return right, as with
sales made on a guaranteed sale, bill-and-hold, sale-or-return, demonstration,
sale on approval or other terms by reason of which the payment by the Account
Debtor is or may be conditional (except with respect to Accounts in connection
with which Account Debtors are entitled to return Inventory solely on the basis
of the quality of such Inventory) or consignment basis; (xii) Accounts to the
extent that the Account Debtor's indebtedness to Borrower or any Guarantor
exceeds a credit limit determined by Agent in Agent's discretion following prior
written notice of such credit limit from Agent to Borrower or such Guarantor;
(xiii) Accounts with respect to which any disclosure is required in accordance
with Section 9.2; (xiv) contra Accounts to the extent of the amount of the
accounts payable owed by Borrower or any Guarantor to the Account Debtor; (xv)
Accounts with respect to which the Account Debtor is located in Minnesota or any
other state denying creditors access to its courts in the absence of a Notice of
Business Activities Report or other similar filing unless Borrower or any
Guarantor has either qualified as a foreign corporation authorized to transact
business in such state or has filed a Notice of Business Activities Report or
similar filing with the applicable Governmental Authority in such state for the
then current year; (xvi) Accounts evidenced by Chattel Paper or any Instrument
of any kind, to the extent possession of such Chattel Paper or Instrument is not
granted to Agent, for the benefit of the Lenders; (xvii) Accounts which Agent
determines in good faith to be unacceptable and (xviii) the Accounts do not
arise from the sale of Inventory produced in violation of the Fair Labor
Standards Act so as to be subject to the so-called "hot goods" provision
contained in Title 19 U.S.C., Section 215(a)(1). In the event that an Eligible
Account previously scheduled in a Borrowing Base Certificate ceases to be an
Eligible Account, Borrower shall notify, or shall cause the applicable Guarantor
to notify, Agent thereof immediately.
SECTION 9.2 ACCOUNT WARRANTIES. With respect to Accounts
scheduled, listed or referred to on the initial Accounts Trial Balance included
in the initial Monthly Report or on any subsequent Accounts Trial Balance or
Borrowing Base Certificate, Borrower represents and warrants to Agent and the
Lenders that, except as disclosed in the applicable Accounts Trial Balance or
Borrowing Base Certificate: (i) the Accounts represent bona fide sales of
Inventory or the provision of services to customers in the ordinary course of
business completed in accordance with the terms and provisions contained in the
documents available to Agent and each Lender with respect thereto and are not
evidenced by a judgment or by an Instrument or Chattel Paper; (ii) the amounts
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shown on the applicable Accounts Trial Balance and on Borrower's and each
Guarantor's books and records and all invoices and statements which may be
delivered to Agent or any Lender with respect thereto are actually and
absolutely owing to Borrower and such Guarantor and are not in any way
contingent; (iii) no payments have been or shall be made thereon except payments
immediately delivered to a Lockbox pursuant to this Agreement; (iv) there are no
setoffs, claims or disputes existing or asserted with respect thereto and none
of Borrower or any Guarantor has made any agreement with any Account Debtor for
any deduction therefrom except a discount or allowance allowed by Borrower or
such Guarantor in the ordinary course of its business for prompt payment and
which discount and allowance is reflected in the calculation of the face amount
of each invoice related to such Account; (v) to the best of Borrower's or any
Guarantor's knowledge, there are no facts, events or occurrences which in any
way impair the validity or enforcement thereof or tend to reduce the amount
payable thereunder as shown on the respective Accounts Trial Balances or
Borrowing Base Certificates, Borrower's or such Guarantor's books and records
and all invoices and statements delivered to Agent or any Lender with respect
thereto; (vi) to the best of Borrower's and each Guarantor's knowledge, all
Account Debtors have the capacity to contract and are Solvent; (vii) none of
Borrower or any Guarantor has received notice of proceedings or actions which
are threatened or pending or have been taken against any Account Debtor which
might result in any material adverse change in such Account Debtor's financial
condition; (viii) none of Borrower or any Guarantor has knowledge that any
Account Debtor is unable generally to pay its debts as they become due; (ix) the
services furnished and/or Inventory sold giving rise to the Account are not, and
will not be at the time of sale thereof, subject to any Lien except that of
Agent; (x) the Accounts have not been pledged or sold to any Person or otherwise
encumbered and Borrower or a Guarantor is the owner of the Accounts free and
clear of any Lien except that of Agent; and (xi) with respect to Accounts for
which the Account Debtor is located in Minnesota or any other state denying
creditors access to its courts in the absence of a Notice of Business Activities
Report or other similar filing, Borrower or a Guarantor, as applicable, has
either qualified as a foreign corporation authorized to transact business in
such state or has filed all required Notice of Business Activities Reports or
comparable filings with the applicable Governmental Authority.
SECTION 9.3 VERIFICATION OF ACCOUNTS. Agent shall have the
right, at any time or times hereafter, in the name of Borrower or a nominee of
Agent, or during the pendency of an Event of Default, in Agent's name, to verify
with Account Debtors the validity, amount or any other matter relating to any
Account, by mail, telephone, or in person.
SECTION 9.4 ELIGIBLE INVENTORY. "ELIGIBLE INVENTORY" shall
consist of all of the Inventory of Borrower and each Guarantor, except the
following: (i) Inventory which is damaged, obsolete, not in good condition, or
not either currently usable or currently saleable in the ordinary course of such
Person's business as determined by Agent; (ii) Inventory which Agent determines,
or which in accordance with such Person's customary business practices, is
unacceptable due to age, type, category and/or quantity, including any Inventory
which is in excess of a one (1) year's supply or is otherwise slow-moving; (iii)
Inventory with respect to which Agent does not have a first and valid, fully
perfected Lien; (iv) Inventory consisting of packaging or supplies; (v)
Inventory in the possession of such Person but not owned by such Person; (vi)
Inventory
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produced in violation of the Fair Labor Standards Act and subject to the
so-called "hot goods" provision contained in Title 29 U.S.C. ss.215(a)(1); (vii)
Inventory with respect to which any disclosure is requireD in the applicable
Monthly Report or Borrowing Base Certificate in accordance with clauses (i)
through (vi) of Section 9.5; (viii) Inventory which is on consignment or is
located at a place other than the places of business and collateral locations of
such Person listed on Schedule 11.29; provided that, subject to Section 11.24,
in the case of leased or bailment locations listed on Schedule 11.29, no
Inventory located at any such location shall be "Eligible Inventory" until the
applicable landlord or bailee has executed a lien waiver in form and substance
satisfactory to Agent), including Inventory in transit; (ix) Inventory
consisting of finished goods which do not meet the specifications of the
purchase order for which such Inventory was produced; (x) Inventory which fails
to meet the standards imposed by any governmental agency, or department or
division thereof, having regulatory authority over such goods, its use and/or
sale and (xi) work in process. In the event that Inventory previously scheduled
in a Monthly Report or Borrowing Base Certificate ceases to be Eligible
Inventory, Borrower shall notify, or shall cause the applicable Guarantor to
notify, Agent thereof immediately.
SECTION 9.5 INVENTORY WARRANTIES. With respect to Inventory
scheduled, listed or referred to in any Monthly Report or Borrowing Base
Certificate, Borrower represents and warrants that, except as disclosed in such
Monthly Reports or Borrowing Base Certificate (i) such Inventory is located at
one of the Facilities or locations set forth on Schedule 11.29, (ii) Borrower or
a Guarantor has good, indefeasible and merchantable title to such Inventory and
such Inventory is not subject to any Lien or document whatsoever except for the
prior, first perfected Lien granted to Lender hereunder, (iii) such Inventory is
of good and merchantable quality, free from any defects and is not goods
returned to Borrower or a Guarantor by or repossessed from an Account Debtor or
goods taken in trade, (iv) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which materially restricts the ability of Borrower or a Guarantor or, in
the case of the exercise of its remedies, Agent to sell the Inventory, (v) the
completion of manufacture, sale or other disposition of such Inventory by Agent
following an Event of Default shall not require the consent of any Person and
shall not constitute a breach or default under any contract or agreement to
which Borrower or a Guarantor is a party or to which the Inventory is subject,
and (vi) no Inventory has been produced in violation of the Fair Labor Standards
Act so as to be subject to the so-called "hot goods" provision contained in
Title 29 U.S.C., Section 215(a)(1).
SECTION 9.6 SECURITY INTEREST. All of Borrower's Liabilities
constitute one (1) loan secured by Agent's Liens on the Collateral now or from
time to time hereafter granted by Borrower to Agent. To secure timely payment
and performance in full of the Liabilities, Borrower shall grant to Agent, for
the benefit of the Lenders, a right of setoff against and a continuing Lien upon
all of Borrower's right, title and interest in and to the Collateral, whether
now owned or hereafter acquired by Borrower and wheresoever located. In
addition, concurrently with the execution and delivery hereof Borrower shall
deliver the Mortgages.
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SECTION 9.7 CONSIGNED INVENTORY. With respect to consigned
Inventory in an aggregate amount of $100,000 or more with respect to which
Borrower or any Guarantor is the consignor, Borrower shall perfect its interest
in such Inventory by filing and delivering notice to the creditors of record of
the consignee, all as provided in Section 9-114 of the Code, and in form and
substance satisfactory to Agent, and Borrower shall execute and deliver all
financing statements, security agreements, amendments thereto, or other
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by Agent), as Agent may request, in a form satisfactory
to Agent, to perfect and maintain the Liens on such Collateral granted by
Borrower to Agent hereunder.
SECTION 9.8 COLLATERAL DOCUMENTS. Concurrently with or prior to
the making of the initial Loan, Borrower shall execute and deliver, and, as
applicable, shall cause each Subsidiary to execute and deliver, to Agent the
following: (a) a security agreement in the form of
9.8.1 (as the same
may be amended, modified or supplemented from time to time, collectively, the
"SECURITY AGREEMENTS" and individually, the "SECURITY AGREEMENT"); (b) mortgages
covering all real estate owned by Borrower and each Subsidiary (except for the
real estate identified in Schedule 10.5), and substantially in the form of
Exhibit 9.8.2, or in such other form as Agent may reasonably require (as the
same may be amended, modified or supplemented from time to time, collectively,
the "MORTGAGES" and individually, a "MORTGAGE") and (c) a Stock Pledge
Agreements in the form of Exhibit 9.8.3 (as the same may be amended, modified or
supplemented from time to time, collectively, the "STOCK PLEDGE AGREEMENTS" and
individually, the "STOCK PLEDGE AGREEMENT"). At any time after the date hereof
that a Subsidiary shall be formed or acquired by Borrower, Borrower shall cause
such Subsidiary to execute and deliver to Agent a security agreement and a
guaranty in form and substance satisfactory to Agent with such changes therein
as Agent may reasonably require, together with such other documents, instruments
and things as Agent may reasonably require in connection therewith.
SECTION 9.9 SUBSEQUENTLY ACQUIRED PROPERTY. As further security
for the payment, performance and observance of the Liabilities, Borrower shall
so long as any of the Liabilities shall remain outstanding or any Lender shall
continue to have any Commitment: (a) acquire and maintain its property in a
manner which will enable Borrower to allow such property to become subject to
the Liens of the Collateral Documents; (b) obtain and maintain the consent or
approval of any Person whose consent or approval is required to the granting of
a Lien on any such property to or for the benefit of Agent; (c) execute and
deliver from time to time within ten (10) days after its purchase or acquisition
of any real property or leasehold interest in real property or of property
subject to a titling statute or of any other personal property, asset or other
right, amendments and supplements to the Collateral Documents in form and
substance, and together with other documents, satisfactory to Agent, and in such
number of counterparts as Agent may require, by which it shall (and only in the
event that such action shall be required in order to) pledge, mortgage and grant
a perfected Lien on such property, asset or right to Agent; (d) execute and
deliver to Agent , in form and substance satisfactory to Agent and in such
number of counterparts as Agent may require, (i) an assignment of Borrower's
rights under any contract to construct any property with a fair market value in
excess of $100,000 promptly upon entering into such contract, and (ii) such
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other agreements and instruments (including, without limitation, acknowledgments
by other contract parties) as may be necessary to grant a Lien on and security
interest in Borrower's rights and interests under each such contract and each
such property, whether under construction or otherwise, to Agent; and (e)
execute and deliver to Agent, in form and substance satisfactory to Agent and in
such number of counterparts as Agent may require, assignments of Borrower's
rights under each lease to which Borrower is a party as landlord or sublandlord,
promptly upon entering into such lease.
SECTION 9.10 CHANGE OF LOCATION OR NAME. So long as any of the
Liabilities shall remain outstanding or any Lender shall continue to have any
Commitment, Borrower shall not change (a) the location of its principal place of
business, chief executive office, major executive office, chief place of
business or its records concerning its business and financial affairs, or (b)
its name or the name under or by which it conducts its business, in each case
without first giving Agent and the Lenders at least 30 days' advance written
notice thereof and having taken any and all action required or desirable by
Agent to maintain and preserve the first perfected Lien and security interest in
favor of Agent on all property thereof free and clear of any Lien whatsoever
except for Permitted Liens; provided, however, that notwithstanding the
foregoing, Borrower shall not change the location of its principal place of
business, chief executive office, major executive office, chief place of
business or its records concerning its business and financial affairs to any
place outside the contiguous continental United States of America.
SECTION 9.11 DELIVERIES; FURTHER ASSURANCES. Borrower agrees
that it will, at its sole expense, (i) without any request by the Lenders,
immediately deliver or cause to be delivered to Agent, in due form for transfer
(i.e., endorsed in blank or accompanied by duly executed undated blank stock or
bond powers), all securities, chattel paper, instruments and documents, if any,
at any time representing all or any of the Collateral, (ii) upon request of
Agent, furnish or cause to be furnished to Agent such surveys, mortgagee title
commitments or policies, appraisals, opinions of counsel and other documents as
Agent may specify, (iii) upon request by Agent, cause Agent's Lien hereunder and
under the Collateral Documents to be at all times duly noted on any certificate
of title issuable with respect to any of the Collateral and forthwith deliver or
cause to be delivered to Agent each such certificate of title, and (iv) execute
and deliver, or cause to be executed and delivered, to Agent in due form for
filing or recording (and pay the cost of filing or recording the same in all
public offices deemed necessary or advisable by Agent) such assignments
(including, without limitation, assignments of life insurance), security
agreements, mortgages, deeds of trust, pledge agreements, consents, waivers,
financing statements, stock or bond powers, and other documents, and do such
other acts and things, all as may from time to time be necessary or desirable to
establish and maintain to the satisfaction of Agent a valid first perfected Lien
on and security interest in all assets of Borrower now or hereafter existing or
acquired (free of all other Liens whatsoever other than Permitted Liens) to
secure payment and performance of the Liabilities.
SECTION 10 REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make Loans
hereunder, Borrower represents and warrants to the Lenders that:
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SECTION 10.1 DUE ORGANIZATION AUTHORIZATION, ETC. Borrower and
each Subsidiary is a corporation duly existing and in good standing under the
laws of the jurisdiction of its formation and is duly qualified and in good
standing in each jurisdiction where, because of the nature of its activities or
properties, such qualification is required or where the failure so to qualify
could have a Material Adverse Effect (which jurisdictions shall include, without
limitation, those jurisdictions listed on Schedule 10.1). The execution,
delivery and performance by Borrower and each Subsidiary of this Agreement and
the Related Documents to which it is a party, and the consummation of the
Related Transactions, are within its corporate powers, have been duly authorized
by all necessary corporate action (including, without limitation, director and
shareholder approval, if required), have received all necessary governmental and
other consents and approvals and made all necessary filings with and given all
necessary notices to any governmental authority (if any shall be required), and
do not and will not contravene or conflict with, or create a Lien or right of
termination or acceleration under, any Requirement of Law or Contractual
Obligation binding upon it. This Agreement and each of the Related Documents to
which Borrower and each Guarantor and Subsidiary is a party are (or when
executed and delivered will be) the legal, valid, and binding obligations of
Borrower and each Guarantor and Subsidiary enforceable against such Persons in
accordance with their respective terms, except as limited by applicable
bankruptcy, reorganization, insolvency or similar laws affecting the enforcement
of creditors' rights generally and except as limited by general principles of
equity.
SECTION 10.2 CERTAIN AGREEMENTS. Borrower has furnished to the
Lenders true, correct and complete copies of each of the Related Documents
(including all schedules and written disclosures in connection therewith). All
warranties of Borrower and, to Borrower's knowledge, all warranties of the
Subsidiaries and all other parties thereto (other than Agent, the Lenders and
Master Account Bank) set forth in the Related Documents are true and correct in
all material respects without any waiver or modification thereof and no default
of Borrower and to its knowledge, no default of any Subsidiary or any other
party, exists thereunder.
SECTION 10.3 FINANCIAL INFORMATION; FINANCIAL CONDITION. All
balance sheets and all statements of operations, of N shareholders' equity and
of changes in financial position, and other financial data (other than
projections) which have been or shall hereafter be furnished to the Lenders by
or on behalf of Borrower for the purposes of or in connection with this
Agreement, the Related Documents or the Related Transactions (including the
financial information referred to below, except for the Pro Forma and the
projections referred to in clauses (c) and (d) below) have been and will be
prepared in accordance with GAAP consistently applied throughout the periods
involved and do and will present fairly the financial condition of the entities
involved as of the dates thereof and the results of their operations for the
periods covered thereby. The Pro Forma and all projections (including, without
limitation, the Pro Forma and the projections described in clauses (c) and (d)
below) which have been or shall be furnished to the Lenders for purposes of or
in connection with this Agreement, the Related Documents or the Related
Transactions have represented and will, when delivered to the Lenders, represent
management's best estimates of future performance, based upon historical
financial information and reasonable assumptions of management. Such financial
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data includes, without limitation, the following financial statements and
reports which have been furnished to Agent or the Lenders on or prior to the
date hereof:
(a) the audited balance sheet of Borrower and its Subsidiaries on a
consolidated basis as of June 28, 1997, and the related audited statements of
earnings, shareholders' equity, cash flow and changes in financial position for
the year ending on such date (the "FINANCIALS");
(b) the balance sheet of Borrower and its Subsidiaries as of May 31,
1998 and the related statements of income and cash flow of the Borrower for the
eleven month period ending on such date;
(c) the pro forma balance sheet of Borrower as of the Closing Date
after giving effect to all Related Transactions (the "PRO FORMA");
(d) the projected balance sheets and projected statements of
earnings and cash flow for Borrower and its Subsidiaries for each month from
July 1998 to June 1999, and for each Fiscal Year through the Fiscal Year ending
June 30, 2003 after giving effect to all Related Transactions.
There has been no Material Adverse Effect since March 31, 1998, other than
as a result of the Related Transactions, from that reflected in the financial
information as to Borrower referred to in clause (a) through (c).
SECTION 10.4 LITIGATION AND CONTINGENT OBLIGATIONS. Except as
set forth in Schedule 10.4 hereto (including estimates of the dollar amounts
involved) and except for claims as to which the insurer has admitted coverage in
writing and which are fully covered by insurance, no claims, litigation
(including, without limitation, derivative actions and litigation with respect
to any Employee Benefit Plan), arbitration, governmental investigation or
proceeding or inquiry is pending or, to the best of Borrower's knowledge,
threatened against Borrower or any Subsidiary, any member of the Controlled
Group or any Employee Benefit Plan fiduciaries (i) which could, if adversely
determined, have a Material Adverse Effect, or (ii) which relates to any of the
Related Transactions, and, except as set forth in Schedule 10.4, there is no
basis known to Borrower for any of the foregoing. Other than any liability
incident to such claims, litigation or proceedings, neither Borrower nor any
Subsidiary has any material Contingent Obligations not provided for or referred
to in the Financials or in Schedule 10.4 hereto. The matters described on
Schedule 10.4, if adversely determined, would not be reasonably likely to have a
Material Adverse Effect.
SECTION 10.5 LIENS. None of the assets of Borrower or any
Subsidiary will be subject to any Lien, except for Permitted Liens which are
junior to the Lien of the Collateral Documents. Except as described in Schedule
10.5, Agent will obtain, as security for the Liabilities, (i) a legally valid
and binding first mortgage Lien on all real property and interests in real
property now owned or hereafter acquired by Borrower and its Subsidiaries, and
(ii) a first priority perfected Lien on all other property described in the
Collateral Documents as being pledged, assigned or
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granted thereby. The descriptions of other Property described in the Collateral
Documents correctly describe all Property purported to be secured by such
Collateral Documents in a manner sufficient to create an enforceable Lien on or
security interest in such Property.
SECTION 10.6 CONTRACTS; ABSENCE OF DEFAULT. Neither Borrower nor
any Subsidiary is in material default under any Contract or other contracts (a)
to which it is a party or by which it is bound, and (b)(i) pursuant to which
Borrower or any Subsidiary provides goods or services to one or more customers
which contributed more than $2,500,000 of gross revenue during the prior Fiscal
Year of Borrower or such Subsidiary, as the case may be, or which is reasonably
expected to contribute more than $2,500,000 of gross revenue during the current
or any future Fiscal Year of Borrower or such Subsidiary (each, a "MATERIAL
CONTRACT"), (ii) pursuant to which Borrower incurs or is committed to incur
Lease Obligations in excess of $500,000 during any Fiscal Year, (iii) which
cannot be replaced without material expense, delay or interruption of business
(including, without limitation, any Material Intellectual Property Right), or
(iv) where such default could have a Material Adverse Effect. A list of all
Material Contracts existing on the date hereof is attached hereto as Schedule
10.6. Neither Borrower nor any Subsidiary has received notice that any Material
Contract will be terminated or not extended or renewed.
SECTION 10.7 EMPLOYEE BENEFIT PLANS
(a) Neither Borrower nor any member of its Controlled Group have
incurred any liability with respect to any Pension Plan other than to pay
premiums to the PBGC and make required contributions to such Pension Plans
(provided that any such contributions and premiums which are due have been
paid).
(b) With respect to any Employee Benefit Plan, full and timely
payment has been made of all amounts required under Section 412 of the IRC,
Section 302 of ERISA or under the terms of each such Plan, no event or condition
has occurred which has or could result in the imposition of a lien or an
accumulated funding deficiency (whether or not waived) under Section 412 of the
IRC or Section 302 of ERISA, Borrower and each current or past member of its
Controlled Group have fulfilled their obligations, if any, under the minimum
funding standards of ERISA and the IRC, and no security has been posted or is
required to be posted under Section 401(a)(29) of the IRC or Section 307 of
ERISA.
(c) Except as set forth on Schedule 10.7, no steps have been taken
to terminate, or withdraw from, any Pension Plan or any Multiemployer Plan.
(d) No Reportable Event has occurred.
(e) Neither Borrower nor any member of its Controlled Group has any
contingent liability with respect to any post-retirement benefits under a
Welfare Plan (other than liability for health care continuation coverage in
compliance with the requirements of Part 6 of Subtitle B of Title I of ERISA or
Section 4980B of the IRC).
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(f) All Employee Benefit Plans (i) comply in form with any
requirements of ERISA and have been operated and administered in compliance with
their terms and in a manner so as not to result in any liability to Borrower or
any current or past member of its Controlled Group for failure to comply with
ERISA and all of the applicable statutes and regulations issued thereunder, and
(ii) if intended to qualify under the IRC, are in a form and have been
administered in a manner so as not to result in any liability to Borrower or any
current or past member of its Controlled Group for failure to comply with the
applicable provisions thereof and are subject to an Internal Revenue Service
determination with respect to such qualification. Except for future funding
obligations, no conditions exist or events or transactions have occurred with
respect to any Employee Benefit Plan which could result in the incurrence by
Borrower or any current or past member of the Controlled Group of any liability,
except to the extent the same (x) have been funded or adequately reserved on the
balance sheet of Borrower, or (y) will not result in the incurrence of any
liability by Borrower or any current or past member of its Controlled Group in
excess of $50,000 in the aggregate.
(g) Neither Borrower nor any Subsidiary is an Employee Benefit Plan.
Neither Borrower's nor any Subsidiary's assets constitute assets of an Employee
Benefit Plan. The execution, performance and delivery of this Agreement and the
Related Documents and the consummation of the Related Transactions will not
involve any prohibited transaction, as defined in Section 406 of ERISA or
Section 4975 of the IRC, for which an exemption is unavailable.
SECTION 10.8 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING
COMPANY ACT. Neither Borrower nor any Subsidiary is an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 10.9 REGULATIONS U AND X. Neither Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U or X of the Board of Governors of the
Federal Reserve System). None of Borrower or any Affiliate of Borrower or any
Person acting on behalf of Borrower or any of its Affiliates has taken or will
take action to cause the execution, delivery or performance of this Agreement or
the Notes, or the other Related Documents, the making or existence of the Loans
or the use of proceeds of the Loans to violate Regulation U or X of the Board of
Governors of the Federal Reserve System.
SECTION 10.10 PROCEEDS. The proceeds of the Loans will be used
for working capital purposes, except that proceeds of the Term Loans and the
initial Revolving Loan shall be used to refinance existing indebtedness of
Borrower.
SECTION 10.11 CONFIRMATION OF WARRANTIES. All representations
and warranties of Borrower and, to Borrower's knowledge, each Subsidiary and
each other party to the
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Related Documents set forth in the Related Documents are true and correct in all
material respects as if made as of the Closing Date.
SECTION 10.12 INSURANCE. Schedule 10.12 hereto sets forth a true
and correct summary of all insurance carried by Borrower. Borrower is adequately
insured for its benefit under policies issued by insurers of recognized
responsibility. No notice of any pending or threatened cancellation has been
received by Borrower with respect to any of such insurance policies. Borrower is
in compliance with all conditions contained in such insurance policies .
SECTION 10.13 MATERIAL DISRUPTIONS. Neither the business nor the
properties of Borrower or any Subsidiary is affected, or anticipated to be
affected, by any existing event of Force Majeure or other existing casualty
which could have a Material Adverse Effect.
SECTION 10.14 PATENTS, TRADEMARKS, ETC. Borrower and each
Subsidiary owns and possesses, or is licensed under valid and enforceable
license agreements, or is otherwise entitled to use without payment, all such
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights, trade secrets, mask works and
copyrights as are necessary for the conduct of its business as now conducted or
presently proposed to be conducted without any infringement upon rights of
others which could have a Material Adverse Effect, and, except as set forth in
Part 1 of Schedule 10.14, there is no individual patent, patent right,
trademark, trademark right, trade name, trade name right, service mark, service
mark right, trade secret, mask work or copyright the loss of which could have a
Material Adverse Effect (any such item, whether or not set forth on Schedule
10.14, being herein called a "MATERIAL INTELLECTUAL PROPERTY RIGHT"). Parts 1
and 2 of Schedule 10.14 together contain a complete list of all license
agreements relating to patent rights, trademark rights, trade name rights,
service mark rights, trade secrets, mask works and copyrights held by Borrower
and its Subsidiaries under license agreements.
SECTION 10.15 OWNERSHIP OF PROPERTIES; PROPERTY SCHEDULE.
Schedule 10.15 contains descriptions of all real and personal property (i) in
which Borrower and each Subsidiary has an interest as of the date hereof, (ii)
with respect to which the Collateral Documents will not create a valid and
perfected first lien and security interest, and (iii) which cannot be replaced
without material expense, delay or interruption of business. Borrower has good,
indefeasible and merchantable title to and ownership of, or a valid leasehold
interest in, each parcel of Real Estate described in Schedule 10.15, free and
clear of all Liens, except Liens in favor of Agent and the Permitted Liens. No
parcel of its Real Estate is subject to any boundary or encroachment dispute,
special assessment, condemnation or eminent domain proceeding, restrictive
covenant, zoning or building code violation or any other dispute, assessment,
claim or violation of law which might restrict or interfere with Borrower's or
such Subsidiary's use of such parcel of Real Estate in the ordinary course of
Borrower's or such Subsidiary's business or which might have a Material Adverse
Effect.
SECTION 10.16 BUSINESS LOCATIONS; TRADE NAMES. Schedule 10.16
lists each of the locations where Borrower and each Subsidiary maintains an
office, a place of business
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or any records or has maintained an office, a place of business or any records
at any time during the during the five year period prior to the Closing Date
and, except as described on Schedule 10.16, none of such locations have changed
within the six (6) month period prior to the Closing Date; and Schedule 10.16
also lists each name under or by which Borrower and each Subsidiary conducts its
business or has conducted business at any time during the five year period prior
to the Closing Date and a complete and accurate address and legal description of
each parcel of real estate owned or leased by Borrower and each Subsidiary and
the principal place of business and chief executive office of Borrower and each
Subsidiary. The business conducted by Borrower will not be conducted under any
corporate, trade or fictitious name other than those names disclosed on Schedule
10.16. The books and records of Borrower and each Subsidiary and all Chattel
Paper, Instruments and all records of account of Borrower and each Subsidiary
are located and hereafter shall continue to be located at the principal place of
business and chief executive office of the such Person.
SECTION 10.17 ACCURACY OF INFORMATION. All factual information
furnished prior to the Closing Date is true and accurate in every material
respect on the Closing Date and is not incomplete by omitting to state any
material fact necessary to make such information not misleading. All factual
information contemporaneously herewith furnished by or on behalf of Borrower and
each Subsidiary to any one or more of Agent and the Lenders for purposes of or
in connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf of
Borrower and each Subsidiary to any one or more of Agent and the Lenders will
be, true and accurate in every material respect on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading.
SECTION 10.18 SUBSIDIARIES. Except as set forth on Schedule
10.18, Borrower has no Subsidiaries. Section 10.18 contains an accurate list of
all Subsidiaries of Borrower, setting forth their respective jurisdictions of
incorporation and the percentages of their capital stock owned by Borrower or
other Subsidiaries and a description of each class of its authorized capital
stock and the number of shares of each class issued and outstanding. Each
Subsidiary is duly organized and existing under the laws of the jurisdiction of
its organization, and duly licensed or qualified to do business in each state or
other jurisdiction where the nature of the assets owned or leased by it or
business conducted by it requires such licensing or qualification and in which
the failure to be so licensed or qualified would have a Material Adverse Effect
and has all necessary corporate power to carry on its present business. All of
the outstanding shares of capital stock of or other equity interest in each
Subsidiary are validly issued and outstanding and fully paid and nonassessable,
and all shares or other equity interests in each Subsidiary set forth on
Schedule 10.18 are owned, beneficially and of record, by Borrower free and clear
of all Liens other than the Lien of the Agent. Except as set forth on Schedule
10.18, there are no outstanding commitments or other obligations of any
Subsidiary to issue, and no options, warrants or other rights of any Person to
acquire, any shares of any class of capital stock of or other equity interest in
any Subsidiary.
SECTION 10.19 HAZARDOUS MATERIALS. Except as disclosed in
Schedule 10.19 hereto, (a) neither Borrower nor any Subsidiary nor, to
Borrower's knowledge, any other Person has
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ever caused or permitted any Hazardous Material to be released, treated, stored
or disposed of in a manner which could form the basis for any claim, demand,
proceeding or action by any Person, past, present or future on, under or at any
real property legally or beneficially owned (or any interest or estate in real
property which is owned) or operated by Borrower or any Subsidiary (including,
without limitation, any property owned by a land trust the beneficial interest
in which is owned in whole or in part by Borrower or any Subsidiary), (b) no
such real property has ever been used (by Borrower, any Subsidiary or any other
Person) as (i) a disposal site for any Hazardous Material or (ii) a permanent
storage site for any Hazardous Material, (c) to Borrower's knowledge no asbestos
containing materials, polychlorinated biphenyls or underground storage tanks are
or have been located in, on or under real property owned or operated by Borrower
or any Subsidiary, (d) there are no environmental liens attached or, to
Borrower's knowledge, threatened, to real property owned or operated by Borrower
or its Subsidiaries, and (e) neither Borrower nor any Subsidiary nor any of
their respective predecessors or its Affiliates, has ever caused or permitted
any Hazardous Material to be transported, released, treated, stored or disposed
of at any location other than those identified in Schedule 10.19 in a manner
which could form the basis for any claim, demand, proceeding or action by any
Person. The matters described on Schedule 10.19, if adversely determined, could
not reasonably be likely to have a Material Adverse Effect.
SECTION 10.20 AGENT'S FEES. Except as set forth in Schedule
10.20, no agent, broker, investment banker, Person, or firm acting on behalf of
Borrower or Affiliates of Borrower, or under the authority of any such Person,
is or will be entitled to any broker's or finder's fee or any other commission
or similar fee, directly or indirectly, from any of the parties hereto in
connection with any of the transactions contemplated herein.
SECTION 10.21 TAXES. Borrower and each Subsidiary has filed all
tax returns that are required to be filed by it or on behalf of any Employee
Benefit Plan, and has paid or provided adequate reserves for the payment of all
taxes, including, without limitation, all payroll taxes and federal and state
withholding taxes, and all assessments payable by it that have become due, other
than those that are not yet delinquent or that are disclosed on Schedule 10.21
and are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP. There is no ongoing audit or, to Borrower's
knowledge, other governmental investigation of the tax liability of Borrower or
any Subsidiary or any Employee Benefit Plan and there is no unresolved claim by
a taxing authority concerning Borrower's or any Subsidiary's tax liability (or
by any governmental authority with respect to any Employee Benefit Plan), for
any period for which returns have been filed or were due. As used in this
Section 10.21, the term "TAXES" includes all taxes of any nature whatsoever and
however denominated, including, without limitation, excise, import, governmental
fees, duties and all other charges, as well as additions to tax, penalties and
interest thereon, imposed by any government or instrumentality, whether federal,
state, local, foreign or other.
SECTION 10.22 SECURITIES LAWS. None of Borrower or its
Affiliates, nor anyone acting on behalf of any such Person, has directly or
indirectly offered any interest in the Notes or any other Liability for sale to,
or solicited any offer to acquire any such interest from, or
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has sold any such interest to any Person that would subject the issuance or sale
of the Notes or any other Liability to registration under the Securities Act of
1933, as amended.
SECTION 10.23 GOVERNMENTAL AUTHORIZATIONS. Borrower and each
Subsidiary has all licenses, franchises, permits and other governmental
authorizations necessary for all businesses carried on by it (including owning
and leasing the real and personal property owned and leased by it), except where
failure to obtain such licenses, franchises, permits and other governmental
authorizations (a) is not related to any use, manufacture, generation, storage,
transport, release or disposal by any such Person of any Hazardous Material, and
(b) could not (i) subject any such Person or any of its officers to criminal
liability or (ii) have a Material Adverse Effect.
SECTION 10.24 COMPLIANCE WITH LAWS. Except as disclosed on
Schedule 10.19: (i) is in compliance with all laws, ordinances, rules,
regulations, orders, policies, guidelines or other requirements of any
governmental authority, including Environmental Laws, (ii) has obtained and is
in compliance with all permits, certificates, licenses, approvals and
authorizations required under Environmental Laws necessary for its operations
and have filed all required notifications or reports relating to chemical
substances, air emissions, effluent discharges and storage, treatment and
disposal of Hazardous Materials, (iii) has filed in a timely manner all reports,
documents and other materials required to be filed by it with any governmental
bureau, agency or instrumentality (and the information contained in each of such
filings is true, correct and complete in all material respects), except where
failure to make such filings is not related to the manufacture, use, generation,
release, storage, transport or disposal of any Hazardous Material by such Person
and could not have a Material Adverse Effect and (iv) has retained all records
and documents required to be retained by it pursuant to any law, ordinance,
rule, regulation, order, policy, guideline or other requirement of any
governmental authority, except where failure to retain such records is not
related to the use, manufacture, generation, release, storage, transport or
disposal of any Hazardous Material and could not subject such Person or any of
its officers to criminal liability or have a Material Adverse Effect.
SECTION 10.25 EMPLOYEES AND LABOR. There is no unfair labor
practice complaint against Borrower or any Subsidiary pending before the
National Labor Relations Board or any state or local agency nor is there a labor
strike or other labor dispute, pending or, to Borrower's knowledge, threatened
affecting Borrower or any Subsidiary which if adversely resolved could have a
Material Adverse Effect; there is no existing representation question respecting
the employees of Borrower or any Subsidiary, nor are there organizational
attempts affecting any of the employees of Borrower or any Subsidiary which
could have a Material Adverse Effect; and there is no grievance pending or, to
Borrower's knowledge, threatened affecting Borrower or any Subsidiary. Neither
Borrower nor any Subsidiary is a party to any collective bargaining agreements,
except as listed on Schedule 10.25 hereto. To Borrower's knowledge, no customer
or supplier of Borrower or any Subsidiary is involved in, or threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which could have a Material Adverse Effect.
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SECTION 10.26 YEAR 2000. Borrower has conducted a review and
assessment of all computer applications and programs (the "SOFTWARE") owned,
licensed or used by any of Borrower and its Subsidiaries and all such Software
is fully able to perform date-sensitive or other functions on or after, or as to
dates on or after December 31, 1999, except for immaterial Software where the
failure to perform such function could not have a Material Adverse Effect, and
except as listed on Schedule 10.26 annexed hereto.
SECTION 10.27 SOLVENCY. Borrower and each Subsidiary is Solvent
both before and after giving to the execution and delivery of this Agreement and
any of the other Related Documents to which it is a party and consummation of
the transactions contemplated hereunder or thereunder, including, without
limitation, the Related Transactions.
SECTION 10.28 COLLATERAL. Except for the Permitted Liens, all of
the Collateral is and will continue to be owned by Borrower free and clear of
all Liens. From and after the making of the first Loan and after the making of
all necessary filings, the provisions of the Collateral Documents will be
effective to create and will give Agent as security for the repayment of the
Liabilities, a legal, valid, perfected and enforceable Lien (which priority is
subject only to Permitted Liens) upon all right, title and interest of Borrower
and the Subsidiaries in any and all of the Collateral (including the Lien in the
items and amounts deposited in the Bank Accounts.
SECTION 11 COVENANTS.
Until the expiration or termination of the Commitments and
thereafter until the Notes and all other Liabilities are paid and performed in
full, Borrower agrees that, unless at any time the Required Lenders shall
otherwise expressly consent in writing, it will:
SECTION 11.1 REPORTS, CERTIFICATES AND OTHER INFORMATION.
Furnish or cause to be furnished to Agent and each Lender:
(a) As soon as available, but in any event within 90 days after the
end of each Fiscal Year of Borrower: (i) copies of the balance sheet of Borrower
and its Subsidiaries on a consolidated and consolidating basis as at the end of
such Fiscal Year and the related statements of earnings, shareholders' equity
and cash flows for such Fiscal Year, in each case setting forth in comparative
form the figures for the previous year and, as prepared by Borrower, in the
current business plan and containing a narrative discussion by Borrower of
variances reflected by such comparisons, prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein, certified, without a going concern or like qualification or
qualification arising out of the scope of the audit, by Deloitte & Touche, L.P.
(or such other independent certified public accountants of recognized standing
as shall be selected by Borrower with Agent's approval); and (ii) a certificate
from the accountants identified in clause (i) of this Section 11.1(a) containing
a computation of, and showing compliance with, each of the financial ratios and
restrictions contained in this Section 11, and to the effect that, in making the
examination necessary for the signing of the annual audit report of Borrower by
such accountants, they have not
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become aware of any non-compliance by Borrower or any Subsidiary with this
Agreement or any Related Document or any Event of Default or Unmatured Event of
Default.
(b) As soon as available, but in any event within 45 days after the
end of each fiscal quarter of Borrower, copies of the unaudited balance sheet of
Borrower and its Subsidiaries on a consolidated and consolidating basis as at
the end of such fiscal quarter and the related unaudited statements of earnings,
shareholders' equity and cash flows for such fiscal quarter and the portion of
the Fiscal Year through such fiscal quarter, in each case setting forth in
comparative form the figures for the corresponding periods of the previous
Fiscal Year and in the current business plan and containing a narrative
discussion of variances reflected by such comparisons, prepared in reasonable
detail and in accordance with GAAP applied consistently throughout the periods
reflected therein, accompanied by a "management letter" containing a narrative
discussion of such financial statements and certified by the chief financial
officer of Borrower as presenting fairly the financial condition and results of
operations of Borrower and its Subsidiaries (subject to normal year-end audit
adjustments).
(c) As soon as available, but in any event within 30 days after the
end of each month, copies of the unaudited balance sheet of Borrower and its
Subsidiaries on a consolidated and consolidating basis as at the end of such
month and the related unaudited statements of earnings and cash flows for such
month and the portion of the Fiscal Year through such month, in each case
setting forth in comparative form the figures for the corresponding periods of
the previous Fiscal Year and in the current business plan and containing a
narrative discussion of variances reflected by such comparisons, prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein and certified by the chief financial officer of
Borrower as presenting fairly the financial condition and results of operations
of Borrower and its Subsidiaries (subject to normal year-end audit adjustments).
(d) As soon as available, but in any event: (i) within 30 days after
the beginning of each Fiscal Year of Borrower, a copy of the plan and forecast
(including a projected balance sheet, income statement and funds flow statement
and amount of the Revolving Commitment and Borrowing Availability) of Borrower
and its Subsidiaries for the current Fiscal Year in monthly detail; and (ii)
within 30 days after the end of the second fiscal quarter of Borrower in each
Fiscal Year, an update of each plan and forecast delivered with respect to the
Fiscal Year in which such fiscal quarter occurs, reflecting changes in such plan
resulting from actual and then anticipated results and forecasts.
(e) Contemporaneously with the furnishing of a copy of each annual
audit report and of each set of financial statements provided for in Sections
11.1(a), 11.1(b) and 11.1(c), (i) a duly completed certificate in substantially
the form of Exhibit 11.1(e) or in such other form as Agent may from time to time
require (each a "COMPLIANCE CERTIFICATE"), signed by the chief financial officer
of Borrower, containing, among other things, a computation of, and showing
compliance with, each of the applicable financial ratios and restrictions
contained in this Section 11 and to the effect that as of such date no Event of
Default or Unmatured Event of Default has occurred and is
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continuing or if such an Event of Default or Unmatured Event of Default has
occurred and is continuing, setting forth the nature thereof and the actions
Borrower is taking with respect thereto, and (ii) a report of the President or
Chief Executive Officer of Borrower describing the financial performance of
Borrower and its Subsidiaries during the period covered by such set of financial
statements and setting forth any significant events occurring during such period
affecting Borrower and its Subsidiaries.
(f) Promptly upon receipt thereof, copies of all financial and
management reports regarding Borrower and its Subsidiaries, submitted to
Borrower, any Subsidiary or any shareholder of Borrower or any Subsidiary by
independent public accountants in connection with each annual or interim audit
report made by such accountants of the books of Borrower.
(g) Promptly upon the filing or furnishing thereof, copies of all
regular and periodic reports, proxy statements, financial statements,
registration statements, prospectuses and other material filed by Borrower or
any Subsidiary with or to any securities exchange or the Securities and Exchange
Commission or any other Governmental Authority or distributed to the
stockholders of any such Person and all pres releases and other statements made
available by Borrower or any Subsidiary to the public concerning material
adverse changes or developments in the business of any such Person.
(h) Forthwith upon Borrower learning of the occurrence of any of the
following, written notice thereof, describing the same and the steps being taken
by Borrower, any Subsidiary or any other party with respect thereto: (i) the
occurrence of an Event of Default or an Unmatured Event of Default, (ii) the
institution of, or any adverse determination or materially adverse development
in, any litigation, arbitration proceeding or governmental proceeding which
could have a Material Adverse Effect, (iii) the occurrence of a Reportable
Event, (iv) the institution of any steps to terminate any Pension Plan, (v) the
institution of any steps to completely or partially withdraw from any
Multiemployer Plan, (vi) the failure of Borrower or any current or past member
of its Controlled Group to make a required contribution to any Pension Plan if
such failure is sufficient to give rise to a Lien under Section 412 of the IRC
or Section 302 of ERISA, (vii) the adoption of any amendment which would require
Borrower or any current or past member of its Controlled Group to provide a bond
or other security to a Pension Plan under Section 401(a)(29) of the IRC or
Section 307 of ERISA, (viii) the incurrence of any increase in the contingent
liability of Borrower or any member of its Controlled Group or any other
conditions, events or transactions with respect to any present (or future)
Employee Benefit Plan which (a) is not adequately reserved on the balance sheet
of Borrower or one of its Controlled Group members and (b) could result in the
incurrence by Borrower or any member of its Controlled Group of any liability in
excess of $50,000 (in the aggregate), (ix) the commencement of any dispute which
might lead to the modification, transfer, revocation, suspension or termination
of any Related Document, (x) any termination (without renewal), loss, suspension
or other impairment of Borrower's or its Subsidiary's rights under any Material
Intellectual Property Right or Material Contract or any expectation of any such
termination, loss, suspension or other impairment, (xi) any other material
adverse change in a Material Contract, or (xii) any other event or events which
could have a Material Adverse Effect.
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(i) (i) Within 90 days after the end of each Fiscal Year, a
certificate signed by its chief financial officer that summarizes the insurance
policies carried by Borrower (such certificate to be in form and substance
satisfactory to Agent), and (ii) written notification 30 days prior to any
cancellation or material change (other than one which enlarges the scope of
coverage, adds additional insureds or increases coverage limits) of any such
insurance by Borrower and within 5 days after receipt of any notice (whether
formal or informal) of cancellation, reduction in coverage, or shortening of
policy period or material adverse change by any of its insurers.
(j) With respect to each Multiemployer Plan as to which Borrower or
any current or past member of its Controlled Group may have any liability, (i)
no less frequently than annually, a written estimate (which shall be based on
information received from each such plan, it being expressly understood that
Borrower shall take all reasonable steps to obtain such information) of the
withdrawal liability that would be incurred by Borrower or any current or past
member of its Controlled Group in the event that Borrower or any current or past
member of its Controlled Group were to completely withdraw from that plan in a
complete withdrawal as defined in Section 4201 of ERISA, and (ii) written notice
thereof, as soon as it has reason to believe (on the basis of the most recent
information available to it) that the sum of (a) the withdrawal liability that
would be incurred by Borrower or any current or past member of its Controlled
Group if Borrower or any current or past member of its Controlled Group
completely withdrew from any Multiemployer Plans as to which Borrower of any
current or past member of its Controlled Group has an obligation to contribute,
and (b) the amount of the outstanding withdrawal liability (without unaccrued
interest) incurred by Borrower of any current or past member of its Controlled
Group to Multiemployer Plans, would exceed $50,000 in the aggregate.
(k) Prompt written notice of execution of any agreement by Borrower
or any Subsidiary to merge or consolidate into or with, or purchase or otherwise
acquire all or substantially all of the assets or stock of any class of, or any
partnership or joint venture interest in, any other Person, or for the sale,
transfer, lease or conveyance by Borrower or any Subsidiary of all or any
substantial part of its assets or sale or assignment without recourse of any of
its receivables.
(l) Within 30 days after the filing thereof, copies of all income
tax returns filed by Borrower or any Subsidiary with any Federal taxing
authority.
(m) Not later than the twentieth (20th) day of each month, a monthly
report ("MONTHLY REPORT"), accompanied by a certificate in the form attached as
Exhibit 11.1(m), which shall be signed by the chief executive officer or chief
financial officer of Borrower. The Monthly Report shall be in form and substance
satisfactory to Agent and shall include, as of the last Business Day of the
preceding month (and with respect to the initial Monthly Report attached hereto,
as of a date not more than two (2) Business Days prior to the Closing Date): (i)
an aged trial balance of Accounts ("ACCOUNTS TRIAL BALANCE") sorted by Account
Debtor in invoice detail and submitted in hard copy and electronic disk
indicating which Accounts are current, up to 30, 30 to 59, 60 to 89 and 90 days
or more past the original invoice date and listing the names and addresses of
all applicable Account Debtors, (ii) a summary of accounts payable showing which
accounts payable are current,
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up to 30, 30 to 59, 60 to 89 and 90 days or more past due and listing the names
and addresses of applicable creditors; and (iii) a schedule of Inventory owned
by Borrower and in Borrower's possession valued at the lower of cost or market
on a FIFO basis. Borrower shall provide in all Monthly Reports and more
frequently if requested by Agent, in form satisfactory to Agent, information on
each of the following occurrences arising subsequent to the immediately
preceding Monthly Report: all sales or other reductions of and all additions to
Inventory, all returns of Inventory, and all credits issued by Borrower, all
material complaints and claims against Borrower in connection with Inventory. In
addition, Borrower shall deliver a Borrowing Base Certificate to Agent not later
than each Tuesday as of the previous Friday.
(n) Together with each delivery of financial statements required by
Section 11.1(c), a current list of outstanding intercompany loans made pursuant
to Section 11.33.
(o) From time to time, such other information concerning Borrower or
any Subsidiary as Agent or any Lender may reasonably request.
SECTION 11.12 CORPORATE EXISTENCE; FOREIGN QUALIFICATION. Do and
cause to be done at all times all things necessary to (i) maintain and preserve
the corporate existence of Borrower and each Subsidiary, (ii) be duly qualified
to do business and in good standing as a foreign corporation in each
jurisdiction where the nature of its business makes such qualification
necessary, except any such jurisdiction where failure to so qualify could not
have a Material Adverse Effect (which jurisdictions shall include, without
limitation, those jurisdictions listed in Schedule 10.1) and (iii) comply with
all Contractual Obligations and Requirements of Law binding upon Borrower and
each Subsidiary, except to the extent that the failure to comply therewith could
not have a Material Adverse Effect.
SECTION 11.13 BOOKS, RECORDS AND INSPECTIONS. Maintain, and
shall cause each Subsidiary to maintain, complete and accurate books and
records. In addition, Agent, each Lender, or any Person designated by Agent or
any Lender in writing, shall have the right, from time to time hereafter, to
call at Borrower's place or places of business (or any other place where the
Collateral or any information relating thereto is kept or located) during normal
business hours upon reasonable prior written or telephonic notice by Agent and
each Lender or such other Person; provided, that no prior notice shall be
required upon the occurrence and during the continuance of an Event of Default
or Unmatured Event of Default, and, without hindrance or delay (i) to inspect,
audit, check and make copies of and extracts from Borrower's books, records,
journals, orders, receipts and any correspondence and other data relating to
Borrower's or any Subsidiary's business or to any transactions between the
parties hereto, (ii) to make such verification concerning the Collateral as
Agent or the Required Lenders may consider reasonable under the circumstances,
and (iii) to discuss the affairs, finances and business of Borrower or any
Subsidiary with any officers, employees or directors of Borrower and its
Subsidiaries.
SECTION 11.14 INSURANCE. (i) If Borrower maintains "key man"
insurance with respect to any officer or director of Borrower, Borrower shall
assign the proceeds of such
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insurance to Agent pursuant to an assignment in form and substance reasonably
satisfactory to Agent, (ii) maintain, and shall cause each Subsidiary to
maintain, such insurance (x) as may be required by law, or by the Collateral
Documents or otherwise by Agent or any Lender, and (y) in any event to such
extent and against such hazards and liabilities, as is customarily maintained by
prudent companies similarly situated, (iii) maintain, and shall cause each
Subsidiary to maintain, a sufficient amount of insurance so that neither
Borrower nor Agent or any Lender will be considered a co-insurer or co-insurers,
(iv) with respect to each liability insurance policy, including pollution
liability policies, (A) cause such policy to provide, pursuant to endorsements
in form and substance satisfactory to Agent, that Agent is named as an
additional insured and that the insurer will give Agent 30 days' prior written
notice of the termination or other material modification of such policy and (B)
notify Agent within 5 days after obtaining any new policy, or increasing
coverage under any existing policy, describing in detail in such notice any such
new policy or increase, and (v) with respect to each physical damage or casualty
policy, and each life insurance policy referred to in subclause (i), (1) cause
such policy to provide, pursuant to endorsements in form and substance
satisfactory to Agent, that Agent is named as a loss payee as to personal
property, mortgagee as to real property and an assignee with respect to life
insurance and that the insurer will give 30 days' prior written notice of the
termination or other material modification of such policy, (2) cause such policy
to provide, pursuant to endorsements in form and substance satisfactory to
Agent, that the insurance shall not be invalidated as against Agent or any
Lender by any action or inaction of any Person other than Agent or any Lender,
regardless of any breach or violation of any warranty, declaration or condition
contained in such policy, (3) as against Agent and the Lenders, the insurers
shall waive any rights of subrogation to the extent that the named insured has
waived such rights (and Borrower hereby irrevocably and unconditionally waives
any right of subrogation against Agent and the Lenders, except for claims
arising out of the gross negligence or willful misconduct of the Lenders), and
(4) notify Agent within 5 days of obtaining any new policy or increasing
coverage under any existing policy, describing in detail in such notice any such
new policy or increase.
SECTION 11.5 TAXES AND LIABILITIES. Pay, and shall cause each
Subsidiary to pay, when due all taxes, assessments and other material
liabilities except as contested in good faith and by appropriate proceedings
with respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP if and so long as forfeiture of any part of
the Collateral will not result from the failure to pay any such taxes,
assessments or other material liabilities during the period of any such contest.
SECTION 11.6 EMPLOYEE BENEFIT PLANS. (i) Maintain, and cause
each current or past member of the Controlled Group to maintain, each Pension
Plan as to which it may have any liability, in compliance in all material
respects with all applicable Requirements of Law or as required pursuant to a
collective bargaining agreement, or if intended to qualify under Section 401(a)
or 501(a) of the IRC, in form and administered in a manner so as not to result
in any liability to Borrower or any current or past member of its Controlled
Group for failure to comply with the applicable provisions thereof, and (ii) not
institute any actions which could give rise to any of the following, unless the
liability to Borrower or any current or past member of its Controlled Group
arising from the same will not exceed $50,000 or is adequately reserved on the
balance sheet of
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Borrower or one of its Controlled Group members: (a) a Reportable Event, (b) the
complete or partial withdrawal from any Multiemployer Plan as defined in Section
4210 of ERISA, (c) an amendment, modification or termination or withdrawal from
of a Pension Plan or the entering into of any new Pension Plan, (whether or not
resulting in the posting of a security under Section 401(a)(29) of the IRC or
Section 307 of ERISA), (d) an obligation to file a notice of intent to terminate
a Pension Plan under Section 4041 of ERISA, (e) a lien under Section 412 of the
IRC or Section 302 of ERISA, (f) the institution of proceedings to terminate a
Pension Plan by the Pension Benefit Guaranty Corporation under Section 4043 of
ERISA, or (g) other than in the ordinary course, the incurrence of any increase
in the contingent liability of Borrower or any other conditions, events or
transactions with respect to any present (or future) Employee Benefit Plan.
SECTION 11.7 COLLATERAL DOCUMENTS. Cause the Collateral
Documents, as security for the payment and performance of Notes and all other
Liabilities, to be and remain valid, perfected Liens on and security interests
in all assets of Borrower and each Subsidiary now or hereafter existing or
acquired (free of all other Liens whatsoever other than Permitted Liens).
SECTION 11.8 COMPLIANCE WITH LAWS. Comply, and shall cause each
Subsidiary to comply, with all Federal, state and local laws, rules and
regulations related to its business except to the extent that the failure to
comply could not have a Material Adverse Effect.
SECTION 11.9 MAINTENANCE OF PERMITS. Maintain, and shall cause
each Subsidiary to maintain, all permits, licenses and consents as are required
for the conduct of its business by any state, Federal or local government agency
or instrumentality (including, without limitation, any such license, consent or
permit relating to Hazardous Materials or the disposal thereof) if the failure
to maintain such licenses, permits and consents could not have a Material
Adverse Effect.
SECTION 11.10 PURCHASE, REDEMPTION, DISTRIBUTION, INTEREST AND
PAYMENT RESTRICTIONS. Not, nor shall it permit any Subsidiary to, (i) directly
or indirectly, purchase, redeem or otherwise acquire any of its Equity Interests
or declare or make any dividend, distribution or payment to any holder of any of
its Equity Interests, or set aside any funds for any such purpose, or make any
other payment of any nature whatsoever to any holder of any shares of the
capital stock or any of their or Borrower's Affiliates or members, partners or
shareholders (in their capacity as such), or (ii) enter into or assume any
agreement, instrument, indenture or other obligation (other than the Related
Documents) which (a) contains a negative pledge provision which would require a
sharing of any interest in the Collateral, (b) prohibits or limits the creation
or assumption of any Lien in favor of Agent for the benefit of itself and the
Lenders upon its Property, whether now owned or hereafter acquired, or (c)
restricts, prohibits or requires the consent of any Person with respect to the
payment of any dividend, distribution or payment to any holder of its Equity
Interests.
SECTION 11.11 LOANS, ADVANCES OR INVESTMENTS. Not make or permit
any Subsidiary to make any loans or advances to, investments in, or
contributions to the capital of, any other Person, except for (i) the
endorsement, in the ordinary course of collection, of instruments
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payable to it or to its order, (ii) investments in Cash Equivalents and (iii)
loans made in accordance with Section 11.33.
SECTION 11.12 MERGERS, CONSOLIDATIONS, SALES. Not, nor shall it
permit any Subsidiary to, (a) be a party to any merger or consolidation or
purchase or otherwise acquire all or substantially all of the assets or stock of
any class of, or any partnership or joint venture interest or other interest in,
any other Person; or (b) sell, transfer, convey or lease all or any substantial
part of its assets or sell or assign with or without recourse any Account, other
than (i) any sale of inventory in the ordinary course of business and (ii) a
sale of all or substantially all of the equity interests or all or substantially
all of the assets of Niemand Holdings, Inc. or Niemand Industries, Inc. for cash
at a price determined to be fair and reasonable by Borrower's board of directors
(the "NIEMAND SALE"), provided, that no Event of Default or Unmatured Event of
Default exists after giving effect to such sale.
SECTION 11.13 UNCONDITIONAL PURCHASE OBLIGATIONS. Not, nor shall
it permit any Subsidiary to, enter into or be a party to any contract for the
purchase of materials, supplies or other property or services, if such contract
requires that payment be made by it regardless of whether delivery is ever made
of such materials, supplies or other property or services.
SECTION 11.14 REGULATIONS U AND X. Not use or permit any proceeds
of the Loans to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing or carrying margin stock"
within the meaning of Regulations U and X of the Board of Governors of the
Federal Reserve System, as amended from time to time.
SECTION 11.15 SUBSIDIARIES. Notwithstanding any provision of
this Agreement to the contrary, not create or permit to exist any Subsidiary of
it except for the Subsidiaries identified on Schedule 10.18.
SECTION 11.16 NO AMENDMENT OF ORGANIZATION DOCUMENTS. Not enter
into or permit to exist any amendment or TS modification of the Organization
Documents of Borrower or any Subsidiary.
SECTION 11.17 OTHER AGREEMENTS. Not enter into, nor shall it
permit any Subsidiary to enter into, any agreement containing any provision
which would be violated or breached by the performance of its obligations
hereunder, any of the Related Documents or under any other instrument or
document delivered or to be delivered by it hereunder or in connection herewith.
SECTION 11.18 BUSINESS ACTIVITIES; NAME. Not engage in, nor
shall it permit any Subsidiary to engage in, any type of business except the
businesses described in Schedule 11.18 and the activities incidental and related
thereto. Borrower shall, and shall cause each Subsidiary to, transact business
only in its corporate name and such trade names as are set forth in Schedule
10.16.
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Following the Closing Date, neither Borrower nor any Subsidiary will conduct its
business under any trade or fictitious name other than the duly registered names
disclosed on Schedule 10.16.
SECTION 11.19 TRANSACTIONS WITH AFFILIATES. Not, nor shall it
permit any Subsidiary to, enter into, or cause, suffer or permit to exist any
transaction, arrangement or contract with any Affiliate, including without
limitation the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate, except transactions referred to on Schedule 11.19,
loans permitted by Section 11.33 and transactions entered into in the ordinary
course of business between Borrower and any Subsidiary or any two Subsidiaries
with respect to the operations of their respective businesses.
SECTION11.20 ENVIRONMENTAL LIABILITIES. (i) Comply, and cause
any Subsidiary to comply with any applicable Environmental Laws; (ii) without
limiting the foregoing, not, and not permit any Person to store, release,
generate or dispose of (except in accordance with Environmental Laws) any
Hazardous Material at, onto, or from any real property owned or operated by it,
(iii) not allow any lien imposed pursuant to any Environmental Law to be imposed
or to remain on such real property, or (iv) perform, satisfy and implement any
assessments, investigations, response or corrective actions, at any real
property owned or operated by it or any subsidiary, as required by any
Governmental Authority or Environmental Law, including without limitation, such
actions as may be required to investigate, assess, remediate or abate the
contaminated conditions at, under or from the GB Labels, Inc., Burlington, North
Carolina facility (hereinafter "GB LABELS FACILITY"); (v) with respect to the
contaminated conditions at the GB Labels Facility, maintain in effect the
third-party pollution liability insurance identified on Schedule 10.12; (vi)
allow Agent and Lenders, or their representatives, from time to time at Agent's
or Lenders' reasonable discretion and expense to inspect the real property owned
or operated by it or any subsidiary and conduct an environmental assessment
(including invasive soil or groundwater sampling); (vii) notwithstanding its
notice obligations under Section 11.1(h), provide Agent with a copy of, (a) any
assessment, investigation, corrective action or other environmental reports or
plans, concerning remedial activities undertaken at the GB Labels Facility, (b)
any material written communications concerning such remedial activities or the
contaminated conditions with any Government Authority asserting jurisdiction
over the GB Labels Facility or the environmental conditions thereon or emanating
therefrom, and (c) any written communications (other than privileged
attorney-client work product and communications) concerning any material
developments, including the settlement of any claims, in any third-party
litigation relating to the contaminated conditions at or from the GB Labels
Facility; and (viii) promptly undertake and complete, at its own expense and to
the reasonable satisfaction of Agent, the remedial actions described on Schedule
11.20, in the time frame set forth therein and in accordance with applicable
Environmental Laws, and provide Agent written evidence of the completion of each
schedule remedial action or demonstration that such remedial action is not
required under applicable Environmental Laws.
SECTION 11.21 INDEBTEDNESS. Not, nor shall it permit any
Subsidiary to, incur or permit to exist any Indebtedness or accounts payable
except (i) the Loans, (ii) deferred taxes, (iii) current accounts payable
arising in the ordinary course of business and not overdue, (iv) non-
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current accounts payable which Borrower or such Subsidiary, as the case may be,
is contesting in good faith and by appropriate proceedings diligently conducted,
and with respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP, and (v) Indebtedness of a type referenced
in clauses (b) and (c) of the definition of Permitted Liens ("PERMITTED PURCHASE
MONEY DEBT"), provided that the aggregate outstanding amount thereof does not at
any time exceed $100,000 as to the Indebtedness referenced in either such
clause, and (vi) other Indebtedness shown on Schedule 11.21; provided, that
Borrower may guarantee any Indebtedness of any Subsidiary that is permitted
pursuant to the terms of this Agreement.
SECTION 11.22 LIENS. Not create or permit to exist, nor shall it
permit any Subsidiary to create or permit to exist, any Lien with respect to any
of its assets shall now or hereafter existing or acquired, except Permitted
Liens.
SECTION 11.23 FISCAL YEAR. Not change, nor shall it permit any
Subsidiary to change, its Fiscal Year.
SECTION 11.24 LANDLORD AND WAREHOUSE AGREEMENTS. Provide, and
shall cause each Subsidiary to provide, Agent with copies of all agreements
between such Person and any landlord, bailee, warehouseman or processor which
owns any premises at which Inventory or any other Collateral may, from time to
time, be located. Borrower shall deliver to Agent on or before the Closing Date
a landlord's waiver in form and substance acceptable to Agent from the lessor of
each leased property currently being used by Borrower or any Subsidiary where
Collateral is located. Borrower shall deliver to Agent a bailee letter in form
and substance acceptable to Agent with respect to any warehouse or other
location where Collateral is located. With respect to leased locations or
warehouse space or processing locations leased on the Closing Date, if Borrower
is unable to deliver such a landlord waiver or bailee letter the Inventory at
that location shall automatically be deemed ineligible without further action by
Agent . In the event that Borrower delivers to Agent such landlord waiver or
bailee letter, as applicable, after the Closing Date, subject to the terms and
conditions of this Agreement (including Section 9.4), Inventory located at such
leased location or other location, as applicable, may be considered Eligible
Inventory. Borrower shall timely and fully pay and perform its obligations under
all leases and other agreements with respect to each leased location or
warehouse or processing location where any Collateral is or may be located.
Borrower shall promptly deliver to Agent copies of (i) any and all default
notices received by it under or with respect to any such leased location or
other location, and (ii) such other notices or documents as Agent may request in
its reasonable discretion.
SECTION 11.25 MAINTENANCE OF REAL ESTATE. Keep and maintain, and
shall cause each Subsidiary to keep and maintain, the Real Estate owned by such
Person and all improvements thereon in good condition and repair (ordinary wear
and tear excepted) and shall maintain, and shall cause each Subsidiary to
maintain, the value and utility thereof, and shall maintain, and shall cause
each Subsidiary to maintain, such Real Estate in conformity with all applicable
building and zoning codes and other applicable laws, statutes, rules and
regulations. Borrower shall maintain, and shall cause each Subsidiary to
maintain, its leased real property in the
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same manner as its owned Real Estate, and comply with the terms of its leases of
Real Estate, in accordance with the applicable leases.
SECTION 11.26 ACCOUNTS RECORDS. At all times hereafter maintain
a record of its Accounts, keeping correct and accurate records itemizing and
describing the names and addresses of Account Debtors, relevant invoice numbers,
shipping dates and due dates, collection histories, and Accounts agings, all of
which records shall be available during Borrower's usual business hours at the
request of any of Agent's or any Lender's officers, employees or agents.
Borrower shall cooperate fully with Agent and its agents who shall have the
right at any time or times to inspect its Accounts and the records with respect
thereto. Borrower shall conduct a review of its bad debt reserves and collection
histories at least once each year and promptly following such review shall
supply Agent with a report in a form and with such specificity as may be
reasonably satisfactory to Agent concerning such review of the Accounts.
SECTION 11.27 INSTRUMENTS AND CHATEL PAPER. All Chattel Paper
shall be marked with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of First Source
Financial LLP, as Agent." Upon the request of Agent and at all times upon the
occurrence and during the continuance of an Event of Default or Unmatured Event
of Default, immediately upon Borrower's receipt thereof, Borrower shall deliver
or cause to be delivered to Agent, with appropriate endorsement and assignment
to vest title, with full recourse to Borrower, and possession in Agent, all
Instruments and Chattel Paper which Borrower now owns or may at any time or
times hereafter acquire.
SECTION 11.28 INVENTORY RECORDS. At all times hereafter maintain
a perpetual inventory, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory and of Eligible
Inventory, Borrower's cost therefor and daily withdrawals therefrom and
additions thereto, and the locations of all Inventory in the possession of
bailees, all of which records shall be available during Borrower's usual
business hours at the request of any of Agent's officers, employees or agents.
Borrower shall cooperate fully with Agent and its agents who shall have the
right at any time or times to inspect the Inventory and the records with respect
thereto. Borrower shall conduct a physical count of its Inventory at least once
each year and promptly following such physical inventory shall supply Agent with
a report in form and substance satisfactory to Agent concerning such physical
count of its Inventory, and shall furnish to Agent, at Agent's request, such
other documents and reports with respect to the Inventory.
SECTION 11.29 COLLATERAL LOCATIONS. Neither the location of the
principal place of business and chief executive office of Borrower or any
Subsidiary as set forth on Schedule 10.16, the locations of Collateral as set
forth on Schedule 11.29, nor the corporate name or mailing address of Borrower
or any Subsidiary shall be changed, nor shall there be established additional
places of business or additional locations at which Collateral is stored, kept
or processed unless (i) Borrower shall have given Agent not less than thirty
(30) days prior written notice thereof, (ii) Agent shall have determined that,
after giving effect to any such change of name, address or location, Agent shall
have a first perfected Lien in the Collateral except for Permitted Liens, (iii)
in
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the case of Collateral locations, Borrower shall have delivered a landlord
waiver or bailee letter, as applicable, in form and substance satisfactory to
Agent with respect to such location, and (iv) all negotiable documents and
receipts in respect of any Collateral maintained at such premises are promptly
delivered to Agent. Prior to making any such change or establishing such new
location, Borrower or a Subsidiary, as the case may be, shall execute any
additional financing statements or other documents or notices required by Agent.
All Collateral located at any such new location shall automatically without
further action by Agent be deemed ineligible to constitute Eligible Accounts or
Eligible Inventory, as the case may be, until Borrower shall have complied with
the requirements of this Section 11.29 and Section 11.24.
SECTION 11.30 DISPOSAL OF PROPERTY. Not, and shall not permit any
Subsidiary to, sell, lease, assign, transfer or otherwise dispose of any of its
Property or rights to any Person except for (i) bona fide sales of Inventory to
customers for fair value in the ordinary course of business and (ii) sales of
Equipment which is obsolete, worn-out or otherwise not useable in Borrower's
business. In the event any Equipment of Borrower or any Subsidiary is sold,
transferred or otherwise disposed of as permitted by this Section 11.30 or with
the Required Lenders' consent, and (i) such sale, transfer or disposition is
effected without replacement of the Equipment so sold, transferred or disposed
of or such Equipment is replaced by Equipment leased by such Person, such Person
shall promptly (but in any event within three (3) Business Days of the receipt
thereof) deliver all of the cash proceeds of any such sale, transfer or
disposition to Agent, or (ii) such sale, transfer or disposition is made in
connection with the purchase by such Person of replacement Equipment, such
Person shall use the proceeds of such sale, transfer or disposition to finance
the purchase by such Person of replacement Equipment and shall deliver to Agent
written evidence of the use of the proceeds for such purchase. Except as
permitted by Section 11.22, all replacement Equipment purchased by Borrower or
any Subsidiary shall be free and clear of all Liens, except for Liens in favor
of Agent. All proceeds delivered to Agent under this Section 11.30 shall be
applied to the remaining scheduled payments on the Term Loans in the inverse
order of their maturities or, if the Term Loans have been paid in full, to the
outstanding Revolving Loans (without permanent reduction of the Revolving
Commitment) without premium or penalty except as provided in Section 2.8, with
such proceeds to be applied first to Base Rate Loans until paid in full and then
to LIBOR Rate Loans.
SECTION 11.31 CORPORATE ACCOUNTS. Not maintain corporate deposit
accounts jointly with any Affiliate or commingle any of its funds with funds of
any Affiliate.
SECTION 11.32 FINANCIAL COVENANTS.
(a) Net Worth. Maintain a Net Worth at all times during each period
listed below of at least the amounts set forth opposite such period:
MINIMUM
PERIODS (ALL DATES ARE INCLUSIVE) NET WORTH
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Fiscal Quarter ending September 30,
1998 $ 27,500,000
Fiscal Quarter ending December 31, 1998 $ 27,500,000
Fiscal Quarter ending March 31, 1999 $ 27,500,000
Fiscal Quarter ending July 3, 1999 $ 27,500,000
July 4, 1999 through July 2, 2000 $ 28,000,000
July 3, 2000 through June 30, 2001 $ 29,000,000
July 1, 2001 through June 29, 2002 $ 30,000,000
June 30, 2002 and thereafter $ 32,000,000
(b) Debt to EBITDA Ratio. Not permit the Debt to EBITDA Ratio for
any period set forth below to be more than the ratio listed below opposite such
period:
MAXIMUM
RATIO
PERIOD(S) (ALL DATES ARE INCLUSIVE) (TO 1.0)
Fiscal Quarter ending September 30,
1998 5.70:1.0
Fiscal Quarter ending December 31, 1998 5.20:1.0
Fiscal Quarter ending March 31, 1999 4.50:1.0
Fiscal Quarter ending July 3, 1999 4.20:1.0
Each Fiscal Quarter of Fiscal Year 2000 3.50:1.0
Each Fiscal Quarter of Fiscal Year 2001 3.00:1.0
Each Fiscal Quarter of Fiscal Year 2002 2.50:1.0
Fiscal Quarter ending on June 30, 2002
and each Fiscal Quarter thereafter 2.50:1.0
(c) Interest Coverage Ratio. Not permit the Interest Coverage Ratio
measured on the last day of any month for any twelve (12) month period (or, in
the case of months ending before July 3, 1999, for the period from and including
June 27, 1998, to and including the last day of such month) ending on the last
day of such month to be less than the ratio listed below opposite the period
including such month:
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MAXIMUM
RATIO
PERIOD(S) (ALL DATES ARE INCLUSIVE) (TO 1.0)
Fiscal Quarter ending September 30,
1998 1.80:1.0
Fiscal Quarter ending December 31, 1998 2.00:1.0
Fiscal Quarter ending March 31, 1999 2.00:1.0
Fiscal Quarter ending July 3, 1999 2.00:1.0
July 4, 1999 through July 2, 2000 2.25:1.0
July 3, 2000 through June 30, 2001 2.50:1.0
July 1, 2001 through June 29, 2002 2.50:1.0
June 30, 2002 and thereafter 2.50:1.0
(d) Fixed Charge Coverage Ratio. Not permit the Fixed Charge
Coverage Ratio measured on the last day of any month for any twelve (12) month
period (or, in the case of months ending before July 3, 1999, for the period
from and including June 27, 1998, to and including the last day of each month)
ending on the last day of such month to be less than the ratio listed below
opposite the period including such month:
MAXIMUM
RATIO
PERIOD(S) (ALL DATES ARE INCLUSIVE) (TO 1.0)
Fiscal Quarter ending September 30,
1998 1.00:1.0
Fiscal Quarter ending December 31, 1998 1.00:1.0
Fiscal Quarter ending March 31, 1999 1.00:1.0
Fiscal Quarter ending July 3, 1999 1.00:1.0
July 4, 1999 through July 2, 2000 1.05:1.0
July 3, 2000 through June 30, 2001 1.10:1.0
July 1, 2001 through June 29, 2002 1.10:1.0
June 30, 2002 and thereafter 1.10:1.0
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(e) Gross Capital Expenditures. Not, nor shall it permit any
Subsidiary to, directly or indirectly (by way of the acquisition of the
securities of a Person or otherwise), make or commit to make Gross Capital
Expenditures, except that Borrower may, so long as no Event of Default or
Unmatured Event of Default shall exist or would result therefrom, make Gross
Capital Expenditures in the ordinary course of business in an aggregate amount
not to exceed during any Fiscal Year of Borrower $1,000,000.
SECTION 11.33 INTERCOMPANY LOANS. Notwithstanding any provision
contained in this Agreement to the contrary, Borrower may make loans to any
Guarantor (and such Guarantor may incur the Indebtedness related thereto and
repay such Indebtedness) subject to the following terms and conditions:
(i) such loans shall be unsecured and be payable on demand;
(ii) at the time any such intercompany loan is made by
Borrower to any Guarantor and after giving effect to such loan, both
Borrower and the Guarantor receiving the loan shall be Solvent;
(iii) the obligor of such loan shall use the proceeds thereof
solely for its own working capital requirements arising in the
ordinary course of business;
(iv) each Guarantor shall have executed and delivered to
Borrower, on the Closing Date, a demand promissory note
(collectively, the "INTERCOMPANY NOTES") to evidence any such
intercompany Indebtedness owing at any time by such Guarantor to
Borrower, which Intercompany Notes shall be in form and substance
satisfactory to Agent and pledged to Agent for the benefit of the
Lenders;
(v) each Guarantor shall record all intercompany transactions
on its books and records in a manner satisfactory to Agent;
(vi) the obligations of each Guarantor under any such
Intercompany Notes shall be subordinated to the Liabilities of such
Guarantor under any Related Document in a manner satisfactory to
Agent;
(vii) no Unmatured Event of Default or Event of Default would
occur and be continuing after giving effect to the incurrence of any
such proposed intercompany loan; and
(viii) after giving effect to each such loan, Borrower shall
have cash in (including, without limitation, unused Borrowing
Availability) an amount equal to or greater than its working capital
requirements for the next succeeding ninety (90) days, based upon
Borrower's historical cash needs and taking into account all of its
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payment obligations under the Related Documents and under any of its
other Indebtedness.
Borrower hereby agrees that, until all of the Obligations have been
indefeasibly repaid in full in cash, all loans made by it to the Guarantors
shall be subordinated in all respects to the Liabilities and subject in right of
payment to the prior payment of the Liabilities in full in cash.
SECTION 12 CONDITIONS
The obligation of the Lenders to make the Loans is subject to the
following conditions precedent or concurrent:
SECTION 12.1 TERM LOANS. The obligations of each Lender to make
its Term Loan and its initial Revolving Loan shall be subject to the prior or
concurrent satisfaction (in form and substance satisfactory to Agent and the
Required Lenders) of each of the conditions precedent set forth below:
(a) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing or will result from the making of such Loan.
(b) All warranties and representations contained in this Agreement
and the Related Documents shall be true and correct as of the date of such Loan,
with the same effect as though made on the date of such Loan.
(c) In the opinion of Agent and the Required Lenders, in their sole
and absolute discretion, (i) no litigation (including, without limitation,
derivative actions), arbitration, governmental investigation or proceeding or
inquiry shall, on the date of the initial Loan, be pending, or to the knowledge
of Borrower, threatened which seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or to obtain relief as a result of,
the Related Transactions, or would be materially adverse to, or be detrimental
to the interests of, any of the parties to this Agreement or the Related
Documents or any of the Related Transactions, and (ii) no material adverse
development shall have occurred in any litigation (including, without
limitation, derivative actions), arbitration, government investigation or
proceeding or inquiry disclosed in Schedule 10.4.
(d) The fees referred to in Section 5 which are due and payable on
or prior to the date of the initial Loan shall have been paid to Agent and the
Lenders.
(e) The Lockbox, the Master Account and the Operating Account shall
have been established pursuant to Section 6.2 and the financial institutions at
which Borrower has established the payroll and petty cash accounts described in
Section 6.2(c) shall have furnished Agent with the acknowledgment referred to in
such Section.
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(f) Agent shall have received all of the following, each duly
executed and dated the date of the initial Loan (or such earlier date as shall
be satisfactory to Agent), in form and substance satisfactory to Agent: the
Notes, the Bank Agency Agreement, the Security Agreements, the Guaranties, the
Stock Pledge Agreement, the Mortgages, Borrower's and each Subsidiary's
certificate of incorporation and such other agreements, documents, environmental
reports, appraisals, instruments, certificates and opinions as Agent may
reasonably request.
(g) Borrowing Availability after giving effect to all such Revolving
Loans and LC Exposure existing on the Closing Date shall be not less than
$3,800,000.
(h) The obligations of Borrower identified on Schedule 12.1(h)
(herein called "INDEBTEDNESS TO BE REFINANCED"), together with all interest
accrued thereon and all prepayment premiums and other amounts payable in
connection therewith, shall have been refinanced in full from the proceeds of
the Loans and Agent shall have received (i) the certificate of the President or
a Vice President of Borrower, dated the date of the initial Term Loans to such
effect, (ii) a letter from each of the holders of the Indebtedness to be
Refinanced setting forth in each case (x) the amount of principal and accrued
interest thereon due such holder as of the date of such letter, (y) the per diem
interest rate on unpaid principal thereunder as of such date, and (z) payment
instructions relative to the payment of such Indebtedness to be Refinanced, and,
unless waived by Agent, enclosing in escrow any and all Uniform Commercial Code
termination statements, mortgage releases and releases of security interests in
patents, trademarks and copyrights, in form and substance satisfactory to Agent,
sufficient to terminate all Liens securing any of the Indebtedness to be
Refinanced.
SECTION 12.2 ALL LOANS; LC GUARANTIES. The obligation of the
Lenders to make the initial Loan and each subsequent Loan or to issue an LC
Guaranty is subject to the following further conditions precedent (except as set
forth in Section 12.2(c)):
(a) (i) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing or will result from the making of such Loan or
issuing such LC Guaranty, (ii) the warranties and representations contained in
this Agreement and the Related Documents shall be true and correct in all
material respects as of the date of such requested Loan or provision of such LC
Guaranty, with the same effect as though made on the date of such Loan or
provision of such LC Guaranty, and (iii) there shall have been no material
adverse change or notice to Borrower of prospective material adverse change with
respect to insurance maintained by Borrower.
(b) (i) No claims, litigation (including, without limitation,
derivative actions), arbitration, governmental proceeding, investigation or
inquiry not disclosed in writing by Borrower to Lender prior to the date of the
last previous Loan or issuance of an LC Guaranty, whichever shall be pending or
known to be threatened against Borrower, (ii) no material development not so
disclosed shall have occurred in any claim, litigation (including, without
limitation, derivative actions), arbitration, governmental proceeding,
investigation or inquiry which was so disclosed, and (iii) no event, condition
or development shall have occurred or developed at any time (whether
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before or after the making of the last previous Loan), which (in the case of
each of the foregoing clauses (i) through (iii)) in the opinion of the Required
Lenders could have a Material Adverse Effect.
(c) Agent shall have received (i) a Monthly Report from Borrower
dated no more than thirty-one (31) days prior to the date of such Loan (provided
such period shall be two (2) days prior in the case of the Initial Loans), (ii)
a Borrowing Base Certificate delivered in accordance with Section 11.1(m), (iii)
not later than the fifteenth Business Day of the first calendar month following
the making of each Loan, a certificate, substantially in the form of Exhibit
12.2(c)-1 or in such other form as Agent shall from time to time designate to
Borrower (the "BORROWING CERTIFICATE") dated the last Business Day of the month
in which such Loan was requested, signed by the President or a Vice President of
Borrower, (iv) not less than three (3) days prior to the making of an LC
Guaranty, a certificate substantially in the form of Exhibit 12.2(c)-2 (the "LC
GUARANTY REQUEST") relating to all Permitted LCs to be covered by an LC Guaranty
since the most recent prior LC Guaranty Request, signed by the President or a
Vice President or other appropriate officer of Borrower, and (v) such other
documents as Agent may reasonably request in support of such requested Loan or
LC Guaranty, provided, that unless otherwise requested by Agent, Borrower may
deliver one Borrowing Certificate each calendar month for all Loans for which
such Borrowing Certificate is required.
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 13.1 EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Default in the payment when due, whether by acceleration or
otherwise, of any principal of or interest or premium on any Loan.
(b) Default, and continuance thereof for five days, in the payment
when due, whether by acceleration or otherwise, of any amount payable hereunder
or under the Related Documents (other than any amount described in Section
13.1(a)).
(c) (i) Default in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any other Indebtedness
of, or guaranteed by, Borrower or any Subsidiary, or (ii) default in the
performance or observance of any obligation or condition with respect to any
such other Indebtedness of, or guaranteed by, Borrower or any Subsidiary, if the
effect of such default is to accelerate the maturity of (or there is matured and
unpaid) such other Indebtedness aggregating $100,000 or more, or to cause such
other Indebtedness aggregating $100,000 or more to become due and payable, or to
permit the holder or holders of such other Indebtedness of $100,000 or more, or
any trustee or agent for such holders, to cause such other Indebtedness to
become due and payable prior to its expressed maturity.
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(d) Default in the payment when due, or in the performance or
observance of any material obligation of, or material condition agreed to by
Borrower or any Subsidiary (subject to applicable cure periods) with respect to
any Material Contract or any Material Intellectual Property Right (except only
to the extent that the existence of any such default is being contested by such
Person in good faith and by appropriate proceedings diligently conducted and
with respect to which such Person has established, and is maintaining, adequate
reserves therefor in accordance with GAAP).
(e) (i) Borrower or any Subsidiary or Guarantor becomes insolvent or
generally fails to pay, or admits in writing its inability to pay, debts as they
become due; or (ii) Borrower or any Subsidiary or Guarantor applies for,
consents to, or acquiesces in the appointment of, a trustee, receiver or other
custodian or similar Person for itself or for any of its Property, or makes a
general assignment for the benefit of creditors; or (iii) in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian or
similar Person is appointed for Borrower or any Subsidiary or Guarantor or for a
substantial part of its Property, unless (I) Borrower or such Subsidiary or
Guarantor institutes appropriate proceedings to contest or discharge such
appointment within 10 days and thereafter continuously and diligently prosecutes
such proceedings and (II) such appointment is in fact discharged within 45 days
of such appointment; or (iv) any bankruptcy, reorganization, debt arrangement,
or other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding is commenced in respect of Borrower or any
Subsidiary or Guarantor, unless (X) such case or proceeding is not commenced by
Borrower or such Subsidiary or Guarantor, (Y) such case or proceeding is not
consented to or acquiesced in by Borrower or such Subsidiary or Guarantor, and
(Z) Borrower or such Subsidiary or Guarantor institutes appropriate proceedings
to dismiss such case or proceeding within 10 days and thereafter continuously
and diligently prosecutes such proceedings and such case or proceeding is in
fact dismissed within 45 days after the commencement thereof; or (v) Borrower or
such Subsidiary or Guarantor takes any action to authorize, or in furtherance
of, any of the foregoing.
(f) Failure by Borrower to comply with or to perform any provision
of this Agreement (other than occurrences referred to or embodied in other
clauses of this Section 13.1) for a period of five (5) days after the earlier of
(i) Borrower's receipt of notice from Agent or (ii) actual knowledge of such
breach by Borrower.
(g) Any warranty or representation made by or on behalf of Borrower,
any Subsidiary or any other Person (other than Agent or a Lender) herein or in
any of other Related Documents, or otherwise in connection herewith or therewith
is inaccurate or incorrect, or is breached or false or misleading, in any
material respect as of the date such warranty or representation is made; or any
schedule, certificate, financial statement, report, notice, or other writing
furnished by or on behalf of Borrower or any Subsidiary to Agent or any Lender
is false or misleading in any material respect on the date as of which the facts
therein set forth are stated or certified.
(h) Except to the extent that any of the following is expressly
permitted hereunder or does not give rise to the incurrence by Borrower or any
current or past member of its
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Controlled Group of any liability in excess of $50,000, or except to the extent
any of the following is adequately reserved on the balance sheet of Borrower or
one of its current members of its Controlled Group , the institution of any
steps by Borrower or any other Person, including the Pension Benefit Guaranty
Corporation, (a) to amend, modify or terminate a Pension Plan or to enter into
any new Pension Plan, (b) to cause a complete or partial withdrawal from any
Multiemployer Plan, or (c) other than in the ordinary course, to directly or
indirectly cause to exist any other conditions, events or transaction which
could give rise to any liability of Borrower or any current member of its
Controlled Group with respect to any Employee Benefit Plan.
(i) Any party (including Borrower) to any other Related Document
(other than Agent or any Lender) shall fail to comply with or to perform
(subject to any applicable grace period) any provision of such Related Document
applicable to it; or any of the Related Documents shall fail to remain in full
force and effect; or any action shall be taken by any Person (other than Agent
or any Lender or Master Account Bank) to discontinue or terminate any of the
Related Documents or to contest the validity, binding nature or enforceability
of any thereof.
(j) Any of the Collateral or the Property of Borrower or any
Subsidiary having a fair market value of more than $50,000 in the aggregate is
attached, seized, subjected to a writ or distress warrant, or levied upon, or
come within the possession or control of any judgment creditor, receiver,
trustee, custodian or assignee for the benefit of creditors of Borrower or any
Subsidiary and on or before the thirty (30) day period thereafter such
Collateral or Property is not returned to such Person or such writ, distress
warrant or levy is not dismissed, vacated, stayed or lifted.
(k) Any Change of Control shall occur.
(l) There shall be entered against Borrower or any Subsidiary one or
more judgments, awards or decrees, or orders of attachment, garnishment or any
other writ, which exceed $100,000 in the aggregate at any one time outstanding,
excluding judgments, awards, decrees, orders or writs (i) for which there is
full insurance and with respect to which the insurer has assumed responsibility
in writing, (ii) for which there is full indemnification (upon terms and by
creditworthy indemnitors which are satisfactory to Agent) or (iii) which have
been in force for less than the applicable period for filing an appeal so long
as execution is not levied thereunder (or in respect of which Borrower or such
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceeding for review and in respect of which a stay of execution or appropriate
appeal bond shall have been obtained pending such appeal or review).
(m) The receipt by Borrower or any Subsidiary of any notice, claim
or assessment from any Federal, state or local governmental authority, or any
other Person, asserting liability or potential liability against Borrower or
such Subsidiary under any Environmental Law that could have a Material Adverse
Effect.
(n) Any material damage to, or loss, theft, or destruction of, any
of the Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or
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public enemy, or other casualty which results in or causes cessation or
substantial curtailment of production or other revenue producing activities of
more than ten percent (10%) of Borrower's consolidated gross revenues for more
than fifteen (15) consecutive days (based upon consolidated gross revenues for
the most recent twelve months ending on the date of such occurrence; provided,
that such occurrence shall not constitute an Event of Default if such occurrence
is covered by Borrower's business interruption insurance in an amount which, in
the judgement of the Required Lenders, is reasonably expected to cover the
period during which such revenue-producing activities have ceased or are
substantially curtailed.
(o) Any security interest created under any Related Document shall
cease to be a valid and perfected first priority security interest or Lien
(subject to Permitted Liens) in any of the Collateral purported to be covered
thereby for any reason other than the failure of Agent or any Lender to take any
action within its control.
SECTION 13.2 EFFECT OF DEFAULT. If an Unmatured Event of Default
or an Event of Default shall have occurred and be continuing, Agent may elect to
do one or more of the following at any time or times and in any order: (i)
reduce the amount of the Revolving Commitment, (ii) restrict the amount of, or
suspend its obligations to make, Revolving Loans, (iii) restrict or suspend the
issuance of Letters of Credit or LC Guaranties or (iv) demand that Borrower
immediately deposit with Agent an amount equal to one hundred ten percent (110%)
of the LC Exposure to enable Agent to make payments under the LC Guaranties when
required, and such amount shall become immediately due and payable. If any Event
of Default described in Section 13.1(e) shall occur, the Commitments (if not
theretofore terminated) shall immediately terminate and the Notes and all other
Liabilities shall become immediately due and payable, all without notice of any
kind; and, in the case of any other Event of Default, Agent may, and Agent shall
at the direction of the Required Lenders, declare the Commitments (if not
theretofore terminated) to be terminated and the Notes and all other Liabilities
to be due and payable, whereupon the Commitments (if not theretofore terminated)
shall immediately terminate and the Notes and all other Liabilities shall become
immediately due and payable, all without further notice of any kind. Agent shall
promptly provide Borrower written notice of any such declaration but failure to
do so shall not impair the effect of such declaration. Notwithstanding the
foregoing, the effect as an Event of Default of any event described in Section
13 may be waived by the Required Lenders in writing. In the case of any Event of
Default occurring by reason of any wilful action or inaction by or on behalf of
Borrower in order to avoid payment of any prepayment fee or premium pursuant to
Section 2.8 which Borrower would have to pay if the Liabilities were paid in
full, such prepayment fee or premium shall also be immediately due and payable
to the extent permitted by law.
SECTION 13.3 RIGHTS AND REMEDIES GENERALLY. Upon acceleration of
the Liabilities, Agent, on behalf of the Lenders, shall have, in addition to any
other rights and remedies contained in this Agreement or in any of the other
Related Documents, all of the rights and remedies of a secured party under the
Code or other applicable laws, all of which rights and remedies shall be
cumulative and non-exclusive, to the extent permitted by law. In addition to all
such rights and remedies, Agent shall have the right to sell, lease or otherwise
dispose of all or any part of the
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Collateral and the sale, lease or other disposition of the Collateral, or any
part thereof, by Agent after an Event of Default may be 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 purchase
price against the Liabilities then owing. Any sales of the Collateral may be
adjourned from time to time with or without notice. Agent shall have the right
to conduct such sales on Borrower's premises, at Borrower's expense, or
elsewhere, on such occasion or occasions as Agent may see fit.
SECTION 13.4 ENTRY UPON PREMISES AND ACCESS TO INFORMATION.
Upon acceleration of the Liabilities, Agent shall have the right (i) to cause
the Collateral to remain on Borrower's premises, without any obligation to pay
rent, (ii) to enter upon the premises of Borrower where the Collateral is
located or any other place or places where the Collateral is believed to be
located and kept, without any obligation to pay rent, to render the Collateral
useable or saleable, or to remove the Collateral therefrom to the premises of
Agent or any agent of Agent, at Borrower's expense, for such time as Agent may
desire in order effectively to collect or liquidate the Collateral, and (iii) to
require Borrower to assemble the Collateral and make it available to Agent at a
place or places to be designated by Agent. Upon acceleration of the Liabilities,
Agent shall have the right to take possession of Borrower's original books and
records, to obtain access to Borrower's data processing equipment, computer
hardware and software relating to the Collateral and to use all of the foregoing
and the information contained therein in any manner Agent deems appropriate; and
Agent shall have the right to notify postal authorities to change the address
for delivery of Borrower's mail to an address designated by Agent and to
receive, open and dispose of all mail addressed to Borrower and to take
possession of all checks or other original remittances contained in such mail.
SECTION 13.5 SALE OR OTHER DISPOSITION FO COLLATERAL BY AGENT.
Any notice required to be given by Agent or any Lender of a NT sale, lease or
other disposition or other intended action by Agent with respect to any of the
Collateral which is given to Borrower as specified in Section 14.3, at least ten
(10) days prior to such proposed action, shall constitute fair and reasonable
notice to Borrower of any such action. The net proceeds realized by Agent upon
any such sale or other disposition, after deduction for the expenses of
retaking, holding, storing, transporting, preparing for sale, selling or
otherwise disposing of the Collateral incurred by Agent in connection therewith,
shall be applied as provided herein toward satisfaction of the Liabilities.
Agent shall account to Borrower for any surplus realized upon such sale or other
disposition, and Borrower shall remain liable for any deficiency. The
commencement of any action, legal or equitable, or the rendering of any judgment
or decree for any deficiency shall not affect Agent's Liens on the Collateral
until the Liabilities are fully paid.
SECTION 13.6 NOTICE TO ACCOUNT DEBTORS. Agent may, in its sole
discretion, at any time or times, upon the occurrence and during the continuance
of an Event of Default and without prior notice to Borrower, notify any or all
Account Debtors that the Accounts have been assigned to Agent, for the benefit
of the Lenders, and that Agent has a Lien therein. Upon the occurrence and
during the continuance of an Event of Default, Agent may direct or, at the
request
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of Agent, Borrower shall direct, any or all Account Debtors to make all
payments upon the Accounts directly to Agent. Agent shall furnish Borrower with
a copy of any such notice.
SECTION 13.7 WAIVER OF DEMAND. DEMAND, PRESENTMENT, PROTEST AND
NOTICE OF DEMAND, PRESENTMENT, PROTEST, NONPAYMENT, INTENT TO ACCELERATE AND
ACCELERATION ARE HEREBY WAIVED BY BORROWER. BORROWER ALSO WAIVES THE BENEFIT OF
ALL VALUATION, APPRAISAL AND EXEMPTION LAWS.
SECTION 13.8 WAIVER OF NOTICE. EXCEPT AS PROVIDED IN SECTION
13.5, UPON THE OCCURRENCE OF A DEFAULT OR AN EVENT OF DEFAULT, BORROWER HEREBY
WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY
AGENT AND THE LENDERS OF THEIR RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT
JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR
NOTICE OR HEARING. BORROWER ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF
ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS AGREEMENT.
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SECTION 14 GENERAL
SECTION 14.1 WAIVER; AMENDMENTS. No delay on the part of any
Lender or Agent or any holder of a Note or other Liability in the exercise of
any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by any of them of any right, power or remedy preclude
other or further exercise thereof, or the exercise of any other right, power or
remedy. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or a Note or any Related Document shall in any event
be effective unless the same shall be in writing and signed and delivered by the
Required Lenders, and then any such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that no amendment, waiver or consent shall, unless in
writing and signed by all each affected Lender, do any of the following: (i)
increase the Commitment of a Lender or subject a Lender to any additional
obligations, (ii) except as otherwise expressly provided in this Agreement,
reduce the principal of, or interest on, the Notes, any Reimbursement
Obligations or any fees hereunder, (iii) postpone any date fixed for any payment
in respect of principal of, or interest on, the Notes, any Reimbursement
Obligations or any fees hereunder, (iv) change the percentage of the Commitment,
or any minimum requirement, necessary for the Lenders or the Required Lenders to
take any action hereunder, (v) amend or waive this Section 14.1, or change the
definition of Required Lenders, or (vi) except as otherwise expressly provided
in this Agreement (including without limitation as provided in Section 11.30
hereof), and other than in connection with the financing, refinancing, sale or
other disposition of any asset of any Borrower or Subsidiary permitted under
this Agreement, release any Liens in favor of Agent on all or any substantial
portion of the Collateral; provided, further, that no amendment, waiver or
consent affecting the rights or duties of Agent under any Related Documents
shall in any event be effective, unless in writing and signed by Agent, in
addition to the Lenders required hereinabove to take such action.
Notwithstanding any of the foregoing to the contrary, the consent of Borrower or
any Guarantor shall not be required for any amendment, modification or waiver of
the provisions of Section 15.2 (other than the provisions of Section 15.2.9). In
addition, Borrower and the Lenders hereby authorize Agent to modify this
Agreement by unilaterally amending or supplementing Schedule 1 from time to time
in the manner requested by Borrower, Agent or any Lender in order to reflect any
assignments or transfers of the Loans, as provided for hereunder; provided,
however, that Agent shall promptly deliver a copy of any such modification to
Borrower and each Lender. All Events of Default shall continue until the same
are waived in accordance with this Subsection 14.1.
SECTION 14.2 CONFIRMATIONS. Borrower and the Lenders (or any
holder of a Note) agree from time to time, upon written request received by it
from the other, to confirm to the other in writing the aggregate unpaid
principal amount of the Loans then outstanding under such Note.
SECTION 14..3 NOTICES. Except with respect to Sections 2.3 and
4.3: (a) notices forwarded by mail shall be deemed to have been given on the
earlier to occur of (i) receipt or (ii) three days after the date sent if sent
by registered or certified mail, postage paid, and:
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(a) if to Borrower, addressed to Borrower at its address shown
below its signature hereto; or
(b) if to Agent, addressed to Agent at the address shown below its
signature hereto; or
(c) if to a Lender, addressed to such Lender at its address set
forth on Schedule 1; or
in the case of any party, at such other address as such party may, by written
notice received by the other parties to this Agreement, have designated as its
address for notices; and (b) notices given by telegram or facsimile transmission
shall be deemed to have been given when sent if addressed to the party to whom
sent, at its address as aforesaid. Notices of borrowing pursuant to Section 2.3
and Section 4.3 shall be effective upon receipt by Agent and shall be in writing
(or by telephone to be confirmed in writing by Borrower). Agent and the Lenders
shall be entitled to rely upon all telephone and Electronic Notices and Borrower
shall indemnify and hold Agent and each Lender harmless from any loss, cost or
expense ensuing from any such reliance, which indemnification shall survive any
termination of this Agreement.
SECTION 14.4 COST, EXPENSES AND TAXES. Borrower shall pay on
demand all out-of-pocket costs and expenses of Agent (including the reasonable
fees and out-of-pocket expenses of counsel for Agent and of local counsel, if
any, who may be retained by said counsel and all costs of appraisals, surveys,
environmental reviews and the like required to be made or completed) in
connection with the preparation, execution and delivery of this Agreement, the
Related Documents and all other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. Borrower
further agrees to pay all out-of-pocket costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by Agent (and in the case of
enforcement, each Lender) in connection with the administration, enforcement,
waiver or amendment of this Agreement, the Related Documents and any such other
instruments or documents. In addition, Borrower agrees to pay, and to save Agent
and each Lender harmless from all liability for, any document, stamp, filing,
recording, mortgage or other taxes which may be payable in connection with the
borrowings hereunder or the execution, delivery, recording or filing of this
Agreement, any of the Related Documents or of any other instruments or documents
provided for herein or delivered or to be delivered hereunder or in connection
herewith. All obligations provided for in this Section 14.4 shall survive any
termination of this Agreement.
SECTION 14.5 INDEMNIFICATION. In consideration of Agent's and
each Lender's execution and delivery of this Agreement and the Lenders'
extension of the Commitments, Borrower hereby agrees to indemnify, exonerate and
hold Agent, Manager, each Lender and each of their respective officers,
directors, employees and agents (including, without limitation, Master Account
Bank, and herein collectively called "LENDER PARTIES" and individually called a
"LENDER PARTY") free and harmless from and against any and all claims, demands,
actions, causes of action, suits, losses, costs (including, without limitation,
all documentary, recording, filing, mortgage or
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other stamp taxes or duties), charges, liabilities and damages, and expenses in
connection therewith (irrespective of whether such Lender Party is a party to
the action for which indemnification hereunder is sought), and including,
without limitation, reasonable attorneys' fees and disbursements (called in this
Section 14.5 the "INDEMNIFIED LIABILITIES"), of any and every kind whatsoever
paid, incurred or suffered by, or asserted against, any Lender Party for, with
respect to, arising out of or as a direct or indirect result of:
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan or involving any Loan or
the execution, delivery, performance or enforcement of this Agreement, the
Related Documents and any instrument, document or agreement executed pursuant
hereto by any of Lender Parties;
(b) (i) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission or release from, any real property legally or
beneficially owned (or any estate or interest which is owned) or operated by
Borrower or any Subsidiary (including, without limitation, any property owned by
a land trust the beneficial interest in which is owned, in whole or in part, by
Borrower or any Subsidiary) of any Hazardous Material; (ii) any claims, demands,
actions, causes of action, suits, losses, costs (including investigation cleanup
or other response costs), charges, liabilities and damages, asserted or arising
under Environmental Laws relating to any such real property or Borrower's or any
Subsidiary's operations thereon, or arising from a breach in any of Borrower's
representations, warranties or covenants herein relating to environmental
matters, and (iii) any of the conditions disclosed on Schedule 10.19 regardless
of whether caused by, or within the control of, Borrower or any Subsidiary;
(c) (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement, prospectus or offering
memorandum or in any preliminary prospectus or preliminary offering memorandum
or any amendment or supplement to any thereof or in any other writing prepared
in connection with the offer, sale or resale of any securities of Borrower or
any Subsidiary, or (ii) any omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading; and
(d) (i) any injury to person or damage to property, known or
unknown, reported or unreported, which results from the use of the products of
Borrower or any Subsidiary, or (ii) any obligation or liability arising out of
or with respect to the business or operations of Borrower or any Subsidiary, in
each case whether any of such matters arise before or after the foreclosure of
or other taking of title to all or any portion of the Collateral by Agent or the
Lenders;
except for any such Indemnified Liabilities arising, on account of the relevant
Lender Party's gross negligence or willful misconduct and, to the extent that
the foregoing undertaking may be unenforceable for any reason, Borrower agrees
to make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. All
obligations provided for in this Section 14.5 shall survive any termination of
this Agreement and shall not be reduced or impaired by any investigation made by
or on behalf of any Lender Party.
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SECTION 14.6 SUBMISSION TO JURISDICTION. AGENT AND EACH LENDER
MAY ENFORCE ANY CLAIM ARISING OUT OF THIS AGREEMENT OR THE RELATED DOCUMENTS IN
ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN
CHICAGO, ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH
RESPECT TO ANY SUCH CLAIM, BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF SUCH COURTS. BORROWER HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM WITH OFFICES ON THE DATE HEREOF AT 208 SOUTH LASALLE STREET,
CHICAGO, ILLINOIS, TO RECEIVE FOR AND ON BEHALF OF BORROWER SERVICE OF PROCESS
IN ILLINOIS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF SAID COURTS BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID,
TO BORROWER AND AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY
LAW, (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT
IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (ii) SHALL BE TAKEN AND HELD TO BE
VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT. NOTHING HEREIN
CONTAINED SHALL AFFECT THE RIGHT OF AGENT OR ANY LENDER TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR PRECLUDE AGENT OR ANY LENDER FROM BRINGING AN
ACTION OR PROCEEDING IN RESPECT HEREOF IN ANY OTHER COUNTRY, STATE OR PLACE
HAVING JURISDICTION OVER SUCH ACTION. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT LOCATED IN CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
SECTION 14.7 GOVERNING LAW. This Agreement and the Notes shall
be a contract made under and governed by the internal laws of the State of
Illinois without regard to conflict of laws principles. Whenever 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 to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of Borrower, any of its Subsidiaries and rights of
Agent and each Lender and any other holder of a Note or Liability expressed
herein or in the Related Documents shall be in addition to and not in limitation
of those provided by applicable law or in any other written instrument or
agreement relating to any of the Liabilities.
SECTION 14.8 SALE OF NOTES; PARTICIPATION. Any Lender may assign
to one or more banks or other Persons all or any part of or rights in, or may
grant participations to one or more banks or other Persons in or to, this
Agreement, any Loan or Loans or the Notes or either of them or such Lender's
rights and remedies hereunder and thereunder, and to the extent of any such
assignment or participation (unless otherwise stated therein) the assignee or
participant of such
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assignment or participation shall have the same rights and
benefits hereunder and thereunder as it would have if it were a Lender
hereunder.
SECTION 14.9 ENTRY INTO AGREEMENT. Borrower represents, warrants
and acknowledges that (i) the relationship between it and the Lenders is solely
that of a borrower and a lender, and (ii) Borrower is in sole control of its
business and has entered into this Agreement as its own free act and voluntary
deed, based upon its independent judgment as to its best interests.
SECTION 14.10 LEGAL OPINIONS. Borrower expressly consents to the
rendering of opinions by its counsel and of each other counsel required by Agent
or a Lender to be rendered in connection with the initial closing of the matters
contemplated hereby, and thereafter to be rendered from time to time in
connection with this Agreement or any Related Document, and acknowledges that
such opinions, when so rendered, shall be deemed to be rendered at the request
and upon the instruction of Borrower, which has, and will have (prior to the
rendering of each opinion), consulted with and been advised by such counsel as
to the consequences of such consent, request and instructions.
SECTION 14.11 JURY TRIAL; DAMAGE WAIVER. EACH PARTY HERETO HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATED TO OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED DOCUMENT TO WHICH IT IS A PARTY, OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY. BORROWER WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN
ANY LITIGATION REFERRED TO ABOVE ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.
SECTION 14.12 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon Borrower, Agent and the Lenders and their respective successors and
assigns, and shall inure to the benefit of Borrower, Agent and each Lender and
their respective successors and assigns; provided, however, that Borrower shall
have no right to assign their rights or delegate its duties under this
Agreement. FSFP may assign any of its rights under this Agreement and the
Related Documents to its lenders for collateral security purposes. This
Agreement and the Related Documents contain the entire agreement of the parties
hereto with respect to the matters covered hereby.
SECTION 14.13 MARSHALING. The Lenders shall be under no
obligation to marshall any assets in favor of Borrower or any other Person or
against or in payment of any or all of the Liabilities.
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SECTION 14.14 WAIVERS WITH RESPECT TO OTHER INSTRUMENTS.
Borrower waives presentment, demand and protest and notice of presentment,
demand protest, default, nonpayment, maturity, release, compromise, settlement,
extension, or renewal of any or all commercial paper, Accounts, contract rights,
documents, Instruments, Chattel Paper and guaranties at any time held by Agent
and the Lenders on which Borrower may in any way be liable and hereby ratifies
and confirms whatever Agent and the Lenders may do regarding the enforcement,
collection, compromise, or release thereof.
SECTION 14.15 RETENTION OF BORROWER'S DOCUMENTS. Agent or any
Lender may destroy or otherwise dispose of all documents, schedules, invoices or
other papers delivered to Agent or any Lender in accordance with its customary
practices unless Borrower requests in writing that same be returned. Upon
Borrower's request and at Borrower's expense, Agent or any Lender shall return
such papers held by it when its actual or anticipated need for same has
terminated.
SECTION 14.16 SURVIVAL OF WARRANTIES. All representations and
warranties of Borrower, the Guarantors and the Subsidiaries contained in this
Agreement or any of the other Related Documents shall survive the execution and
delivery of this Agreement and the other Related Documents and the making of the
Loans. Notwithstanding anything contained in this Agreement to the contrary, the
provisions of, and the undertakings, indemnifications and agreements of Borrower
set forth in Sections 14.4 and 14.5 shall survive payment of the Liabilities and
termination of this Agreement.
SECTION 14.17 COUNTERPARTS. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same agreement. Delivery
of an executed counterpart of this Agreement by telecopy or similar electronic
medium shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any Person delivering an executed counterpart of
this Agreement by telecopy or similar electronic medium shall also deliver a
manually executed counterpart of this Agreement; provided, that the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability or binding effect of this Agreement.
SECTION 14.18 EXCEPTIONS TO COVENANTS. Neither Borrower nor any
Guarantor or Subsidiary shall be deemed to be permitted to take any action or
omit to take any action which is permitted as an exception to any of the terms,
provisions or covenants contained in any of the Related Documents if such action
or omission would result in an Event of Default or Unmatured Event of Default or
the breach of any term, provision or covenant contained in any Related Document.
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SECTION 14.19 CONSTRUCTION. Borrower acknowledges that it and
its counsel have approved the Related Documents and that the usual rule of
construction to the effect that any ambiguities or inconsistencies are to be
resolved against the drafting Person shall not be applicable in the
interpretation of any of the Related Documents.
SECTION 14.20 REINSTATEMENT. This Agreement shall remain in full
force and effect and continue to be effective or to be reinstated, as the case
may be, if at any time payment and performance of the Liabilities, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Liabilities, whether as
a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Liabilities
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
SECTION 14.21 ENTIRE AGREEMENT. This Agreement, including all
Exhibits, Schedules, the Related Documents and other documents attached hereto
or incorporated by reference herein, constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all other
negotiations, understandings and representations, oral or written, with respect
to the subject matter hereof, including that certain Commitment Letter dated as
of July __, 1998, between Borrower and FSFP.
SECTION 14.22 CONFIDENTIALITY. BORROWER ACKNOWLEDGES THAT IT HAS
BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY, AND BORROWER ACKNOWLEDGES AND AGREES THAT (I)
EACH OF THE WAIVERS SET FORTH HEREIN WERE KNOWINGLY AND VOLUNTARILY MADE, (II)
THE OBLIGATIONS OF AGENT AND EACH LENDER HEREUNDER, INCLUDING THE OBLIGATION TO
ADVANCE AND LEND FUNDS TO BORROWER IN ACCORDANCE HEREWITH, SHALL BE STRICTLY
CONSTRUED AND SHALL BE EXPRESSLY SUBJECT TO BORROWER'S COMPLIANCE IN ALL
RESPECTS WITH THE TERMS AND CONDITIONS HEREIN SET FORTH, AND (III) NO
REPRESENTATIVE OF AGENT OR ANY LENDER HAS WAIVED OR MODIFIED ANY OF THE
PROVISIONS OF THIS AGREEMENT AS OF THE DATE HEREOF AND NO SUCH WAIVER OR
MODIFICATION FOLLOWING THE DATE HEREOF SHALL BE EFFECTIVE UNLESS MADE IN
ACCORDANCE WITH SECTION 14.1.
SECTION 14.23 CONFIDENTIALITY. Borrower agrees that FSFP may
disclose information relating to Borrower (a) to any regulatory authority having
jurisdiction over the Agent or any Lender, (b) to any other Person in connection
with a Lender's proposed or actual assignment of, or sale of any participations
in, the Liabilities, (c) to any other Person in connection with the exercise of
the Agent's or any Lender's rights hereunder or under any of the other Related
Documents, or (d) to each of the Master Lenders and the Master Agents, so long
as each such party has agreed to use procedures substantially comparable to
those used by such Person in respect of non-public information as supplied to
such Person by or on behalf of FSFP to the extent that such information is not
and does not become publicly available and which FSFP indicates at the time is
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to be treated confidentially; provided, however, that each of the Master
Lenders, and the Master Agents, as the case may be, is hereby authorized to
deliver a copy of each or any financial statement of Borrower or any other
information relating to the Loans, or the Collateral, which may be furnished to
it hereunder or otherwise to (a) its legal counsel and auditors and other
professional advisors, (b) governmental or regulatory authorities having
jurisdiction over it, (c) independent financial rating agencies (including,
without limitation the Rating Agencies), (d) any person providing general
liquidity or credit enhancement to the Master Lenders , and (e) (subject to
obtaining a confidentiality agreement containing the foregoing confidentiality
restrictions) any Person to whom a Master Lender proposes to assign all or any
part of its interest or grant a participation in its interest. As used herein:
"MASTER AGENTS" shall mean Citicorp North America, Inc., Bank of New York and
any successor thereto or assignee thereof; "MASTER LENDER" shall mean any person
becoming a "Lender" under that certain Second Amended and Restated Credit
Agreement dated as of May 24, 1996 (as amended from time to time, the "MASTER
CREDIT AGREEMENT") among First Source Financial, Inc., FSFP, Master Agents and
such Lenders; and "RATING AGENCIES" shall mean Standard and Poor's and Moody's
Ratings Group, a division of McGraw-Hill, Inc., and Moody's Investors Services,
Inc.
SECTION 14.24 SEVERAL OBLIGATIONS; NATURE OF LENDER'S RIGHTS.
The respective obligations of the Lenders hereunder are IGHTS several and not
joint and no Lender shall be the partner or agent of any other Lender (except to
the extent to which the Agent is authorized to act as such). No provision
contained herein or in any other Related Document and no course of dealing
between the parties shall be deemed to create any fiduciary relationship between
the Agent or any Lender and the Borrower or any Guarantor or Subsidiary. The
indebtedness of the Borrower incurred under each of the Notes shall be a
separate obligation owing to the holder thereof; provided that each Lender
hereby agrees that it shall have no individual right to seek to enforce its
rights under its Notes or this Agreement, or to realize upon the Collateral, it
being understood and agreed that such rights and remedies may be exercised
solely by the Agent for the benefit of the Lenders at the direction of the
Required Lenders in accordance with the terms of the Related Documents.
SECTION 15 ASSIGNMENT AND PARTICIPATION; AGENT.
SECTION 15.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND NOTES.
Each Lender may assign its rights and delegate its obligations under this
Agreement to another Person; provided, that (i) such Lender shall first obtain
the written consent of Agent, (ii) the aggregate amount of the outstanding
Commitment and Loans of the assigning Lender being assigned pursuant to such
assignment (determined as of the date of the Assignment and Acceptance (the
"ASSIGNMENT AND ACCEPTANCE") entered into with respect to such assignment by the
assigning Lender and the assignee, and accepted by Agent, in form and substance
satisfactory to Agent, the assigning Lender and the assignee) shall in no event,
except in the case of an assignment of all of a Lender's rights and obligations
under this Agreement, be less than $5,000,000 of the assigning Lender's rights
and obligations under this Agreement, and (iii) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance. In the case of an assignment
authorized under this Section 15.1, the assignee shall have, to the extent
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of such assignment, the same rights, benefits and obligations as it would if it
were a Lender hereunder and the assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitment to the extent of such
assignment. Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a Lender hereunder.
Agent shall maintain a copy of each Assignment and Acceptance delivered to
and accepted by it and books and records, including computer records, in which
it shall record the names and addresses of the Lenders and the Commitment of,
and principal amount of the Loans owing to, each Lender from time to time (the
"REGISTER"). The entries in the Register shall constitute rebuttably presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein, and Borrower, Agent and the Lenders may treat each Person the name of
which is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by any Lender or
Borrower at any reasonable time and from time to time upon reasonable prior
notice.
Upon its receipt of an Assignment and Acceptance executed by an assigning
Lender and an assignee, together with the Notes subject to such assignment,
Agent shall, if such Assignment and Acceptance has been completed, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register, and (iii) give prompt notice thereof to Borrower. Within five (5)
Business Days after Borrower's receipt of such notice, Borrower, at its own
expense, will execute and deliver to Agent in exchange for the surrendered
Notes, new Notes, to the order of such assignee in amounts corresponding to the
interest in the assigning Lender's rights and obligations under this Agreement
acquired by such assignee pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained an interest in such rights and obligations
hereunder, new Notes to the order of the assigning Lender in amounts
corresponding to such interest retained by it hereunder. Such Notes shall be in
an aggregate principal amount equal to the aggregate principal amount of such
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the forms of Exhibits 3.1 and
3.2, as applicable. Upon delivery of such new Notes, the surrendered Notes shall
be canceled by Agent and returned to Borrower.
Each Lender may sell participations in all or any part of any Loans and
Letters of Credit made by it to another Person; provided, that (i) immediately
after giving effect to any participation, the aggregate amount of the
outstanding Commitment and Loans still held by the Lender granting the
participation for its own account shall in no event be less than $5,000,000 and
(ii) all amounts payable by Borrower hereunder shall be determined as if that
Lender had not sold such participation and the holder of any such participation
shall not be entitled to require such Lender to take or omit to take any action
hereunder except action directly affecting (a) any reduction in the principal
amount, interest rate or fees payable with respect to any Loan in which such
holder participates; (b) any extension of the final scheduled maturity date of
the principal amount of the Loans in which such holder participates; and (c) any
release of any Collateral (other than in accordance with the terms of this
Agreement or the Related Documents). Borrower hereby acknowledges and agrees
that
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any participation will give rise to a direct obligation of Borrower to the
participant, and the participant shall for purposes of Sections 2.11 and 14.5 be
considered to be a Lender hereunder.
Except as otherwise provided in this Section 15.1 no Lender shall, as
between Borrower and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Loans, the Notes or other
Liabilities owed to such Lender. Each Lender may furnish any information
concerning Borrower in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to such Lender's confidentiality obligations.
SECTION 15.2 AGENT.
15.2.1 APPOINTMENT OF AGENT.
(a) Each Lender hereby designates FSFP as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder of
any Note or participation in any Letter of Credit and LC Guaranty by the
acceptance of a Note or participation shall be deemed irrevocably to
authorize, Agent to take such action on its behalf under the provisions of
this Agreement and the Notes, the other Related Documents and any other
instruments and agreements referred to herein and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. Agent shall hold all
Collateral and all payments of principal, interest, fees, charges and
expenses received pursuant to this Agreement or any other Related
Documents for the benefit of the Lenders to be distributed as provided
herein. Agent may perform any of its duties hereunder by or through its
agents or employees.
(b) The provisions of this Section 15.2 are solely for the benefit
of Agent and the Lenders, and Borrower shall not have any rights as a
third party beneficiary of any of the provisions hereof (other than
Subsection 15.2.9) nor shall Borrower have any obligations under this
Section 15.2. In performing its functions and duties under this Agreement,
Agent shall act solely as agent of the Lenders and does not assume and
shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for Borrower.
SECTION 15.2.2 NATURE OF DUTIES OF AGENT. Agent shall have no duties
or responsibilities except those expressly set forth in this Agreement and
the other Related Documents. Neither Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or
omitted by it as such hereunder or in connection herewith, unless caused
by its or their own gross negligence or willful misconduct. The duties of
Agent shall be mechanical and administrative in nature; Agent shall not
have by reason of this Agreement or the other Related Documents a
fiduciary relationship in respect of any Lender; and nothing in this
Agreement or the other Related Documents, expressed or implied, is
intended to or shall be
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so construed as to impose upon Agent any obligations in respect of this
Agreement or the other Related Documents except as expressly set forth
herein or therein.
15.2.3 LACK OF RELIANCE ON AGENT.
(a) Independently and without reliance upon Agent, each Lender, to
the extent it deems appropriate, has made and shall continue to make (i)
its own independent investigation of the financial or other condition and
affairs of Borrower in connection with the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the
creditworthiness of Borrower, and, except as expressly provided in this
Agreement, Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession
before the making of any Loan, Advance or issuance of any Letter of Credit
or LC Guaranty or at any time or times thereafter.
(b) Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Agreement, the Notes or
other Related Documents or the financial or other condition of Borrower.
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of
this Agreement, the Notes or any of the other Related Documents, or the
financial condition of Borrower, or the existence or possible existence of
any Unmatured Event of Default or Event of Default, unless specifically
requested to do so in writing by any Lender.
15.2.4 CERTAIN RIGHTS OF AGENT. Agent shall have the right to
request instructions from the Required Lenders at any time. If Agent shall
request instructions from the Required Lenders with respect to any act or
action (including the failure to act) in connection with this Agreement or
any of the other Related Documents, Agent shall be entitled to refrain
from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders, and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against
Agent as a result of Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Lenders.
15.2.5 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, teletransmission or telephone
message believed by it to be genuine and correct and to have been signed,
sent or made by the proper person. Agent may consult with legal counsel
(including counsel for Borrower with respect to matters concerning
Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken
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by it in good faith in accordance with the advice of such counsel,
accountants or experts.
15.2.6 INDEMNIFICATION OF AGENT. To the extent that Agent is not
reimbursed and indemnified by Borrower, the Lenders will reimburse and
indemnify Agent for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses,
advances 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 of the Related Documents or any
action taken or omitted to be taken by Agent under this Agreement or the
Related Documents, in proportion to each Lender's Pro Rata Share,
including, without limitation, Agent Advances made pursuant to Section
15.3. The obligations of the Lenders under this Section 15.2 shall survive
the payment in full of the Loans and the termination of this Agreement.
15.2.7 AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
obligation to lend under this Agreement, any Loans made by it and the
Notes issued to it, and its participation in Letters of Credit or LC
Guaranty issued hereunder, or its issuance as the Issuing Bank of any
Letter of Credit or LC Guaranty, Agent in its individual capacity shall
have the same rights and powers hereunder as any other Lender or holder of
a Note or participation interests or the Issuing Bank, as the case may be
and may exercise the same as though it was not performing the duties
specified herein; and the terms "Lenders," "Required Lenders," "holders of
Notes," or "Issuing Bank" or any similar terms shall, unless the context
clearly otherwise indicates, include Agent in its individual capacity.
Agent in its individual capacity may accept deposits from, lend money to,
acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory or other business with any Borrower or any
Affiliate of any Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from any
Borrower for services in connection with this Agreement and otherwise
without having to account for the same to the Lenders.
15.2.8 HOLDERS OF NOTES. Agent may deem and treat the original named
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have
been filed with Agent. Any request, authority or consent of any Person
who, at the time of making such request or giving such authority or
consent, is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
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15.2.9 SUCCESSOR AGENT.
(a) Agent may, upon five (5) Business Days' notice to the Lenders
and Borrower, resign at any time (effective upon the appointment of a
successor Agent pursuant to the provisions of this Section 15.2.9) by
giving written notice thereof to the Lenders and Borrower. Upon any such
resignation, the Required Lenders shall have the right, upon five (5)
days' notice and approval by Borrower (which approval shall not be
unreasonably withheld), to appoint a successor Agent. If no successor
Agent (i) shall have been so appointed by the Required Lenders, and (ii)
shall have accepted such appointment, within thirty (30) days after the
retiring Agent's giving of notice of resignation, then, upon five (5)
days' notice, the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent.
(b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section 15.2 shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
15.2.10 COLLATERAL MATTERS.
(a) Each Lender authorizes and directs Agent to enter into any
Collateral Documents and other Related Documents for the benefit of the
Lenders. Each Lender hereby agrees, and each holder of any Note by the
acceptance thereof will be deemed to agree, that, except as otherwise set
forth herein, any action taken by the Required Lenders in accordance with
the provisions of this Agreement or the Related Documents and the exercise
by the Required Lenders of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders. Agent is hereby
authorized on behalf of all of the Lenders, without the necessity of any
notice to or further consent from any Lender, from time to time, to take
any action with respect to any Collateral or Related Documents which may
be necessary to perfect and maintain perfected the security interest in
and Liens upon the Collateral granted pursuant to any of the Related
Documents.
(b) The Lenders hereby authorize Agent to release any Lien granted
to or held by Agent upon any Collateral upon termination of this Agreement
and the Commitments and payment and satisfaction of all of the Liabilities
at any time arising under or in respect of this Agreement and the other
Related Documents or the transactions contemplated hereby or thereby. In
addition, the Lenders hereby authorize Agent to release any Lien granted
to or held by Agent upon any Collateral (i) constituting property being
sold or disposed of upon receipt of the proceeds of such sale by Agent if
Borrower certifies to Agent that the sale or disposition is made in
compliance with this Agreement (and Agent may rely conclusively on any
such certificate, without further inquiry), or (ii) constituting
Collateral with a value
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as certified to Agent by Borrower of less than $100,000 in the aggregate in
any Fiscal Year (and Agent may rely conclusively on any such certificate,
without further inquiry). Upon request by Agent at any time, the Lenders
will confirm in writing Agent's authority to release particular types or
items of Collateral pursuant to this Section 15.2.10.
(c) Upon the release of any Lien in accordance with Section
15.2.10(B), and upon at least five (5) Business Days' prior written
request by Borrower, Agent shall (and is hereby irrevocably authorized by
the Lenders to) execute such documents as may be necessary to evidence the
release of such Liens; provided, that (i) Agent shall not be required to
execute any such document on terms which, in Agent's reasonable opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or
warranty and (ii) such release shall not in any manner discharge, affect
or impair the Liabilities or any Liens upon (or obligations of Borrower in
respect of) all interests retained by Borrower, including (without
limitation) the proceeds of the sale, all of which shall continue to
constitute part of the Collateral. In the event of any sale or transfer of
Collateral, or any foreclosure with respect to any of the Collateral,
Agent shall be authorized to deduct all of the expenses reasonably
incurred by Agent from the proceeds of any such sale, transfer or
foreclosure.
(d) Agent shall have no obligation whatsoever to the Lenders or to
any other Person to assure that the Collateral exists or is owned by
Borrower or any other Person or is cared for, protected or insured or that
the Liens granted to Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or to continue
exercising at all or in any manner or under any duty of care, disclosure
or fidelity any of the rights, authorities and powers granted or available
to Agent in this Section 15.2.10 or in any of the Related Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its sole discretion, given Agent's own interest in the
Collateral as one of the Lenders and that Agent shall have no duty or
liability whatsoever to the Lenders, except for its gross negligence or
willful misconduct.
15.2.11 ACTIONS WITH RESPECT TO DEFAULTS. In addition to Agent's
right to take actions on its own accord as permitted under this Agreement,
Agent shall take such action with respect to an Unmatured Event of Default
or Event of Default as shall be directed by the Required Lenders;
provided, that 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 Unmatured Event of Default or Event of
Default as it shall deem advisable.
15.2.12 DELIVERY OF INFORMATION. Agent shall not be required to
deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by Agent from
Borrower, the Required Lenders, any Lender or any other Person under or in
connection with this Agreement or any other Related Document
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except (i) as specifically provided in this Agreement or any other Related
Document and (ii) as specifically requested from time to time in writing by
any Lender with respect to a specific document, instrument, notice or other
written communication received by and in the possession of Agent at the
time of receipt of such request and then only in accordance with such
specific request.
SECTION 15.3 DISBURSEMENT OF FUNDS. Agent may, on behalf of the
Lenders, make such disbursements and advances ("AGENT ADVANCES") pursuant to
this Agreement and the Related Documents which Agent, in its sole discretion,
deems necessary or desirable to preserve or protect the Collateral, or any
portion thereof, in order to enhance the likelihood of, or maximize the amount
of, repayment by Borrower, or any guarantor or other Person, of the Loans and
other Liabilities or to pay any other amount chargeable to Borrower pursuant to
the terms of this Agreement, including, without limitation, costs, fees and
expenses as described in Section 14.4. Agent Advances shall be repayable on
demand and be secured by the Collateral. Agent Advances shall constitute
Revolving Loans and shall otherwise constitute Liabilities to pay principal
hereunder and shall bear interest at the rate applicable to the Revolving Loans.
Agent shall notify each Lender in writing of each such Agent Advance, which
notice shall include a description of the purpose of such Agent Advance. Without
limitation of any of its obligations under this Agreement, each Lender agrees
that it shall make available to Agent, upon Agent's demand, in immediately
available funds, an amount equal to such Lender's Pro Rata Share of each such
Agent Advance. If such funds are not made available to Agent by such Lender
within one (1) Business Day after Agent's demand therefor, Agent will be
entitled to recover any such amount from such Lender together with interest
thereon at the Federal Funds Rate for each day during the period commencing on
the date of such demand and ending on the date such amount is received. Each
Lender shall reimburse Agent on demand for all Loans disbursed on its behalf by
Agent, or if Agent so requests, each Lender will remit to Agent its Pro Rata
Share of any Loan before Agent disburses same to Borrower. If any Lender fails
to pay the amount of its Pro Rata Share forthwith upon Agent's demand, Agent
shall promptly notify Borrower, and Borrower shall immediately repay such amount
to Agent. Nothing in this Section 15.4 shall be deemed to require Agent to
advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Borrower may have against any Lender as a result of any default by such Lender
hereunder.
SECTION 15.4 AGENT'S DISCRETION. In the event Borrower is unable
to comply with (i) the Borrowing Base limitations applicable to it set forth in
Section 2 or (ii) the conditions precedent to the making of a Revolving Loan,
the Lenders authorize Agent, in its sole discretion, to make Revolving Loans
(and Lenders shall fund their Pro Rata Share of such Revolving Loans upon the
request of Agent) (such Revolving Loans are collectively referred to as "INTERIM
REVOLVING LOANS") for a period commencing on the date Agent first receives a
request for an Interim Revolving Loan until the earlier of (i) the 30th day
after such date, or (ii) the date Borrower is again able to comply with the
Borrowing Base limitations applicable to it and the conditions precedent to the
making of Revolving Loans set forth in Sections 2 and 12 hereof, or obtains an
amendment or waiver with respect thereto (such period, in each case, is referred
to as the "INTERIM REVOLVING LOAN
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PERIOD"). Agent shall not, in any event, make any Interim Revolving Loan if at
such time the amount of such Interim Revolving Loan when added to the then
aggregate outstanding principal amount of other Interim Revolving Loans made to
all Borrowers would exceed 10% of the amount of the Revolving Commitment;
provided, that nothing in this Section 15.4 shall limit the Agent's right to
Agent may make Agent's Advances; provided, further, that, after giving effect to
any Interim Revolving Loans, the aggregate outstanding principal amount of the
Total Revolving and LC Exposure shall not exceed the aggregate Commitments. All
Interim Revolving Loans shall be Prime Rate Loans. An Interim Revolving Loan
shall cease to be an Interim Revolving Loan (and shall be deemed to be an
Advance consisting of Revolving Loans) if the unsatisfied conditions giving rise
to such Interim Revolving Loan shall thereafter be satisfied or the events which
cause such Loan to be an Interim Revolving Loan shall thereafter cease to exist.
The provisions of this Section 15.4 are solely for the benefit of Agent and the
Lenders, and Borrower shall not have any rights of a third-party beneficiary of
any of the provisions hereof.
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Delivered at Chicago, Illinois, as of the day and year first above
written.
GIBRALTAR PACKAGING GROUP, INC.,
as Borrower
By: /s/ John W. Lloyd
------------------------------
Name Printed:
---------------------
Its: Secretary
------------------------------
Address: 2000 Summit Avenue
Hastings, NE 68902-2148
Attention: Richard D. Hinrichs
Telecopy: (402) 463-2467
Telephone: (402) 463-1366
Commitments: FIRST SOURCE FINANCIAL LLP,
=========== individually and as Agent
Term Commitment: $25,000,000
Revolving Commitment: $15,000,000 By: First Source Financial, Inc.
Its: Manager
By: /s/Chester R. Zara
------------------------------
Name Printed:
----------------------
Its: Senior Vice President
-------------------------------
2850 West Golf Road - Fifth Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (847) 734-7910, 7911
Telephone: (847) 734-2000
Aggregate Commitments:
=====================
Term Commitment: $25,000,000
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Revolving Commitment: $15,000,000
==========
S-1
EXHIBIT 10.18
EXHIBIT 3.1
TERM NOTE
$25,000,000 July 31, 1998
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the
order of First Source Financial LLP ("Lender") in lawful money of the United
States of America and in immediately available funds at the principal office of
LaSalle National Bank in Chicago, Illinois or such other place as the holder of
this Note may from time to time designate the principal amount of Twenty-Five
Million and 00/100 Dollars ($25,000,000.00).
The undersigned further promises to pay interest on the unpaid principal
amount of the Term Loan from the date of the Term Loan until the Term Loan is
paid in full, payable at such rate(s) and at such time(s), as provided in the
Secured Credit Agreement hereinafter referred to.
This Note evidences indebtedness incurred under, and is entitled to the
benefits of, that certain Secured Credit Agreement, dated as of July 31, 1998
(as amended, modified or supplemented from time to time herein called the
"Secured Credit Agreement"), among Gibraltar Packaging Group, Inc., a Delaware
corporation, the undersigned, certain financial institutions (the undersigned
and such financial institutions being referred to herein collectively as the
"Lenders") and First Source Financial LLP, as agent for the Lenders, to which
reference is hereby made for a statement of the terms and provisions under which
this Note and the Term Loan evidenced hereby were made and are to be repaid,
including provisions as to when it may be paid prior to its due date or its due
date accelerated. Capitalized terms used but not otherwise defined herein are
used herein as defined in the Secured Credit Agreement to the extent defined
therein.
If a payment hereunder becomes due and payable hereunder other than on a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
applicable rate specified above. Checks, drafts or similar items of payment
received by the Lender shall not constitute payment, but credit therefor shall,
solely for the purpose of computing interest earned by the Lender, be given in
accordance with the Secured Credit Agreement. In no contingency or event
whatsoever shall interest charged hereunder, however such interest may be
characterized or computed, 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 the Lender has
received interest hereunder in excess of the highest rate applicable hereto,
such excess shall be applied in accordance with the terms of the Loan Agreement.
<PAGE>
This Note is secured pursuant to the Collateral Documents, and is entitled
to the benefits thereof and reference is made thereto for a statement of terms
and provisions under which this Note is secured.
In addition to and not in limitation of the foregoing and the provisions
of the Secured Credit Agreement, the undersigned further agrees, subject only to
any limitation imposed by applicable law, to pay all costs and expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
Whenever in this Note reference is made to Lender or the undersigned, such
reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Note shall be binding
upon and shall inure to the benefit of said successors and assigns; provided the
undersigned shall have no right to delegate any of their duties hereunder.
The undersigned, and all endorsers and other persons obligated hereon,
hereby waive presentment, demand, protest, notice of demand, notice of protest
and notice of nonpayment and agrees to pay all costs of collection, including
reasonable attorneys' fees and expenses.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
----------------------------------
Name Printed: ________________________
Its: Secretary
--------------------------------
EXHIBIT 10.19
EXHIBIT 3.2
REVOLVING NOTE
$ 15,000,000 July 31, 1998
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the
order of First Source Financial LLP ("Lender") in lawful money of the United
States of America and in immediately available funds at the principal office of
LaSalle National Bank in Chicago, Illinois or such other place as the holder of
this Note may from time to time designate the principal amount of Fifteen
Million and 00/100 Dollars ($15,000,000.00) or, if less, the aggregate unpaid
principal amount of all Revolving Loans made to the undersigned pursuant to the
Secured Credit Agreement hereinafter referred to (as shown in the records of
Lender or, at Lender's option, on the schedule attached hereto and any
continuation thereof).
The undersigned further promises to pay interest on the unpaid principal
amount of each Revolving Loan from the date of such Revolving Loan until such
Revolving Loan is paid in full, payable at such rate(s) and at such time(s), as
provided in the Secured Credit Agreement hereinafter referred to.
This Note evidences indebtedness incurred under, and is entitled to the
benefits of, that certain Secured Credit Agreement, dated as of July 31, 1998
(as amended, modified or supplemented from time to time herein called the
"Secured Credit Agreement"), among Gibraltar Packaging Group, Inc., a Delaware
corporation, the undersigned, certain financial institutions (the undersigned
and such financial institutions being referred to herein collectively as the
"Lenders") and First Source Financial LLP, as agent for the Lenders, to which
reference is hereby made for a statement of the terms and provisions under which
this Note and the Revolving Loans evidenced hereby were made and are to be
repaid, including provisions as to when it may be paid prior to its due date or
its due date accelerated. Capitalized terms used but not otherwise defined
herein are used herein as defined in the Secured Credit Agreement to the extent
defined therein.
If a payment hereunder becomes due and payable hereunder other than on a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
applicable rate specified above. Checks, drafts or similar items of payment
received by the Lender shall not constitute payment, but credit therefor shall,
solely for the purpose of computing interest earned by the Lender, be given in
accordance with the Secured Credit Agreement. In no contingency or event
whatsoever shall interest charged hereunder, however such interest may be
characterized or computed, exceed the highest rate
<PAGE>
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 the Lender has received interest hereunder in excess of the
highest rate applicable hereto, such excess shall be applied in accordance with
the terms of the Loan Agreement.
This Note is secured pursuant to the Collateral Documents, and is entitled
to the benefits thereof and reference is made thereto for a statement of terms
and provisions under which this Note is secured.
In addition to and not in limitation of the foregoing and the provisions
of the Secured Credit Agreement, the undersigned further agrees, subject only to
any limitation imposed by applicable law, to pay all costs and expenses,
including reasonable attorneys' fees and legal expenses, incurred by the holder
of this Note in endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
Whenever in this Note reference is made to Lender or the undersigned,
such reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Note shall be binding
upon and shall inure to the benefit of said successors and assigns; provided the
undersigned shall have no right to delegate any of its duties hereunder.
The undersigned, and all endorsers and other persons obligated hereon,
hereby waive presentment, demand, protest, notice of demand, notice of protest
and notice of nonpayment and agree to pay all costs of collection, including
reasonable attorneys' fees and expenses.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
---------------------------------
Name Printed: _______________________
Its: Secretary
--------------------------------
<PAGE>
Schedule Attached to Revolving Note dated as of July 31, 1998
from Gibraltar Packaging Group, Inc. to First Source Financial LLP
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Amount of Amount of Unpaid
Loan Loan Principal Notation
Date Advance Repayment Balance Made By
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EXHIBIT 10.20
EXECUTION
DRAFT
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 31, 1998 between GB LABELS,
INC., a Delaware corporation ("Grantor"), and FIRST SOURCE FINANCIAL LLP, an
Illinois registered limited liability partnership, as agent, for its benefit and
the benefit of Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation
(the "Borrower"), Agent and the Persons from time to time designated as Lenders
thereunder ("Lenders") have entered into that certain Secured Credit Agreement
dated as of the date hereof (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), providing for the extension of loans and
other financial accommodations from Lenders to Grantor;
WHEREAS, pursuant to the Guaranty dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time, the
"Guaranty"), Grantor, together with the other Guarantors party thereto, has
jointly and severally guaranteed to Agent for the benefit of Lenders the payment
when due of all obligations and liabilities of Borrower under the Credit
Agreement and the Related Documents;
WHEREAS, as a condition to making of the loans and other extensions
of credit under the Credit Agreement, and as security for the obligations of
Grantor under the Guaranty, Lenders and Agent are requiring that Grantor shall
have executed and delivered this Security Agreement and granted the security
interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement. All
other undefined terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
-1-
<PAGE>
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Guaranty Indebtedness (as defined in the Guaranty),
Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and
transfers to Agent, for its benefit and the benefit of Lenders, a Lien upon all
of its right, title and interest in, to and under the following property,
whether now owned by or owing to, or hereafter acquired by or arising in favor
of Grantor (including under any trade names, styles or derivations thereof), and
whether owned or consigned by or to, or leased from or to, Grantor, and
regardless of where located (all of which being hereinafter collectively
referred to as the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all goods;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Bank Accounts, and all other deposit and other bank
accounts and all deposits therein;
(xiii) all money, cash or cash equivalents of Grantor; and
(xiv) to the extent not otherwise included, all insurance
proceeds relating to any of the foregoing (including business interruption
insurance) and all cash and non-cash proceeds and products of the foregoing and
all accessions to, substitutions and replacements for, and rents and profits of,
each of the foregoing.
-2-
<PAGE>
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Guaranty Indebtedness and in order to induce
Lenders as aforesaid, Grantor hereby grants to Agent, a right of setoff against
the property of Grantor held by Agent, consisting of property described above in
Section 2(a) now or hereafter in the possession or custody of or in transit to
Agent, for any purpose, including safekeeping, collection or pledge, for the
account of Grantor, or as to which such Grantor may have any right or power.
3. AGENT'S RIGHTS; LIMITATIONS ON AGENT'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder. Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting herein of a Lien thereon or the receipt by Agent of
any payment relating to any Contract pursuant hereto. Agent shall not be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) Agent may, in its sole discretion, at any time after an Event of
Default shall have occurred and be continuing, without prior notice to Grantor,
notify Account Debtors, parties to the Contracts and obligors in respect of
Instruments and Chattel Paper, that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Agent, for the benefit of Lenders, and that payments shall
be made directly to Agent. Upon the request of Agent, Grantor shall so notify
Account Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent at any time and from time to time promptly upon Agent's
request the following reports with respect to Grantor: (i) a reconciliation of
all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts as Agent may request. Grantor, at its own
expense, shall deliver to Agent the results of each physical verification, if
any, which Grantor may in its discretion have made, or caused any other Person
to have made on its behalf, of all or any portion of its Inventory.
-3-
<PAGE>
4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that:
(a) Grantor is the sole owner of each item of the Collateral upon
which it purports to grant a Lien hereunder, and has good and marketable title
thereto free and clear of any and all Liens other than Permitted Liens.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the other Related Documents, and (ii) in connection with any other
Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, on the
Collateral with respect to which a Lien may be perfected by filing pursuant to
the Code. Such Lien is prior to all other Liens, except Permitted Liens that
would be prior to Liens in favor of Agent as a matter of law, and is enforceable
as such as against any and all creditors of and purchasers from Grantor (other
than purchasers of Inventory in the ordinary course of business). All action by
Grantor necessary or desirable to protect and perfect such Lien on each item of
the Collateral has been duly taken.
(d) Schedule II hereto lists all Instruments and Chattel Paper of
Grantor. All action by Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the delivery of
all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof) has been duly taken. The Lien of Agent, on the
Collateral listed on Schedule II hereto is prior to all other Liens, except
Permitted Liens that would be prior to the Liens in favor of Agent as a matter
of law, and is enforceable as such against any and all creditors of and
purchasers from Grantor.
(e) Grantor's chief executive office, principal place of business,
corporate offices, all warehouses and premises where Collateral is stored or
located, and the locations of all of its books and records concerning the
Collateral are set forth on Schedule III hereto.
(f) With respect to the Accounts, except as specifically disclosed
in the most recent Borrowing Base Certificate delivered to Agent: (i) they
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events
-4-
<PAGE>
or occurrences which in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable thereunder as shown on
Grantor's books and records and any invoices, statements and Borrowing Base
Certificates delivered to Agent with respect thereto; (iv) Grantor has not
received any notice of proceedings or actions which are threatened or pending
against any Account Debtor which might result in any adverse change in such
Account Debtor's financial condition; and (v) Grantor has no knowledge that any
Account Debtor is unable generally to pay its debts as they become due. Further
with respect to the Accounts (x) the amounts shown on all invoices, statements
and Borrowing Base Certificates which may be delivered to Agent with respect
thereto are actually and absolutely owing to Grantor as indicated thereon and
are not in any way contingent; (y) no payments have been or shall be made
thereon except payments immediately delivered to the applicable Bank Accounts or
Agent as required pursuant to the terms of the Credit Agreement; and (z) to
Grantor's knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most
recent Borrowing Base Certificate delivered to Agent pursuant to the terms of
this Security Agreement or the Credit Agreement, (i) such Inventory is located
at one of the Grantor's locations set forth on Schedule III hereto (ii) no
Inventory is now, or shall at any time or times hereafter be stored at any other
location without Agent's prior consent, and if Agent gives such consent, Grantor
will concurrently therewith obtain, to the extent required by the Credit
Agreement, bailee, landlord and mortgagee agreements, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, and except for Permitted Liens, (iv) except as
specifically disclosed in the most recent Borrowing Base Certificate delivered
to Agent, such Inventory is Eligible Inventory of good and merchantable quality,
free from any defects, (v) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies to any third party as
a precondition of such sale or other disposition, and (vi) the completion of
manufacture, sale or other disposition of such Inventory by Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which Grantor
is a party or to which such property is subject.
(h) Except as disclosed on Schedule IV hereto, each of Grantor and
its Subsidiaries owns or possesses rights to use all Intellectual Property
required to continue to conduct its business as heretofore conducted. All such
Intellectual Property required to continue to conduct Grantor's and each
Subsidiaries' businesses are disclosed on Schedule IV hereto; and no such
Intellectual Property has been declared invalid, been limited by order of any
Governmental Authority or by agreement. The use of such Intellectual Property by
Grantor or any Subsidiary does not infringe on the rights of any other Person
and may be transferred in connection with any sale of the Property or capital
stock of Grantor or any Subsidiary. As used in this Agreement, "Intellectual
Property" of a Person shall mean all of such Person's present and future
designs, patents, patent rights and applications therefor, technology,
trademarks and registrations or applications therefor, service marks, trade
names, inventions, copyrights and all applications and registrations
-5-
<PAGE>
therefor, advertising matter, software or computer programs, license rights,
trade secrets, methods, processes, logos, knowhow, drawings, specifications,
descriptions and licenses with respect thereto, and all memoranda, notes, and
records with respect to any research and development, whether now owned or
hereafter acquired by such Person, and proceeds of all of the foregoing,
including proceeds of insurance policies thereon.
5. COVENANTS. Grantor covenants and agrees with Agent that from and
after the date of this Security Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Agent of any Contract held by Grantor or in which Grantor has any
rights not heretofore assigned, (ii) filing any financing or continuation
statements under the Code with respect to the Liens granted hereunder or under
any other Related Document, (iii) transferring Collateral to Agent's possession
(for the benefit of Agent and Lenders) if such Collateral consists of Chattel
Paper, Instruments or if a Lien on such Collateral can be perfected only by
possession, or if requested by Agent, and (iv) obtaining, or using its best
efforts to obtain, waivers of Liens, if any exist, from landlords and mortgagees
in accordance with the Credit Agreement. Grantor also hereby authorizes Agent to
file any such financing or continuation statements without the signature of
Grantor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes received in the
ordinary course of business, shall be duly endorsed in a manner satisfactory to
Agent immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain, at its
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. All
Chattel Paper shall be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
First Source Financial LLP, as Agent."
(c) Indemnification. In any suit, proceeding or action brought by
Agent relating to any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantor will save, indemnify and keep agent harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by Grantor of any obligation thereunder or arising out of
-6-
<PAGE>
any other agreement, indebtedness or liability at any time owing to, or in favor
of, such obligor or its successors from Grantor, except in the case of Agent, to
the extent such expense, loss, or damage is attributable solely to the gross
negligence or willful misconduct of Agent as finally determined by a court of
competent jurisdiction. All such obligations of Grantor shall be and remain
enforceable against and only against Grantor and shall not be enforceable
against Agent.
(d) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper and Contracts and all other agreements to which it is a
party or by which it is bound relating to the Collateral.
(e) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title and interest of Agent
in and to any of Grantor's rights under the Collateral against the claims and
demands of all Persons whomsoever.
(f) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(g) Further Identification of Collateral. Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(h) Notices. Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Liens) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Related
Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a
power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent under the Power of Attorney are
solely to protect Agent's interests in the Collateral and shall not impose any
duty upon Agent to exercise any such powers. Agent agrees that (a) it shall not
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing, and (b) Agent shall account for
any moneys received by Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that Agent shall not have
any duty as to any Collateral, and Agent shall be accountable only for amounts
that it actually receive as a result of the exercise of such powers. NEITHER
AGENT NOR ITS RESPECTIVE AFFILIATES, OFFICERS,
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<PAGE>
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR
FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT
IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION,
NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Related Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the or the Guaranty Indebtedness, if any Event of Default shall have occurred
and be continuing, Agent may exercise all rights and remedies of a secured party
under the Code. Without limiting the generality of the foregoing, Grantor
expressly agrees that in any such event Agent, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon Grantor or any
other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the Code and other
applicable law), may forthwith enter upon the premises of Grantor where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving Grantor or any other Person notice and
opportunity for a hearing on Agent's claim or action and may collect, receive,
assemble, process, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. Agent shall have the right upon any such public sale or sales and, to the
extent permitted by law, upon any such private sale or sales, to purchase for
the benefit of Agent, the whole or any part of said Collateral so sold, free of
any right or equity of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. Agent shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use Grantor's premises without
charge for such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall select,
whether at Grantor's premises or elsewhere. Until Agent is able to effect a
sale, lease, or other disposition of Collateral, Agent shall have the right to
hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
Grantor to maintain or preserve the rights of Grantor as against third parties
with respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies, with respect to
such appointment without prior notice or hearing as to such appointment. Agent
shall apply the net proceeds of any such collection, recovery, receipt,
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appropriation, realization or sale to the Guaranty Indebtedness as provided in
the Guaranty, and only after so paying over such net proceeds, and after the
payment by Agent of any other amount required by any provision of law, need
Agent account for the surplus, if any, to Grantor. To the maximum extent
permitted by applicable law, Grantor waives all claims, damages, and demands
against Agent arising out of the repossession, retention or sale of the
Collateral except such as arise solely out of the gross negligence or willful
misconduct of Agent as finally determined by a court of competent jurisdiction.
Grantor agrees that ten (10) days prior notice by Agent of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Guaranty Indebtedness, including any attorneys' fees and
other expenses incurred by Agent to collect such deficiency.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, Grantor hereby grants to
Agent, an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by Grantor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S DUTY IN RESPECT OF COLLATERAL. Agent shall
use reasonable care with respect to the Collateral in its possession or under
its control. Agent shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
Agent, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Liabilities,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof,
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is rescinded, reduced, restored or returned, the Liabilities shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11. NOTICES. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
(a) if delivered in person, when delivered, (b) if delivered by telecopy or
similar electronic medium, on the date of confirmed transmission, (c) if
delivered by overnight courier, one (1) Business Day after delivery to such
courier properly addressed or (d) if by U.S. Mail, five (5) days after deposit
in the United States mails (by certified mail, return receipt requested), with
proper postage prepaid, to the following addresses:
Notices shall be addressed as follows:
(a) If to Grantor:
GB Labels, Inc.
c/o Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: Richard D. Hinrichs
Telephone No.: (402) 463-1366
Telecopy: (402) 463-2467
(b) If to Agent:
First Source Financial LLP
2850 West Golf Road
Fifth Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (847) 734-7910, 7911
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 11. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Related Documents which, taken together,
set forth the complete understanding and agreement of
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Agent, Lenders and Grantor with respect to the matters referred to herein and
therein. In the event of an inconsistency between the Credit Agreement and this
Agreement, the terms of the Credit Agreement shall control.
13. NO WAIVER; CUMULATIVE REMEDIES. Agent shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement and the Power of Attorney attached as Exhibit A
hereto shall terminate on the date (the "Termination Date") of the expiration or
termination of the Commitments and the payment and performance in full of the
Notes and all other Liabilities.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and
shall, together with the rights and remedies of Agent, hereunder, inure to the
benefit of Agent, all future holders of any instrument evidencing any of the
Liabilities and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Liabilities or any portion
thereof or interest therein shall in any manner affect the Lien granted to Agent
hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.
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<PAGE>
17. COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE RELATED DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY 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
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND AGENT PERTAINING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS, PROVIDED, THAT AGENT AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH BELOW
ITS SIGNATURE TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
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AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN AGENT AND GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Agent and Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Guaranty Indebtedness in accordance with the terms of the Guaranty.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
GRANTOR
GB LABELS, INC., a Delaware corporation
By: /s/ John W. Lloyd
-------------------------------------
Name: _________________________________
Title: Secretary
---------------------------------
AGENT:
FIRST SOURCE FINANCIAL LLP, as Agent
By: First Source Financial, Inc.
Its: Manager
By: /s/ Chester R. Zara
-------------------------------------
Name: ___________________________________
Title: /s/ Senior Vice President
----------------------------------
EXHIBIT 10.21
EXECUTION
DRAFT
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 31, 1998 between RIDGEPAK
CORPORATION, an Illinois corporation ("Grantor"), and FIRST SOURCE FINANCIAL
LLP, an Illinois registered limited liability partnership, as agent, for its
benefit and the benefit of Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation
(the "Borrower"), Agent and the Persons from time to time designated as Lenders
thereunder ("Lenders") have entered into that certain Secured Credit Agreement
dated as of the date hereof (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), providing for the extension of loans and
other financial accommodations from Lenders to Grantor;
WHEREAS, pursuant to the Guaranty dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time, the
"Guaranty"), Grantor, together with the other Guarantors party thereto, has
jointly and severally guaranteed to Agent for the benefit of Lenders the payment
when due of all obligations and liabilities of Borrower under the Credit
Agreement and the Related Documents;
WHEREAS, as a condition to making of the loans and other extensions
of credit under the Credit Agreement, and as security for the obligations of
Grantor under the Guaranty, Lenders and Agent are requiring that Grantor shall
have executed and delivered this Security Agreement and granted the security
interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement. All
other undefined terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
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<PAGE>
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Liabilities, Grantor hereby grants, assigns, conveys,
mortgages, pledges, hypothecates and transfers to Agent, for its benefit and the
benefit of Lenders, a Lien upon all of its right, title and interest in, to and
under the following property, whether now owned by or owing to, or hereafter
acquired by or arising in favor of Grantor (including under any trade names,
styles or derivations thereof), and whether owned or consigned by or to, or
leased from or to, Grantor, and regardless of where located (all of which being
hereinafter collectively referred to as the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all goods;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Bank Accounts, and all other deposit and other bank
accounts and all deposits therein;
(xiii) all money, cash or cash equivalents of Grantor; and
(xiv) to the extent not otherwise included, all insurance
proceeds relating to any of the foregoing (including business interruption
insurance) and all cash and non-cash proceeds and products of the foregoing and
all accessions to, substitutions and replacements for, and rents and profits of,
each of the foregoing.
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<PAGE>
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Liabilities and in order to induce Lenders as
aforesaid, Grantor hereby grants to Agent, a right of setoff against the
property of Grantor held by Agent, consisting of property described above in
Section 2(a) now or hereafter in the possession or custody of or in transit to
Agent, for any purpose, including safekeeping, collection or pledge, for the
account of Grantor, or as to which such Grantor may have any right or power.
3. AGENT'S RIGHTS; LIMITATIONS ON AGENT'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder. Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting herein of a Lien thereon or the receipt by Agent of
any payment relating to any Contract pursuant hereto. Agent shall not be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) Agent may, in its sole discretion, at any time after an Event of
Default shall have occurred and be continuing, without prior notice to Grantor,
notify Account Debtors, parties to the Contracts and obligors in respect of
Instruments and Chattel Paper, that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Agent, for the benefit of Lenders, and that payments shall
be made directly to Agent. Upon the request of Agent, Grantor shall so notify
Account Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent at any time and from time to time promptly upon Agent's
request the following reports with respect to Grantor: (i) a reconciliation of
all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts as Agent may request. Grantor, at its own
expense, shall deliver to Agent the results of each physical verification, if
any, which Grantor may in its discretion have made, or caused any other Person
to have made on its behalf, of all or any portion of its Inventory.
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4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that:
(a) Grantor is the sole owner of each item of the Collateral upon
which it purports to grant a Lien hereunder, and has good and marketable title
thereto free and clear of any and all Liens other than Permitted Liens.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the other Related Documents, and (ii) in connection with any other
Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, on the
Collateral with respect to which a Lien may be perfected by filing pursuant to
the Code. Such Lien is prior to all other Liens, except Permitted Liens that
would be prior to Liens in favor of Agent as a matter of law, and is enforceable
as such as against any and all creditors of and purchasers from Grantor (other
than purchasers of Inventory in the ordinary course of business). All action by
Grantor necessary or desirable to protect and perfect such Lien on each item of
the Collateral has been duly taken.
(d) Schedule II hereto lists all Instruments and Chattel Paper of
Grantor. All action by Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the delivery of
all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof) has been duly taken. The Lien of Agent, on the
Collateral listed on Schedule II hereto is prior to all other Liens, except
Permitted Liens that would be prior to the Liens in favor of Agent as a matter
of law, and is enforceable as such against any and all creditors of and
purchasers from Grantor.
(e) Grantor's chief executive office, principal place of business,
corporate offices, all warehouses and premises where Collateral is stored or
located, and the locations of all of its books and records concerning the
Collateral are set forth on Schedule III hereto.
(f) With respect to the Accounts, except as specifically disclosed
in the most recent Borrowing Base Certificate delivered to Agent: (i) they
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events
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<PAGE>
or occurrences which in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable thereunder as shown on
Grantor's books and records and any invoices, statements and Borrowing Base
Certificates delivered to Agent with respect thereto; (iv) Grantor has not
received any notice of proceedings or actions which are threatened or pending
against any Account Debtor which might result in any adverse change in such
Account Debtor's financial condition; and (v) Grantor has no knowledge that any
Account Debtor is unable generally to pay its debts as they become due. Further
with respect to the Accounts (x) the amounts shown on all invoices, statements
and Borrowing Base Certificates which may be delivered to Agent with respect
thereto are actually and absolutely owing to Grantor as indicated thereon and
are not in any way contingent; (y) no payments have been or shall be made
thereon except payments immediately delivered to the applicable Bank Accounts or
Agent as required pursuant to the terms of the Credit Agreement; and (z) to
Grantor's knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most
recent Borrowing Base Certificate delivered to Agent pursuant to the terms of
this Security Agreement or the Credit Agreement, (i) such Inventory is located
at one of the Grantor's locations set forth on Schedule III hereto (ii) no
Inventory is now, or shall at any time or times hereafter be stored at any other
location without Agent's prior consent, and if Agent gives such consent, Grantor
will concurrently therewith obtain, to the extent required by the Credit
Agreement, bailee, landlord and mortgagee agreements, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, and except for Permitted Liens, (iv) except as
specifically disclosed in the most recent Borrowing Base Certificate delivered
to Agent, such Inventory is Eligible Inventory of good and merchantable quality,
free from any defects, (v) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies to any third party as
a precondition of such sale or other disposition, and (vi) the completion of
manufacture, sale or other disposition of such Inventory by Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which Grantor
is a party or to which such property is subject.
(h) Except as disclosed on Schedule IV hereto, each of Grantor and
its Subsidiaries owns or possesses rights to use all Intellectual Property
required to continue to conduct its business as heretofore conducted. All such
Intellectual Property required to continue to conduct Grantor's and each
Subsidiaries' businesses are disclosed on Schedule IV hereto; and no such
Intellectual Property has been declared invalid, been limited by order of any
Governmental Authority or by agreement. The use of such Intellectual Property by
Grantor or any Subsidiary does not infringe on the rights of any other Person
and may be transferred in connection with any sale of the Property or capital
stock of Grantor or any Subsidiary. As used in this Agreement, "Intellectual
Property" of a Person shall mean all of such Person's present and future
designs, patents, patent rights and applications therefor, technology,
trademarks and registrations or applications therefor, service marks, trade
names, inventions, copyrights and all applications and registrations
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<PAGE>
therefor, advertising matter, software or computer programs, license rights,
trade secrets, methods, processes, logos, knowhow, drawings, specifications,
descriptions and licenses with respect thereto, and all memoranda, notes, and
records with respect to any research and development, whether now owned or
hereafter acquired by such Person, and proceeds of all of the foregoing,
including proceeds of insurance policies thereon.
5. COVENANTS. Grantor covenants and agrees with Agent that from and
after the date of this Security Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Agent of any Contract held by Grantor or in which Grantor has any
rights not heretofore assigned, (ii) filing any financing or continuation
statements under the Code with respect to the Liens granted hereunder or under
any other Related Document, (iii) transferring Collateral to Agent's possession
(for the benefit of Agent and Lenders) if such Collateral consists of Chattel
Paper, Instruments or if a Lien on such Collateral can be perfected only by
possession, or if requested by Agent, and (iv) obtaining, or using its best
efforts to obtain, waivers of Liens, if any exist, from landlords and mortgagees
in accordance with the Credit Agreement. Grantor also hereby authorizes Agent to
file any such financing or continuation statements without the signature of
Grantor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes received in the
ordinary course of business, shall be duly endorsed in a manner satisfactory to
Agent immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain, at its
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. All
Chattel Paper shall be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
First Source Financial LLP, as Agent."
(c) Indemnification. In any suit, proceeding or action brought by
Agent relating to any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantor will save, indemnify and keep agent harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by Grantor of any obligation thereunder or arising out of
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any other agreement, indebtedness or liability at any time owing to, or in favor
of, such obligor or its successors from Grantor, except in the case of Agent, to
the extent such expense, loss, or damage is attributable solely to the gross
negligence or willful misconduct of Agent as finally determined by a court of
competent jurisdiction. All such obligations of Grantor shall be and remain
enforceable against and only against Grantor and shall not be enforceable
against Agent.
(d) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper and Contracts and all other agreements to which it is a
party or by which it is bound relating to the Collateral.
(e) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title and interest of Agent
in and to any of Grantor's rights under the Collateral against the claims and
demands of all Persons whomsoever.
(f) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(g) Further Identification of Collateral. Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(h) Notices. Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Liens) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Related
Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a
power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent under the Power of Attorney are
solely to protect Agent's interests in the Collateral and shall not impose any
duty upon Agent to exercise any such powers. Agent agrees that (a) it shall not
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing, and (b) Agent shall account for
any moneys received by Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that Agent shall not have
any duty as to any Collateral, and Agent shall be accountable only for amounts
that it actually receive as a result of the exercise of such powers. NEITHER
AGENT NOR ITS RESPECTIVE AFFILIATES, OFFICERS,
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DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR
FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT
IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION,
NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Related Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Liabilities, if any Event of Default shall have occurred and be
continuing, Agent may exercise all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, Grantor expressly
agrees that in any such event Agent, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon Grantor or any other
Person (all and each of which demands, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the Code and other
applicable law), may forthwith enter upon the premises of Grantor where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving Grantor or any other Person notice and
opportunity for a hearing on Agent's claim or action and may collect, receive,
assemble, process, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. Agent shall have the right upon any such public sale or sales and, to the
extent permitted by law, upon any such private sale or sales, to purchase for
the benefit of Agent, the whole or any part of said Collateral so sold, free of
any right or equity of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. Agent shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use Grantor's premises without
charge for such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall select,
whether at Grantor's premises or elsewhere. Until Agent is able to effect a
sale, lease, or other disposition of Collateral, Agent shall have the right to
hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
Grantor to maintain or preserve the rights of Grantor as against third parties
with respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies, with respect to
such appointment without prior notice or hearing as to such appointment. Agent
shall apply the net proceeds of any such collection, recovery, receipt,
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appropriation, realization or sale to the Liabilities as provided in the Credit
Agreement, and only after so paying over such net proceeds, and after the
payment by Agent of any other amount required by any provision of law, need
Agent account for the surplus, if any, to Grantor. To the maximum extent
permitted by applicable law, Grantor waives all claims, damages, and demands
against Agent arising out of the repossession, retention or sale of the
Collateral except such as arise solely out of the gross negligence or willful
misconduct of Agent as finally determined by a court of competent jurisdiction.
Grantor agrees that ten (10) days prior notice by Agent of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Liabilities, including any attorneys' fees and other
expenses incurred by Agent to collect such deficiency.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, Grantor hereby grants to
Agent, an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by Grantor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S DUTY IN RESPECT OF COLLATERAL. Agent shall
use reasonable care with respect to the Collateral in its possession or under
its control. Agent shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
Agent, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Liabilities,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof,
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is rescinded, reduced, restored or returned, the Liabilities shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11. NOTICES. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
(a) if delivered in person, when delivered, (b) if delivered by telecopy or
similar electronic medium, on the date of confirmed transmission, (c) if
delivered by overnight courier, one (1) Business Day after delivery to such
courier properly addressed or (d) if by U.S. Mail, five (5) days after deposit
in the United States mails (by certified mail, return receipt requested), with
proper postage prepaid, to the following addresses:
Notices shall be addressed as follows:
(a) If to Grantor:
-----------------------
-----------------------
-----------------------
-----------------------
Attn:____________________
Telephone No.:____________________
Telecopy No.: ____________________
(b) If to Agent:
First Source Financial LLP
2850 West Golf Road
Fifth Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (847) 734-7910, 7911
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 11. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Related Documents which, taken together,
set forth the complete understanding and agreement of
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Agent, Lenders and Grantor with respect to the matters referred to herein and
therein. In the event of an inconsistency between the Credit Agreement and this
Agreement, the terms of the Credit Agreement shall control.
13. NO WAIVER; CUMULATIVE REMEDIES. Agent shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement and the Power of Attorney attached as Exhibit A
hereto shall terminate on the date (the "Termination Date") of the expiration or
termination of the Commitments and the payment and performance in full of the
Notes and all other Liabilities.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and
shall, together with the rights and remedies of Agent, hereunder, inure to the
benefit of Agent, all future holders of any instrument evidencing any of the
Liabilities and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Liabilities or any portion
thereof or interest therein shall in any manner affect the Lien granted to Agent
hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.
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17. COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE RELATED DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY 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
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND AGENT PERTAINING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS, PROVIDED, THAT AGENT AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH BELOW
ITS SIGNATURE TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
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AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN AGENT AND GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Agent and Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Liabilities in accordance with the terms of the Credit Agreement.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
GRANTOR
RIDGEPAK CORPORATION, an Illinois corporation
By: /s/ John W. Lloyd
------------------------------------
Name: __________________________________
Title: Secretary
---------------------------------
AGENT:
FIRST SOURCE FINANCIAL LLP, as Agent
By: First Source Financial, Inc.
Its: Manager
By: /s/ Chester R. Zara
----------------------------------
Name: ________________________________
Title: Senior Vice President
EXHIBIT 10.22
EXECUTION
DRAFT
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 31, 1998 between STANDARD
PACKAGING AND PRINTING CORP., a North Carolina corporation ("Grantor"), and
FIRST SOURCE FINANCIAL LLP, an Illinois registered limited liability
partnership, as agent, for its benefit and the benefit of Lenders (in such
capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation
(the "Borrower"), Agent and the Persons from time to time designated as Lenders
thereunder ("Lenders") have entered into that certain Secured Credit Agreement
dated as of the date hereof (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), providing for the extension of loans and
other financial accommodations from Lenders to Grantor;
WHEREAS, pursuant to the Guaranty dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time, the
"Guaranty"), Grantor, together with the other Guarantors party thereto, has
jointly and severally guaranteed to Agent for the benefit of Lenders the payment
when due of all obligations and liabilities of Borrower under the Credit
Agreement and the Related Documents;
WHEREAS, as a condition to making of the loans and other extensions
of credit under the Credit Agreement, and as security for the obligations of
Grantor under the Guaranty, Lenders and Agent are requiring that Grantor shall
have executed and delivered this Security Agreement and granted the security
interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement. All
other undefined terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
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<PAGE>
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Guaranty Indebtedness (as defined in the Guaranty),
Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and
transfers to Agent, for its benefit and the benefit of Lenders, a Lien upon all
of its right, title and interest in, to and under the following property,
whether now owned by or owing to, or hereafter acquired by or arising in favor
of Grantor (including under any trade names, styles or derivations thereof), and
whether owned or consigned by or to, or leased from or to, Grantor, and
regardless of where located (all of which being hereinafter collectively
referred to as the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all goods;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Bank Accounts, and all other deposit and other bank
accounts and all deposits therein;
(xiii) all money, cash or cash equivalents of Grantor; and
(xiv) to the extent not otherwise included, all insurance
proceeds relating to any of the foregoing (including business interruption
insurance) and all cash and non-cash proceeds and products of the foregoing and
all accessions to, substitutions and replacements for, and rents and profits of,
each of the foregoing.
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(b) In addition, to secure the prompt and complete payment,
performance and observance of the Guaranty Indebtedness and in order to induce
Lenders as aforesaid, Grantor hereby grants to Agent, a right of setoff against
the property of Grantor held by Agent, consisting of property described above in
Section 2(a) now or hereafter in the possession or custody of or in transit to
Agent, for any purpose, including safekeeping, collection or pledge, for the
account of Grantor, or as to which such Grantor may have any right or power.
3. AGENT'S RIGHTS; LIMITATIONS ON AGENT'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder. Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting herein of a Lien thereon or the receipt by Agent of
any payment relating to any Contract pursuant hereto. Agent shall not be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) Agent may, in its sole discretion, at any time after an Event of
Default shall have occurred and be continuing, without prior notice to Grantor,
notify Account Debtors, parties to the Contracts and obligors in respect of
Instruments and Chattel Paper, that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Agent, for the benefit of Lenders, and that payments shall
be made directly to Agent. Upon the request of Agent, Grantor shall so notify
Account Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent at any time and from time to time promptly upon Agent's
request the following reports with respect to Grantor: (i) a reconciliation of
all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts as Agent may request. Grantor, at its own
expense, shall deliver to Agent the results of each physical verification, if
any, which Grantor may in its discretion have made, or caused any other Person
to have made on its behalf, of all or any portion of its Inventory.
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4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that:
(a) Grantor is the sole owner of each item of the Collateral upon
which it purports to grant a Lien hereunder, and has good and marketable title
thereto free and clear of any and all Liens other than Permitted Liens.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the other Related Documents, and (ii) in connection with any other
Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, on the
Collateral with respect to which a Lien may be perfected by filing pursuant to
the Code. Such Lien is prior to all other Liens, except Permitted Liens that
would be prior to Liens in favor of Agent as a matter of law, and is enforceable
as such as against any and all creditors of and purchasers from Grantor (other
than purchasers of Inventory in the ordinary course of business). All action by
Grantor necessary or desirable to protect and perfect such Lien on each item of
the Collateral has been duly taken.
(d) Schedule II hereto lists all Instruments and Chattel Paper of
Grantor. All action by Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the delivery of
all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof) has been duly taken. The Lien of Agent, on the
Collateral listed on Schedule II hereto is prior to all other Liens, except
Permitted Liens that would be prior to the Liens in favor of Agent as a matter
of law, and is enforceable as such against any and all creditors of and
purchasers from Grantor.
(e) Grantor's chief executive office, principal place of business,
corporate offices, all warehouses and premises where Collateral is stored or
located, and the locations of all of its books and records concerning the
Collateral are set forth on Schedule III hereto.
(f) With respect to the Accounts, except as specifically disclosed
in the most recent Borrowing Base Certificate delivered to Agent: (i) they
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events
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or occurrences which in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable thereunder as shown on
Grantor's books and records and any invoices, statements and Borrowing Base
Certificates delivered to Agent with respect thereto; (iv) Grantor has not
received any notice of proceedings or actions which are threatened or pending
against any Account Debtor which might result in any adverse change in such
Account Debtor's financial condition; and (v) Grantor has no knowledge that any
Account Debtor is unable generally to pay its debts as they become due. Further
with respect to the Accounts (x) the amounts shown on all invoices, statements
and Borrowing Base Certificates which may be delivered to Agent with respect
thereto are actually and absolutely owing to Grantor as indicated thereon and
are not in any way contingent; (y) no payments have been or shall be made
thereon except payments immediately delivered to the applicable Bank Accounts or
Agent as required pursuant to the terms of the Credit Agreement; and (z) to
Grantor's knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most
recent Borrowing Base Certificate delivered to Agent pursuant to the terms of
this Security Agreement or the Credit Agreement, (i) such Inventory is located
at one of the Grantor's locations set forth on Schedule III hereto (ii) no
Inventory is now, or shall at any time or times hereafter be stored at any other
location without Agent's prior consent, and if Agent gives such consent, Grantor
will concurrently therewith obtain, to the extent required by the Credit
Agreement, bailee, landlord and mortgagee agreements, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, and except for Permitted Liens, (iv) except as
specifically disclosed in the most recent Borrowing Base Certificate delivered
to Agent, such Inventory is Eligible Inventory of good and merchantable quality,
free from any defects, (v) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies to any third party as
a precondition of such sale or other disposition, and (vi) the completion of
manufacture, sale or other disposition of such Inventory by Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which Grantor
is a party or to which such property is subject.
(h) Except as disclosed on Schedule IV hereto, each of Grantor and
its Subsidiaries owns or possesses rights to use all Intellectual Property
required to continue to conduct its business as heretofore conducted. All such
Intellectual Property required to continue to conduct Grantor's and each
Subsidiaries' businesses are disclosed on Schedule IV hereto; and no such
Intellectual Property has been declared invalid, been limited by order of any
Governmental Authority or by agreement. The use of such Intellectual Property by
Grantor or any Subsidiary does not infringe on the rights of any other Person
and may be transferred in connection with any sale of the Property or capital
stock of Grantor or any Subsidiary. As used in this Agreement, "Intellectual
Property" of a Person shall mean all of such Person's present and future
designs, patents, patent rights and applications therefor, technology,
trademarks and registrations or applications therefor, service marks, trade
names, inventions, copyrights and all applications and registrations
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therefor, advertising matter, software or computer programs, license rights,
trade secrets, methods, processes, logos, knowhow, drawings, specifications,
descriptions and licenses with respect thereto, and all memoranda, notes, and
records with respect to any research and development, whether now owned or
hereafter acquired by such Person, and proceeds of all of the foregoing,
including proceeds of insurance policies thereon.
5. COVENANTS. Grantor covenants and agrees with Agent that from and
after the date of this Security Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Agent of any Contract held by Grantor or in which Grantor has any
rights not heretofore assigned, (ii) filing any financing or continuation
statements under the Code with respect to the Liens granted hereunder or under
any other Related Document, (iii) transferring Collateral to Agent's possession
(for the benefit of Agent and Lenders) if such Collateral consists of Chattel
Paper, Instruments or if a Lien on such Collateral can be perfected only by
possession, or if requested by Agent, and (iv) obtaining, or using its best
efforts to obtain, waivers of Liens, if any exist, from landlords and mortgagees
in accordance with the Credit Agreement. Grantor also hereby authorizes Agent to
file any such financing or continuation statements without the signature of
Grantor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes received in the
ordinary course of business, shall be duly endorsed in a manner satisfactory to
Agent immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain, at its
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. All
Chattel Paper shall be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
First Source Financial LLP, as Agent."
(c) Indemnification. In any suit, proceeding or action brought by
Agent relating to any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantor will save, indemnify and keep agent harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by Grantor of any obligation thereunder or arising out of
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any other agreement, indebtedness or liability at any time owing to, or in favor
of, such obligor or its successors from Grantor, except in the case of Agent, to
the extent such expense, loss, or damage is attributable solely to the gross
negligence or willful misconduct of Agent as finally determined by a court of
competent jurisdiction. All such obligations of Grantor shall be and remain
enforceable against and only against Grantor and shall not be enforceable
against Agent.
(d) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper and Contracts and all other agreements to which it is a
party or by which it is bound relating to the Collateral.
(e) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title and interest of Agent
in and to any of Grantor's rights under the Collateral against the claims and
demands of all Persons whomsoever.
(f) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(g) Further Identification of Collateral. Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(h) Notices. Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Liens) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Related
Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a
power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent under the Power of Attorney are
solely to protect Agent's interests in the Collateral and shall not impose any
duty upon Agent to exercise any such powers. Agent agrees that (a) it shall not
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing, and (b) Agent shall account for
any moneys received by Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that Agent shall not have
any duty as to any Collateral, and Agent shall be accountable only for amounts
that it actually receive as a result of the exercise of such powers. NEITHER
AGENT NOR ITS RESPECTIVE AFFILIATES, OFFICERS,
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DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR
FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT
IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION,
NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Related Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Liabilities or the Guaranty Indebtedness, if any Event of Default shall
have occurred and be continuing, Agent may exercise all rights and remedies of a
secured party under the Code. Without limiting the generality of the foregoing,
Grantor expressly agrees that in any such event Agent, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale) to or upon
Grantor or any other Person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent permitted by the Code
and other applicable law), may forthwith enter upon the premises of Grantor
where any Collateral is located through self-help, without judicial process,
without first obtaining a final judgment or giving Grantor or any other Person
notice and opportunity for a hearing on Agent's claim or action and may collect,
receive, assemble, process, appropriate and realize upon the Collateral, or any
part thereof, and may forthwith sell, lease, assign, give an option or options
to purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. Agent shall have the right upon any such public sale or sales and, to the
extent permitted by law, upon any such private sale or sales, to purchase for
the benefit of Agent, the whole or any part of said Collateral so sold, free of
any right or equity of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. Agent shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use Grantor's premises without
charge for such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall select,
whether at Grantor's premises or elsewhere. Until Agent is able to effect a
sale, lease, or other disposition of Collateral, Agent shall have the right to
hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
Grantor to maintain or preserve the rights of Grantor as against third parties
with respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies, with respect to
such appointment without prior notice or hearing
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as to such appointment. Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale to the
Guaranty Indebtedness as provided in the Guaranty, and only after so paying over
such net proceeds, and after the payment by Agent of any other amount required
by any provision of law, need Agent account for the surplus, if any, to Grantor.
To the maximum extent permitted by applicable law, Grantor waives all claims,
damages, and demands against Agent arising out of the repossession, retention or
sale of the Collateral except such as arise solely out of the gross negligence
or willful misconduct of Agent as finally determined by a court of competent
jurisdiction. Grantor agrees that ten (10) days prior notice by Agent of the
time and place of any public sale or of the time after which a private sale may
take place is reasonable notification of such matters. Grantor shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all Guaranty Indebtedness, including any
attorneys' fees and other expenses incurred by Agent to collect such deficiency.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, Grantor hereby grants to
Agent, an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by Grantor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S DUTY IN RESPECT OF COLLATERAL. Agent shall
use reasonable care with respect to the Collateral in its possession or under
its control. Agent shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
Agent, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Liabilities,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof,
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is rescinded, reduced, restored or returned, the Liabilities shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11. NOTICES. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
(a) if delivered in person, when delivered, (b) if delivered by telecopy or
similar electronic medium, on the date of confirmed transmission, (c) if
delivered by overnight courier, one (1) Business Day after delivery to such
courier properly addressed or (d) if by U.S. Mail, five (5) days after deposit
in the United States mails (by certified mail, return receipt requested), with
proper postage prepaid, to the following addresses:
Notices shall be addressed as follows:
(a) If to Grantor:
Standard Packaging and Printing Corp.
c/o Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: Richard D. Hinrichs
Telecopy: (402) 463-2467
(b) If to Agent:
First Source Financial LLP
2850 West Golf Road
Fifth Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (847) 734-7910, 7911
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 11. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Related Documents which, taken together,
set forth the complete understanding and agreement of Agent, Lenders and Grantor
with respect to the matters referred to herein and therein. In the event
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of an inconsistency between the Credit Agreement and this Agreement, the terms
of the Credit Agreement shall control.
13. NO WAIVER; CUMULATIVE REMEDIES. Agent shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement and the Power of Attorney attached as Exhibit A
hereto shall terminate on the date (the "Termination Date") of the expiration or
termination of the Commitments and the payment and performance in full of the
Notes and all other Liabilities.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and
shall, together with the rights and remedies of Agent, hereunder, inure to the
benefit of Agent, all future holders of any instrument evidencing any of the
Liabilities and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Liabilities or any portion
thereof or interest therein shall in any manner affect the Lien granted to Agent
hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.
17. COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
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18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE RELATED DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY 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
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND AGENT PERTAINING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS, PROVIDED, THAT AGENT AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH BELOW
ITS SIGNATURE TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE
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APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN AGENT AND
GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE OTHER RELATED DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Agent and Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Guaranty Indebtedness in accordance with the terms of the Guaranty.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
GRANTOR
STANDARD PACKAGING AND PRINTING CORP.,
a North Carolina corporation
By: /s/ John W. Lloyd
-----------------------------------
Name: _________________________________
Title: Secretary
--------------------------------
AGENT:
FIRST SOURCE FINANCIAL LLP, as Agent
By: First Source Financial, Inc.
Its: Manager
By: /s/ Chester R. Zara
-----------------------------------
Name: _________________________________
Title: Senior Vice President
--------------------------------
EXHIBIT 10.23
EXECUTION
DRAFT
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 31, 1998 between NIEMAND
HOLDINGS, INC., a Delaware corporation ("Grantor"), and FIRST SOURCE FINANCIAL
LLP, an Illinois registered limited liability partnership, as agent, for its
benefit and the benefit of Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation
(the "Borrower"), Agent and the Persons from time to time designated as Lenders
thereunder ("Lenders") have entered into that certain Secured Credit Agreement
dated as of the date hereof (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), providing for the extension of loans and
other financial accommodations from Lenders to Grantor;
WHEREAS, pursuant to the Guaranty dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time, the
"Guaranty"), Grantor, together with the other Guarantors party thereto, has
jointly and severally guaranteed to Agent for the benefit of Lenders the payment
when due of all obligations and liabilities of Borrower under the Credit
Agreement and the Related Documents;
WHEREAS, as a condition to making of the loans and other extensions
of credit under the Credit Agreement, and as security for the obligations of
Grantor under the Guaranty, Lenders and Agent are requiring that Grantor shall
have executed and delivered this Security Agreement and granted the security
interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement. All
other undefined terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
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<PAGE>
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Guaranty Indebtedness (as defined in the Guaranty),
Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and
transfers to Agent, for its benefit and the benefit of Lenders, a Lien upon all
of its right, title and interest in, to and under the following property,
whether now owned by or owing to, or hereafter acquired by or arising in favor
of Grantor (including under any trade names, styles or derivations thereof), and
whether owned or consigned by or to, or leased from or to, Grantor, and
regardless of where located (all of which being hereinafter collectively
referred to as the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all goods;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Bank Accounts, and all other deposit and other bank
accounts and all deposits therein;
(xiii) all money, cash or cash equivalents of Grantor; and
(xiv) to the extent not otherwise included, all insurance
proceeds relating to any of the foregoing (including business interruption
insurance) and all cash and non-cash proceeds and products of the foregoing and
all accessions to, substitutions and replacements for, and rents and profits of,
each of the foregoing.
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(b) In addition, to secure the prompt and complete payment,
performance and observance of the Guaranty Indebtedness and in order to induce
Lenders as aforesaid, Grantor hereby grants to Agent, a right of setoff against
the property of Grantor held by Agent, consisting of property described above in
Section 2(a) now or hereafter in the possession or custody of or in transit to
Agent, for any purpose, including safekeeping, collection or pledge, for the
account of Grantor, or as to which such Grantor may have any right or power.
3. AGENT'S RIGHTS; LIMITATIONS ON AGENT'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder. Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting herein of a Lien thereon or the receipt by Agent of
any payment relating to any Contract pursuant hereto. Agent shall not be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) Agent may, in its sole discretion, at any time after an Event of
Default shall have occurred and be continuing, without prior notice to Grantor,
notify Account Debtors, parties to the Contracts and obligors in respect of
Instruments and Chattel Paper, that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Agent, for the benefit of Lenders, and that payments shall
be made directly to Agent. Upon the request of Agent, Grantor shall so notify
Account Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent at any time and from time to time promptly upon Agent's
request the following reports with respect to Grantor: (i) a reconciliation of
all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts as Agent may request. Grantor, at its own
expense, shall deliver to Agent the results of each physical verification, if
any, which Grantor may in its discretion have made, or caused any other Person
to have made on its behalf, of all or any portion of its Inventory.
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4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that:
(a) Grantor is the sole owner of each item of the Collateral upon
which it purports to grant a Lien hereunder, and has good and marketable title
thereto free and clear of any and all Liens other than Permitted Liens.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the other Related Documents, and (ii) in connection with any other
Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, on the
Collateral with respect to which a Lien may be perfected by filing pursuant to
the Code. Such Lien is prior to all other Liens, except Permitted Liens that
would be prior to Liens in favor of Agent as a matter of law, and is enforceable
as such as against any and all creditors of and purchasers from Grantor (other
than purchasers of Inventory in the ordinary course of business). All action by
Grantor necessary or desirable to protect and perfect such Lien on each item of
the Collateral has been duly taken.
(d) Schedule II hereto lists all Instruments and Chattel Paper of
Grantor. All action by Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the delivery of
all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof) has been duly taken. The Lien of Agent, on the
Collateral listed on Schedule II hereto is prior to all other Liens, except
Permitted Liens that would be prior to the Liens in favor of Agent as a matter
of law, and is enforceable as such against any and all creditors of and
purchasers from Grantor.
(e) Grantor's chief executive office, principal place of business,
corporate offices, all warehouses and premises where Collateral is stored or
located, and the locations of all of its books and records concerning the
Collateral are set forth on Schedule III hereto.
(f) With respect to the Accounts, except as specifically disclosed
in the most recent Borrowing Base Certificate delivered to Agent: (i) they
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or could reasonably be
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expected to reduce the amount payable thereunder as shown on Grantor's books and
records and any invoices, statements and Borrowing Base Certificates delivered
to Agent with respect thereto; (iv) Grantor has not received any notice of
proceedings or actions which are threatened or pending against any Account
Debtor which might result in any adverse change in such Account Debtor's
financial condition; and (v) Grantor has no knowledge that any Account Debtor is
unable generally to pay its debts as they become due. Further with respect to
the Accounts (x) the amounts shown on all invoices, statements and Borrowing
Base Certificates which may be delivered to Agent with respect thereto are
actually and absolutely owing to Grantor as indicated thereon and are not in any
way contingent; (y) no payments have been or shall be made thereon except
payments immediately delivered to the applicable Bank Accounts or Agent as
required pursuant to the terms of the Credit Agreement; and (z) to Grantor's
knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most
recent Borrowing Base Certificate delivered to Agent pursuant to the terms of
this Security Agreement or the Credit Agreement, (i) such Inventory is located
at one of the Grantor's locations set forth on Schedule III hereto (ii) no
Inventory is now, or shall at any time or times hereafter be stored at any other
location without Agent's prior consent, and if Agent gives such consent, Grantor
will concurrently therewith obtain, to the extent required by the Credit
Agreement, bailee, landlord and mortgagee agreements, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, and except for Permitted Liens, (iv) except as
specifically disclosed in the most recent Borrowing Base Certificate delivered
to Agent, such Inventory is Eligible Inventory of good and merchantable quality,
free from any defects, (v) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies to any third party as
a precondition of such sale or other disposition, and (vi) the completion of
manufacture, sale or other disposition of such Inventory by Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which Grantor
is a party or to which such property is subject.
(h) Except as disclosed on Schedule IV hereto, each of Grantor and
its Subsidiaries owns or possesses rights to use all Intellectual Property
required to continue to conduct its business as heretofore conducted. All such
Intellectual Property required to continue to conduct Grantor's and each
Subsidiaries' businesses are disclosed on Schedule IV hereto; and no such
Intellectual Property has been declared invalid, been limited by order of any
Governmental Authority or by agreement. The use of such Intellectual Property by
Grantor or any Subsidiary does not infringe on the rights of any other Person
and may be transferred in connection with any sale of the Property or capital
stock of Grantor or any Subsidiary. As used in this Agreement, "Intellectual
Property" of a Person shall mean all of such Person's present and future
designs, patents, patent rights and applications therefor, technology,
trademarks and registrations or applications therefor, service marks, trade
names, inventions, copyrights and all applications and registrations therefor,
advertising matter, software or computer programs, license rights, trade
secrets, methods,
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processes, logos, knowhow, drawings, specifications, descriptions and licenses
with respect thereto, and all memoranda, notes, and records with respect to any
research and development, whether now owned or hereafter acquired by such
Person, and proceeds of all of the foregoing, including proceeds of insurance
policies thereon.
5. COVENANTS. Grantor covenants and agrees with Agent that from and
after the date of this Security Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Agent of any Contract held by Grantor or in which Grantor has any
rights not heretofore assigned, (ii) filing any financing or continuation
statements under the Code with respect to the Liens granted hereunder or under
any other Related Document, (iii) transferring Collateral to Agent's possession
(for the benefit of Agent and Lenders) if such Collateral consists of Chattel
Paper, Instruments or if a Lien on such Collateral can be perfected only by
possession, or if requested by Agent, and (iv) obtaining, or using its best
efforts to obtain, waivers of Liens, if any exist, from landlords and mortgagees
in accordance with the Credit Agreement. Grantor also hereby authorizes Agent to
file any such financing or continuation statements without the signature of
Grantor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes received in the
ordinary course of business, shall be duly endorsed in a manner satisfactory to
Agent immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain, at its
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. All
Chattel Paper shall be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
First Source Financial LLP, as Agent."
(c) Indemnification. In any suit, proceeding or action brought by
Agent relating to any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantor will save, indemnify and keep agent harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of, such
obligor
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or its successors from Grantor, except in the case of Agent, to the
extent such expense, loss, or damage is attributable solely to the gross
negligence or willful misconduct of Agent as finally determined by a court of
competent jurisdiction. All such obligations of Grantor shall be and remain
enforceable against and only against Grantor and shall not be enforceable
against Agent.
(d) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper and Contracts and all other agreements to which it is a
party or by which it is bound relating to the Collateral.
(e) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title and interest of Agent
in and to any of Grantor's rights under the Collateral against the claims and
demands of all Persons whomsoever.
(f) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(g) Further Identification of Collateral. Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(h) Notices. Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Liens) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Related
Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a
power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent under the Power of Attorney are
solely to protect Agent's interests in the Collateral and shall not impose any
duty upon Agent to exercise any such powers. Agent agrees that (a) it shall not
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing, and (b) Agent shall account for
any moneys received by Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that Agent shall not have
any duty as to any Collateral, and Agent shall be accountable only for amounts
that it actually receive as a result of the exercise of such powers. NEITHER
AGENT NOR ITS RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE
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TO GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR
OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Related Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Liabilities or the Guaranty Indebtedness, if any Event of Default shall
have occurred and be continuing, Agent may exercise all rights and remedies of a
secured party under the Code. Without limiting the generality of the foregoing,
Grantor expressly agrees that in any such event Agent, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale) to or upon
Grantor or any other Person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent permitted by the Code
and other applicable law), may forthwith enter upon the premises of Grantor
where any Collateral is located through self-help, without judicial process,
without first obtaining a final judgment or giving Grantor or any other Person
notice and opportunity for a hearing on Agent's claim or action and may collect,
receive, assemble, process, appropriate and realize upon the Collateral, or any
part thereof, and may forthwith sell, lease, assign, give an option or options
to purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. Agent shall have the right upon any such public sale or sales and, to the
extent permitted by law, upon any such private sale or sales, to purchase for
the benefit of Agent, the whole or any part of said Collateral so sold, free of
any right or equity of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. Agent shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use Grantor's premises without
charge for such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall select,
whether at Grantor's premises or elsewhere. Until Agent is able to effect a
sale, lease, or other disposition of Collateral, Agent shall have the right to
hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
Grantor to maintain or preserve the rights of Grantor as against third parties
with respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies, with respect to
such appointment without prior notice or hearing as to such appointment. Agent
shall apply the net proceeds of any such collection, recovery, receipt,
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appropriation, realization or sale to the Guaranty Indebtedness as provided in
the Guaranty, and only after so paying over such net proceeds, and after the
payment by Agent of any other amount required by any provision of law, need
Agent account for the surplus, if any, to Grantor. To the maximum extent
permitted by applicable law, Grantor waives all claims, damages, and demands
against Agent arising out of the repossession, retention or sale of the
Collateral except such as arise solely out of the gross negligence or willful
misconduct of Agent as finally determined by a court of competent jurisdiction.
Grantor agrees that ten (10) days prior notice by Agent of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Guaranty Indebtedness, including any attorneys' fees and
other expenses incurred by Agent to collect such deficiency.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, Grantor hereby grants to
Agent, an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by Grantor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S DUTY IN RESPECT OF COLLATERAL. Agent shall
use reasonable care with respect to the Collateral in its possession or under
its control. Agent shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
Agent, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Liabilities,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof,
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is rescinded, reduced, restored or returned, the Liabilities shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11. NOTICES. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
(a) if delivered in person, when delivered, (b) if delivered by telecopy or
similar electronic medium, on the date of confirmed transmission, (c) if
delivered by overnight courier, one (1) Business Day after delivery to such
courier properly addressed or (d) if by U.S. Mail, five (5) days after deposit
in the United States mails (by certified mail, return receipt requested), with
proper postage prepaid, to the following addresses:
Notices shall be addressed as follows:
(a) If to Grantor:
Niemand Holdings, Inc.
c/o Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: Richard D. Hinrichs
Telecopy: (402) 463-2467
(b) If to Agent:
First Source Financial LLP
2850 West Golf Road
Fifth Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (847) 734-7910, 7911
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 11. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Related Documents which, taken together,
set forth the complete understanding and agreement of
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Agent, Lenders and Grantor with respect to the matters referred to herein and
therein. In the event of an inconsistency between the Credit Agreement and this
Agreement, the terms of the Credit Agreement shall control.
13. NO WAIVER; CUMULATIVE REMEDIES. Agent shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement and the Power of Attorney attached as Exhibit A
hereto shall terminate on the date (the "Termination Date") of the expiration or
termination of the Commitments and the payment and performance in full of the
Notes and all other Liabilities.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and
shall, together with the rights and remedies of Agent, hereunder, inure to the
benefit of Agent, all future holders of any instrument evidencing any of the
Liabilities and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Liabilities or any portion
thereof or interest therein shall in any manner affect the Lien granted to Agent
hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.
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17. COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE RELATED DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY 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
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND AGENT PERTAINING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS, PROVIDED, THAT AGENT AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH BELOW
ITS SIGNATURE TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
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AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN AGENT AND GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Agent and Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Guaranty Indebtedness in accordance with the terms of the Guaranty.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
GRANTOR
NIEMAND HOLDINGS, INC., a Delaware corporation
By: /s/ John W. Lloyd
---------------------------------------
Name:______________________________________
Title: Secretary
------------------------------------
AGENT:
FIRST SOURCE FINANCIAL LLP, as Agent
By: First Source Financial, Inc.
Its: Manager
By: Chester R. Zara
-------------------------------------
Name: ___________________________________
Title: Senior Vice President
----------------------------------
EXHIBIT 10.24
EXECUTION
DRAFT
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 31, 1998 between NIEMAND
INDUSTRIES, INC., a Delaware corporation ("Grantor"), and FIRST SOURCE FINANCIAL
LLP, an Illinois registered limited liability partnership, as agent, for its
benefit and the benefit of Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation
(the "Borrower"), Agent and the Persons from time to time designated as Lenders
thereunder ("Lenders") have entered into that certain Secured Credit Agreement
dated as of the date hereof (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), providing for the extension of loans and
other financial accommodations from Lenders to Grantor;
WHEREAS, pursuant to the Guaranty dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time, the
"Guaranty"), Grantor, together with the other Guarantors party thereto, has
jointly and severally guaranteed to Agent for the benefit of Lenders the payment
when due of all obligations and liabilities of Borrower under the Credit
Agreement and the Related Documents;
WHEREAS, as a condition to making of the loans and other extensions
of credit under the Credit Agreement, and as security for the obligations of
Grantor under the Guaranty, Lenders and Agent are requiring that Grantor shall
have executed and delivered this Security Agreement and granted the security
interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement. All
other undefined terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
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2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Guaranty Indebtedness (as defined in the Guaranty),
Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and
transfers to Agent, for its benefit and the benefit of Lenders, a Lien upon all
of its right, title and interest in, to and under the following property,
whether now owned by or owing to, or hereafter acquired by or arising in favor
of Grantor (including under any trade names, styles or derivations thereof), and
whether owned or consigned by or to, or leased from or to, Grantor, and
regardless of where located (all of which being hereinafter collectively
referred to as the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all goods;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Bank Accounts, and all other deposit and other
bank accounts and all deposits therein;
(xiii) all money, cash or cash equivalents of Grantor; and
(xiv) to the extent not otherwise included, all insurance
proceeds relating to any of the foregoing (including business interruption
insurance) and all cash and non-cash proceeds and products of the foregoing and
all accessions to, substitutions and replacements for, and rents and profits of,
each of the foregoing.
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(b) In addition, to secure the prompt and complete payment,
performance and observance of the Guaranty Indebtedness and in order to induce
Lenders as aforesaid, Grantor hereby grants to Agent, a right of setoff against
the property of Grantor held by Agent, consisting of property described above in
Section 2(a) now or hereafter in the possession or custody of or in transit to
Agent, for any purpose, including safekeeping, collection or pledge, for the
account of Grantor, or as to which such Grantor may have any right or power.
3. AGENT'S RIGHTS; LIMITATIONS ON AGENT'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder. Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting herein of a Lien thereon or the receipt by Agent of
any payment relating to any Contract pursuant hereto. Agent shall not be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) Agent may, in its sole discretion, at any time after an Event of
Default shall have occurred and be continuing, without prior notice to Grantor,
notify Account Debtors, parties to the Contracts and obligors in respect of
Instruments and Chattel Paper, that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Agent, for the benefit of Lenders, and that payments shall
be made directly to Agent. Upon the request of Agent, Grantor shall so notify
Account Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent at any time and from time to time promptly upon Agent's
request the following reports with respect to Grantor: (i) a reconciliation of
all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts as Agent may request. Grantor, at its own
expense, shall deliver to Agent the results of each physical verification, if
any, which Grantor may in its discretion have made, or caused any other Person
to have made on its behalf, of all or any portion of its Inventory.
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4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that:
(a) Grantor is the sole owner of each item of the Collateral upon
which it purports to grant a Lien hereunder, and has good and marketable title
thereto free and clear of any and all Liens other than Permitted Liens.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the other Related Documents, and (ii) in connection with any other
Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, on the
Collateral with respect to which a Lien may be perfected by filing pursuant to
the Code. Such Lien is prior to all other Liens, except Permitted Liens that
would be prior to Liens in favor of Agent as a matter of law, and is enforceable
as such as against any and all creditors of and purchasers from Grantor (other
than purchasers of Inventory in the ordinary course of business). All action by
Grantor necessary or desirable to protect and perfect such Lien on each item of
the Collateral has been duly taken.
(d) Schedule II hereto lists all Instruments and Chattel Paper of
Grantor. All action by Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the delivery of
all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof) has been duly taken. The Lien of Agent, on the
Collateral listed on Schedule II hereto is prior to all other Liens, except
Permitted Liens that would be prior to the Liens in favor of Agent as a matter
of law, and is enforceable as such against any and all creditors of and
purchasers from Grantor.
(e) Grantor's chief executive office, principal place of business,
corporate offices, all warehouses and premises where Collateral is stored or
located, and the locations of all of its books and records concerning the
Collateral are set forth on Schedule III hereto.
(f) With respect to the Accounts, except as specifically disclosed
in the most recent Borrowing Base Certificate delivered to Agent: (i) they
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events
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or occurrences which in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable thereunder as shown on
Grantor's books and records and any invoices, statements and Borrowing Base
Certificates delivered to Agent with respect thereto; (iv) Grantor has not
received any notice of proceedings or actions which are threatened or pending
against any Account Debtor which might result in any adverse change in such
Account Debtor's financial condition; and (v) Grantor has no knowledge that any
Account Debtor is unable generally to pay its debts as they become due. Further
with respect to the Accounts (x) the amounts shown on all invoices, statements
and Borrowing Base Certificates which may be delivered to Agent with respect
thereto are actually and absolutely owing to Grantor as indicated thereon and
are not in any way contingent; (y) no payments have been or shall be made
thereon except payments immediately delivered to the applicable Bank Accounts or
Agent as required pursuant to the terms of the Credit Agreement; and (z) to
Grantor's knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most
recent Borrowing Base Certificate delivered to Agent pursuant to the terms of
this Security Agreement or the Credit Agreement, (i) such Inventory is located
at one of the Grantor's locations set forth on Schedule III hereto (ii) no
Inventory is now, or shall at any time or times hereafter be stored at any other
location without Agent's prior consent, and if Agent gives such consent, Grantor
will concurrently therewith obtain, to the extent required by the Credit
Agreement, bailee, landlord and mortgagee agreements, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, and except for Permitted Liens, (iv) except as
specifically disclosed in the most recent Borrowing Base Certificate delivered
to Agent, such Inventory is Eligible Inventory of good and merchantable quality,
free from any defects, (v) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies to any third party as
a precondition of such sale or other disposition, and (vi) the completion of
manufacture, sale or other disposition of such Inventory by Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which Grantor
is a party or to which such property is subject.
(h) Except as disclosed on Schedule IV hereto, each of Grantor and
its Subsidiaries owns or possesses rights to use all Intellectual Property
required to continue to conduct its business as heretofore conducted. All such
Intellectual Property required to continue to conduct Grantor's and each
Subsidiaries' businesses are disclosed on Schedule IV hereto; and no such
Intellectual Property has been declared invalid, been limited by order of any
Governmental Authority or by agreement. The use of such Intellectual Property by
Grantor or any Subsidiary does not infringe on the rights of any other Person
and may be transferred in connection with any sale of the Property or capital
stock of Grantor or any Subsidiary. As used in this Agreement, "Intellectual
Property" of a Person shall mean all of such Person's present and future
designs, patents, patent rights and applications therefor, technology,
trademarks and registrations or applications therefor, service marks, trade
names, inventions, copyrights and all applications and registrations
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therefor, advertising matter, software or computer programs, license rights,
trade secrets, methods, processes, logos, knowhow, drawings, specifications,
descriptions and licenses with respect thereto, and all memoranda, notes, and
records with respect to any research and development, whether now owned or
hereafter acquired by such Person, and proceeds of all of the foregoing,
including proceeds of insurance policies thereon.
5. COVENANTS. Grantor covenants and agrees with Agent that from and
after the date of this Security Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Agent of any Contract held by Grantor or in which Grantor has any
rights not heretofore assigned, (ii) filing any financing or continuation
statements under the Code with respect to the Liens granted hereunder or under
any other Related Document, (iii) transferring Collateral to Agent's possession
(for the benefit of Agent and Lenders) if such Collateral consists of Chattel
Paper, Instruments or if a Lien on such Collateral can be perfected only by
possession, or if requested by Agent, and (iv) obtaining, or using its best
efforts to obtain, waivers of Liens, if any exist, from landlords and mortgagees
in accordance with the Credit Agreement. Grantor also hereby authorizes Agent to
file any such financing or continuation statements without the signature of
Grantor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes received in the
ordinary course of business, shall be duly endorsed in a manner satisfactory to
Agent immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain, at its
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. All
Chattel Paper shall be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
First Source Financial LLP, as Agent."
(c) Indemnification. In any suit, proceeding or action brought by
Agent relating to any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantor will save, indemnify and keep agent harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by Grantor of any obligation thereunder or arising out of
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any other agreement, indebtedness or liability at any time owing to, or in favor
of, such obligor or its successors from Grantor, except in the case of Agent, to
the extent such expense, loss, or damage is attributable solely to the gross
negligence or willful misconduct of Agent as finally determined by a court of
competent jurisdiction. All such obligations of Grantor shall be and remain
enforceable against and only against Grantor and shall not be enforceable
against Agent.
(d) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper and Contracts and all other agreements to which it is a
party or by which it is bound relating to the Collateral.
(e) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title and interest of Agent
in and to any of Grantor's rights under the Collateral against the claims and
demands of all Persons whomsoever.
(f) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(g) Further Identification of Collateral. Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(h) Notices. Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Liens) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Related
Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a
power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent under the Power of Attorney are
solely to protect Agent's interests in the Collateral and shall not impose any
duty upon Agent to exercise any such powers. Agent agrees that (a) it shall not
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing, and (b) Agent shall account for
any moneys received by Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that Agent shall not have
any duty as to any Collateral, and Agent shall be accountable only for amounts
that it actually receive as a result of the exercise of such powers. NEITHER
AGENT NOR ITS RESPECTIVE AFFILIATES, OFFICERS,
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DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR
FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT
IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION,
NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Related Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Liabilities or the Guaranty Indebtedness, if any Event of Default shall
have occurred and be continuing, Agent may exercise all rights and remedies of a
secured party under the Code. Without limiting the generality of the foregoing,
Grantor expressly agrees that in any such event Agent, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale) to or upon
Grantor or any other Person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent permitted by the Code
and other applicable law), may forthwith enter upon the premises of Grantor
where any Collateral is located through self-help, without judicial process,
without first obtaining a final judgment or giving Grantor or any other Person
notice and opportunity for a hearing on Agent's claim or action and may collect,
receive, assemble, process, appropriate and realize upon the Collateral, or any
part thereof, and may forthwith sell, lease, assign, give an option or options
to purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. Agent shall have the right upon any such public sale or sales and, to the
extent permitted by law, upon any such private sale or sales, to purchase for
the benefit of Agent, the whole or any part of said Collateral so sold, free of
any right or equity of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. Agent shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use Grantor's premises without
charge for such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall select,
whether at Grantor's premises or elsewhere. Until Agent is able to effect a
sale, lease, or other disposition of Collateral, Agent shall have the right to
hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
Grantor to maintain or preserve the rights of Grantor as against third parties
with respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies, with respect to
such appointment without prior notice or hearing
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as to such appointment. Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale to the
Guaranty Indebtedness as provided in the Guaranty, and only after so paying over
such net proceeds, and after the payment by Agent of any other amount required
by any provision of law, need Agent account for the surplus, if any, to Grantor.
To the maximum extent permitted by applicable law, Grantor waives all claims,
damages, and demands against Agent arising out of the repossession, retention or
sale of the Collateral except such as arise solely out of the gross negligence
or willful misconduct of Agent as finally determined by a court of competent
jurisdiction. Grantor agrees that ten (10) days prior notice by Agent of the
time and place of any public sale or of the time after which a private sale may
take place is reasonable notification of such matters. Grantor shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all Guaranty Indebtedness, including any
attorneys' fees and other expenses incurred by Agent to collect such deficiency.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, Grantor hereby grants to
Agent, an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by Grantor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S DUTY IN RESPECT OF COLLATERAL. Agent shall
use reasonable care with respect to the Collateral in its possession or under
its control. Agent shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
Agent, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Liabilities,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof,
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is rescinded, reduced, restored or returned, the Liabilities shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11. NOTICES. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
(a) if delivered in person, when delivered, (b) if delivered by telecopy or
similar electronic medium, on the date of confirmed transmission, (c) if
delivered by overnight courier, one (1) Business Day after delivery to such
courier properly addressed or (d) if by U.S. Mail, five (5) days after deposit
in the United States mails (by certified mail, return receipt requested), with
proper postage prepaid, to the following addresses:
Notices shall be addressed as follows:
(a) If to Grantor:
Niemand Industries, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: Richard D. Hinrichs
Telephone No.: (402) 463-1366
Telecopy: (402) 463-2467
(b) If to Agent:
First Source Financial LLP
2850 West Golf Road
Fifth Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (847) 734-7910, 7911
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 11. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Related Documents which, taken together,
set forth the complete understanding and agreement of Agent, Lenders and Grantor
with respect to the matters referred to herein and therein. In the event
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of an inconsistency between the Credit Agreement and this Agreement, the terms
of the Credit Agreement shall control.
13. NO WAIVER; CUMULATIVE REMEDIES. Agent shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement and the Power of Attorney attached as Exhibit A
hereto shall terminate on the date (the "Termination Date") of the expiration or
termination of the Commitments and the payment and performance in full of the
Notes and all other Liabilities.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and
shall, together with the rights and remedies of Agent, hereunder, inure to the
benefit of Agent, all future holders of any instrument evidencing any of the
Liabilities and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Liabilities or any portion
thereof or interest therein shall in any manner affect the Lien granted to Agent
hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.
17. COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
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<PAGE>
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE RELATED DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY 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
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND AGENT PERTAINING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS, PROVIDED, THAT AGENT AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH BELOW
ITS SIGNATURE TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE
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<PAGE>
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN AGENT AND
GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE OTHER RELATED DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.
23. Benefit of Agent and Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Guaranty Indebtedness in accordance with the terms of the Guaranty.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
GRANTOR
NIEMAND INDUSTRIES, INC.,
a Delaware corporation
By: /s/ John W. Lloyd
---------------------------------
Name:
---------------------------------
Title: Secretary
---------------------------------
AGENT:
FIRST SOURCE FINANCIAL LLP, as Agent
By: First Source Financial, Inc.
Its: Manager
By: /s/ Chester R. Zara
---------------------------------
Name:
---------------------------------
Title: Senior Vice President
---------------------------------
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EXHIBIT 10.25
EXECUTION
COPY
PLEDGE AGREEMENT
This PLEDGE AGREEMENT ("Pledge Agreement") is made as of this 31st
day of July, 1998 between NIEMAND HOLDINGS, INC., a Delaware corporation
("Pledgor"), and FIRST SOURCE FINANCIAL LLP, as agent, for its benefit and the
benefit of the Lenders (in such capacity, "Agent").
WHEREAS, Pledgor is the legal and beneficial owner of 100% of the
issued and outstanding capital Stock described on Exhibit 1 hereto issued by the
corporations named therein;
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation
("Borrower"), Agent and the Persons from time to time designated as lenders
thereunder ("Lenders") have entered into that certain Secured Credit Agreement
dated as of the date hereof (as amended, supplemented, restated or otherwise
modified from time to time, the "Credit Agreement") providing for the extension
of loans and other financial accommodations from Lenders to Borrower;
WHEREAS, pursuant to the Guaranty dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time, the
"Guaranty"), Pledgor, together with the other Guarantors party thereto, has
jointly and severally guaranteed to the Agent for the benefit of the Lenders the
payment when due of all obligations and liabilities of Borrower under the Credit
Agreement and the Related Documents;
WHEREAS, as a condition to making of the loans and other extensions
of credit under the Credit Agreement, and as security for the obligations of
Pledgor under the Guaranty, Lenders and Agent are requiring that Pledgor shall
have executed and delivered this Pledge Agreement and granted the security
interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Agent as follows:
1. Defined Terms. As used in this Pledge Agreement,
"Pledged Collateral" means the Pledged Stock and the Stock Rights,
including the proceeds of each.
"Pledged Stock" means the respective shares of capital stock
described on Exhibit 1 hereto, together with the certificates or other
instruments or securities representing such shares.
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"Secured Obligations" shall have the meaning assigned to such term
in Section 2 hereof.
"Stock Rights" means any stock (including, without limitation,
securities entered on the books of any financial intermediaries), any dividend
or other distribution and any other right or property which Pledgor shall
receive or shall become entitled to receive for any reason whatsoever with
respect to, in substitution for or in exchange for any shares of the Pledged
Stock and any stock, any right to receive stock and any right to receive
earnings, in which Pledgor now has or hereafter acquires any right, issued by
the issuer of the Pledged Stock.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. In addition, unless otherwise
defined herein, all defined terms herein shall have the respective meanings
ascribed thereto in the Credit Agreement as in effect on the date hereof.
2. Pledge. To secure all indebtedness, liabilities and obligations
of Pledgor now or hereafter existing under this Pledge Agreement and under the
Guaranty (collectively, the "Secured Obligations") Pledgor hereby delivers to
Agent and hereby pledges, assigns, transfers and grants to Agent a first Lien on
the Pledged Collateral. All of the Pledged Stock, together with undated stock
powers duly executed in blank by Pledgor, are being delivered to Agent
simultaneously herewith.
3. Representations and Warranties of Pledgor. Pledgor represents and
warrants to Agent that:
3.1 Existence and Standing. Pledgor is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
3.2 Authorization, Validity and Enforceability. Pledgor has full
power, authority and legal right to execute this Pledge Agreement and to pledge
the Pledged Collateral to Agent. The execution and delivery by Pledgor of this
Pledge Agreement have been duly authorized by all necessary corporate action and
this Pledge Agreement constitutes a legal, valid and binding obligation of
Pledgor enforceable against Pledgor in accordance with its terms, creates a
security interest which is enforceable against Pledgor in the Pledged Collateral
and will create a security interest enforceable against Pledgor in the Stock
Rights and the proceeds of the Pledged Stock and the Stock Rights at the time
Pledgor acquires any right therein, in each such case subject to bankruptcy,
insolvency, liquidation, reorganization and other laws of general application
affecting the rights and remedies of creditors.
3.3 Conflicting Laws and Contracts. Neither the execution and
delivery by Pledgor of this Pledge Agreement, nor the creation and perfection of
the Lien on the Pledged Collateral granted hereunder, nor compliance with the
terms and provisions hereof violates or will violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on
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Pledgor or Pledgor's Certificate of Incorporation or By-laws or the provisions
of any material indenture, instrument or agreement to which Pledgor is a party
or is subject, or by which it, or its property, is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
Lien pursuant to the terms of any such indenture, instrument or agreement.
3.4 Ownership of Pledged Stock. Pledgor is the direct legal and
beneficial owner of the Pledged Stock, and such Pledged Stock represents 100% of
the issued and outstanding stock of its issuer.
3.5 Other Agreements. Pledgor has not performed any act or executed
any instrument, agreement or other document that might prevent or hinder Agent
from obtaining and enjoying fully and completely all of the benefits, rights and
powers conferred, or sought to be conferred, upon Agent by this Pledge
Agreement.
3.6 Issuance of Pledged Stock. Each share of the Pledged Stock has
been duly and validly issued, is fully paid and non-assessable and is owned by
Pledgor free and clear of any Lien other than the Lien created by this Pledge
Agreement.
3.7 Consents. No consent, approval or authorization of, notice to,
designation or filing with, or other action by, any Person is required in
connection with the execution, delivery and performance of the pledge and Lien
granted under this Pledge Agreement by Pledgor, or in connection with the
exercise of remedies with respect to the Pledged Collateral pursuant to this
Pledge Agreement.
3.8 Priority. The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Pledge Agreement creates a valid first perfected
Lien on Pledgor's interest in such Pledged Collateral and the proceeds thereof
in favor of Agent, subject to no prior Lien of any other Person.
4. Covenants. From the date of this Pledge Agreement until the
Pledge Agreement is terminated pursuant to Section 7.13:
4.1 Pledgor shall:
4.1.1 Delivery of Certain Items. Except as otherwise permitted
by the Credit Agreement, hold in trust for Agent and deliver forthwith
(and without any necessity for any request or demand by Agent) to Agent,
in the exact form received, with the endorsement of Pledgor when necessary
and/or appropriate instruments of transfer, assignment or endorsement as
applicable, duly executed in blank, any additional stock certificates,
cash, checks, draft, remittances, documents, promissory notes,
instruments, debt securities or other proceeds evidencing or constituting
Pledged Collateral, whether as an addition to, in substitution for, or in
exchange for any of the Pledged Collateral, or otherwise. In case any
property shall be distributed upon or with respect to any Pledged
Collateral pursuant to the recapitalization or reclassification of the
capital of the issuer thereof or pursuant to the reorganization thereof,
except as otherwise permitted by the Credit Agreement, the property
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<PAGE>
so distributed shall be delivered to Agent to be held by it as additional
collateral security for the Secured Obligations. Except as otherwise
permitted by the Credit Agreement, all sums of money and property so paid
or distributed in respect of any Pledged Collateral which are received by
Pledgor shall, until paid or delivered to Agent in accordance with the
terms hereof, be held by Pledgor in trust as additional collateral
security for the Secured Obligations.
4.1.2 Taxes. Pay when due all taxes, assessments and
governmental charges and levies upon the Pledged Collateral, except those
being contested in good faith by appropriate proceedings and with respect
to which no Lien exists.
4.1.3 Notice of Default. Give prompt notice in writing to
Agent of the occurrence of any default hereunder and of any other
development, financial or otherwise, which could reasonably be expected to
materially adversely affect the value of the Pledged Collateral or the
ability of Pledgor to perform the Secured Obligations.
4.1.4 Stock Powers and Other Actions. Execute and deliver to
Agent all stock powers, assignments, financing statements, endorsements,
instruments and other documents and take all further action, at the
expense of Pledgor, from time to time requested by Agent in order to
perfect or maintain a first perfected Lien on the Pledged Collateral in
favor of Agent or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to the Pledged Collateral or to effect a
transfer of the Pledged Collateral, or any part thereof. All instruments
representing or evidencing the Pledged Collateral shall be delivered to
and held by Agent pursuant hereto and shall be in suitable form for
transfer or assignment in blank, all in form and substance satisfactory to
Agent.
4.1.5 Reports. Furnish to Agent such reports relating to the
Pledged Collateral as Agent shall from time to time may reasonably
request.
4.1.6 Defense of Collateral. Defend for the benefit of Agent,
Agent's right, title and Lien acquired by this Pledge Agreement in and to
the Pledged Collateral and the proceeds thereof against the claims and
demands of all other Persons except by, through or under Agent.
4.2 Pledgor shall not:
4.2.1 Liens. Create, incur, or suffer to exist any Lien on the
Pledged Collateral except the Lien created by this Pledge Agreement or
perform any act or execute any instrument that might prevent or hinder
Agent from obtaining and enjoying, fully and completely, all of the
benefits, rights and privileges conferred or sought to be conferred upon
Agent by this Pledge Agreement.
4.2.2 Disposition of Collateral. Except as otherwise provided
in the Credit Agreement, sell or otherwise dispose of all or any part of
the Pledged Collateral.
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<PAGE>
4.2.3 Changes in Capital Structure of Issuer. Except as
otherwise provided in the Credit Agreement, (a) permit or suffer any
issuer of the Pledged Stock to dissolve, liquidate, retire any of its
capital stock, reduce its capital or merge or consolidate with any other
Person, or (b) vote any of the Pledged Stock or Stock Rights in favor of
any of the foregoing.
4.2.4 Issuance of Additional Stock. Permit or suffer the
issuer of the Pledged Stock to issue any stock, any right to receive stock
or any right to receive earnings, except to Pledgor.
5. Remedies.
5.1 Acceleration and Remedies. If any Event of Default has occurred
and is continuing, then, upon the election of Agent, the Secured Obligations
shall immediately become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and Agent may (a)
exercise all rights set forth in Section 7.3 and (b) exercise any or all of the
rights and remedies provided (i) in this Pledge Agreement, (ii) in the Code to a
secured party when a debtor is in default under a security agreement and (iii)
by any other applicable law or agreement.
5.2 Foreclosure Sales. (a) Without limiting the provisions of
Section 5.1, Agent may, following the occurrence and during the continuance of
an Event of Default, without notice except as specified below, and to the extent
permitted under applicable law, sell the Pledged Collateral or any part thereof
in one or more transactions at public or private sale, for cash or property and
at such price or prices and upon such other terms as Agent may deem commercially
reasonable, irrespective of the impact of any of such sales on the value of any
of the Pledged Collateral. To the extent permitted under applicable law, Agent
may be the purchaser of any or all of the Pledged Collateral at any such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Pledgor, and Pledgor hereby waives (to
the extent permitted by law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Agent shall not be obligated to make
any sale with respect to the Pledged Collateral regardless of a notice of sale
having been given. Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Agent may be unable to effect a public sale or
disposition of any or all of the securities included within the Pledged
Collateral but may be compelled to resort to one or more private sales or
dispositions thereof to a restricted group of purchasers who will agree, among
other things, to acquire the Pledged Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Pledgor
acknowledges that any sales under such restrictions may be at prices and on
terms
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<PAGE>
less favorable than those obtainable through a sale without such restrictions
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act), and notwithstanding such
circumstances, agrees that any sale under such restrictions shall be deemed to
have been made in a commercially reasonable manner and that Agent shall have no
obligation to engage in sales without such restrictions and no obligation to
delay the sale of any securities included within the Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if Pledgor would agree to do so.
6. Waivers, Amendments and Remedies. No course of dealing between
Agent and Pledgor and no delay or omission of Agent to exercise any right,
power, privilege or remedy granted under this Pledge Agreement, the Credit
Agreement or any other Related Document or any collateral document or guaranty
related thereto shall impair such right or remedy or be construed to be a waiver
of any Event of Default or an acquiescence therein, and any single or partial
exercise of any such right or remedy shall not preclude other or further
exercise thereof or the exercise of any other right, power, privilege or remedy,
and no waiver, amendment or other variation of the terms, conditions or
provisions of this Pledge Agreement whatsoever shall be valid unless in writing
signed by Agent, and then only to the extent in such writing specifically set
forth. All rights, power, privilege and remedies contained in this Pledge
Agreement shall be cumulative, are in addition to such other rights, power,
privileges and remedies Agent may have by law or otherwise and shall be
available to Agent until the Secured Obligations have been paid in full.
7. General Provisions.
7.1 Special Collateral Account. All cash received by Agent with
respect to the Pledged Collateral pursuant to Section 4.1.1 or upon the exercise
of the remedies provided for in Section 5.1, shall be deposited into a special
collateral account with Agent and shall be held by Agent as security for the
Secured Obligations. Pledgor shall have no control whatsoever over said special
collateral account. Agent shall apply any part of the credit balance in said
special collateral account to the payment of the Secured Obligations, whether or
not any of them shall be then due.
7.2 Application of Proceeds. All cash, property or other proceeds
received by Agent pursuant to the enforcement of this Pledge Agreement, the
Credit Agreement or any other Related Document or any collateral document or
guaranty related to any of the foregoing after acceleration of the Secured
Obligations shall be distributed in the manner set forth in the Credit
Agreement.
7.3 Exercise of Rights in Pledged Collateral. After the occurrence
and during the continuance of an Event of Default, Agent or its nominee may, but
shall not be obligated to, at any time and from time to time, without notice to
Pledgor, exercise all voting and corporate rights relating to the Pledged
Collateral including, without limitation, exchange, subscription or any other
rights, privileges, or options pertaining to any shares of the Pledged Stock and
the Stock Rights, as if it were the absolute owner thereof. Upon the occurrence
and during the continuance of an Event of Default, in the event that Pledgor, as
record and beneficial owner of the Pledged Stock, shall
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receive or shall become entitled to receive, any cash dividends or other
distributions, Pledgor shall deliver to Agent, and Agent shall be entitled to
receive and retain, all such cash or other distributions. At all times when no
Event of Default has occurred and is continuing, Pledgor shall be entitled to
vote its Pledged Stock and otherwise exercise the incidents of ownership of the
Pledged Stock.
7.4 Notice of Disposition of Collateral. Notice of the time and
place of any public sale or the time after which any private sale or other
disposition of all or any part of the Pledged Collateral may be made shall be
reasonable if sent to Pledgor, addressed as set forth in Section 8, at least ten
days prior to any such public sale or the time after which any such private sale
or other disposition may be made.
7.5 Possession of Collateral. Beyond the exercise of reasonable care
to assure the safe custody of the Pledged Collateral in the physical possession
of Agent pursuant hereto, neither Agent nor any nominee of Agent, shall have any
duty or liability to collect any sums due in respect thereof or to protect,
preserve or exercise any rights pertaining thereto, and shall be relieved of all
responsibility for the Pledged Collateral upon surrendering it to Pledgor.
7.6 Specific Performance of Certain Covenants. Pledgor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1.1,
4.1.4, 4.1.6, 4.2.2, 4.2.3 or 4.2.4 will cause irreparable injury to Agent and
that Agent has no adequate remedy at law in respect of such breaches and
therefore agrees, without limiting the right of Agent to seek and obtain
specific performance of other obligations of Pledgor contained in this Pledge
Agreement, that the covenants of Pledgor contained in the Sections referred to
in this Section 7.6 shall be specifically enforceable against Pledgor.
7.7 Definition of Certain Terms. Terms defined in the Code which are
not otherwise defined in this Pledge Agreement are used in this Pledge Agreement
as defined in the Code as in effect on the date hereof.
7.8 Benefit of Agreement. The terms and provisions of this Pledge
Agreement shall be binding upon and inure to the benefit of Agent and Pledgor
and their respective successors and assigns, except that Pledgor shall not have
the right to assign its rights or obligations under this Pledge Agreement or any
interest herein.
7.9 Survival of Representations. All representations and warranties
of Pledgor contained in this Pledge Agreement shall survive the execution and
delivery of this Pledge Agreement.
7.10 Taxes and Expenses. Pledgor will upon demand pay to Agent (a)
any taxes (excluding income taxes, franchise taxes or other taxes levied on
gross earnings, profits or the like) payable or ruled payable by any Federal or
State authority in respect of this Pledge Agreement, together with interest and
penalties, if any, and (b) all reasonable expenses, including the reasonable
fees and expenses of counsel for Agent and of any experts and agents that Agent
may incur in
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connection with (i) the administration of this Pledge Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Agent hereunder, or (iv) the failure of
Pledgor to perform or observe any of the provisions hereof.
7.11 CHOICE OF LAW. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS.
7.12 Headings. The title of and section headings in this Pledge
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Pledge Agreement.
7.13 Termination. This Pledge Agreement shall continue in effect
until no Secured Obligations shall be outstanding.
7.14 Severability. The provisions of this Pledge Agreement are
severable and if any clause or provision thereof shall be held invalid or
unenforceable in whole or in part, then such invalidity or unenforceability
shall attach only to such clause or provision, or part thereof, and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision in this Pledge Agreement or any jurisdiction. In the
event of an inconsistency between the Credit Agreement and this Pledge
Agreement, the terms of the Credit Agreement shall control.
7.15 Attorney-In-Fact. Pledgor hereby irrevocably appoints Agent as
Pledgor's attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, from time to time in Collateral
Agent's discretion reasonably exercised, to take any action and to execute any
instrument that Agent deems reasonably necessary or advisable to accomplish the
purposes of this Pledge Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to Pledgor representing any
dividend, principal, interest payment or other proceeds or distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same, when and to the extent permitted by this Pledge Agreement.
7.16 Incorporation by Reference. The security interests granted
hereunder are granted in conjunction with the security interests granted to
Agent, for the benefit of Lenders, pursuant to the Credit Agreement. Pledgor
hereby acknowledges and affirms that the rights and remedies of Agent with
respect to the Pledged Collateral made and granted hereunder are more fully set
forth in the Credit Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
8. Notices. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
five (5) days after deposit in the United States mails (by certified mail,
return receipt requested), with proper postage prepaid, or upon delivery by
courier or upon transmission by telex, telecopy or similar electronic medium to
the following addresses:
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<PAGE>
(i) If to Agent, at:
First Source Financial LLP
2850 West Golf Road - Fifth Floor
Rolling Meadows, Illinois 60008
Attn: Contract Administration
Telecopy No.: (847) 734-7910, 7911
(ii) If to Pledgor at:
Niemand Holdings, Inc.
c/o Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: Richard D. Hinrichs
Telecopy: (402) 463-2467
or to such other address as each Person designates to the other in the manner
herein prescribed.
9. Waivers. Pledgor waives presentment and demand for payment of any
of the Secured Obligations, protest and notice of dishonor or default with
respect to any of the Secured Obligations, and all other notices to which
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein.
10. Counterparts. This Pledge Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Pledge Agreement
by signing any such counterpart.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their duly authorized officers on
the date first above written.
NIEMAND HOLDINGS, INC.
By: /s/ John W. Lloyd
-------------------------------
Name:
-------------------------------
Title: Secretary
-------------------------------
ACCEPTED AS OF THE DATE
FIRST SET FORTH ABOVE:
FIRST SOURCE FINANCIAL LLP,
as Agent
By: /s/ Chester R. Zara
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Name:
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Title: Senior Vice President
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[S-1]
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EXHIBIT 1
PLEDGED STOCK
Issuer Certificate No (s). Number of Shares
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Niemand Industries, Inc. 2 3,000
EXHIBIT 10.26
(Nebraska)
DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FINANCING STATEMENT
BY
GIBRALTAR PACKAGING GROUP, INC. D/B/A GREAT PLAINS PACKAGING,
a Delaware corporation
Trustor
TO
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation
Trustee
FOR THE BENEFIT OF
FIRST SOURCE FINANCIAL, LLP,
as Agent
Beneficiary
Relating to Premises in:
Adams County, Nebraska
DATED: As of July 31, 1998
This instrument was prepared by
and after recording should be returned to:
Stephen N. Sher, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
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TABLE OF CONTENTS
TOPIC PAGE
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I RECITALS ..............................................................1
II THE GRANT .............................................................3
III GENERAL AGREEMENTS ....................................................6
3.01 Payment of Indebtedness ......................................6
3.02 Impositions ....................................................6
3.03 Payment of Impositions by Beneficiary ..........................7
3.04 Insurance and Insurance Proceeds ...............................7
3.05 Condemnation Awards ............................................7
3.06 Restoration ....................................................8
3.07 Maintenance of Property ........................................8
3.08 Prohibited Liens and Transfers .................................8
3.09 Stamp Taxes ....................................................8
3.10 Change in Tax Laws .............................................9
3.11 Assignment of Leases and Rents .................................9
3.12 Releases ......................................................10
3.13 Further Assurances ............................................10
3.14 Environmental Provisions ......................................11
IV EVENT OF DEFAULT AND REMEDIES ........................................14
4.01 Event of Default ..............................................14
4.02 Acceleration upon Default, Additional Remedies ................14
4.03 Foreclosure by Power of Sale. .................................15
4.04 Beneficiary's Other Rights. ...................................15
4.05 Application of the Rents or Proceeds from Foreclosure or Sale .15
4.06 Cumulative Remedies; Delay or Omission Not a Waiver ...........16
4.07 Beneficiary's Remedies Against Multiple Parcels ...............16
4.08 No Merger .....................................................16
4.09 Insurance Upon Foreclosure ....................................17
4.10 Waiver of Statutory Rights ....................................17
V MISCELLANEOUS ........................................................17
5.01 Notices .......................................................17
5.02 Time of Essence ...............................................17
5.03 Covenants Run with Land .......................................18
5.04 GOVERNING LAW .................................................18
5.05 Rights and Remedies Cumulative ................................18
5.06 Severability ..................................................18
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5.07 Non-Waiver ....................................................18
5.08 Headings ......................................................18
5.09 Grammar .......................................................18
5.10 Deed in Trust .................................................18
5.11 Successors and Assigns ......................................19
5.12 Beneficiary in Possession .....................................19
5.13 Compliance with Applicable Law ................................19
5.14 Incorporation of Credit Agreement .............................19
5.15 Security Agreement ............................................19
5.16 Additional Provisions .........................................21
5.17 Intentionally Deleted. ........................................22
5.18 Reduction of Secured Amount ...................................22
5.19 Application of Payments and Repayments ........................22
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DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FINANCING STATEMENT
THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,
AND FINANCING STATEMENT ("Mortgage") is made as of July 31, 1998 by GIBRALTAR
PACKAGING GROUP, INC. D/B/A GREAT PLAINS PACKAGING, a Delaware corporation
("Trustor") with its principal office at 1140 Hayden Street, Fort Wayne, IN
46803 as trustor, to CHICAGO TITLE INSURANCE COMPANY, 171 North Clark Street,
Chicago, Illinois ("Trustee"), for the ratable benefit of FIRST SOURCE
FINANCIAL, LLP ("First Source"), an Illinois Limited liability partnership with
its principal office at 2850 Golf Road, Rolling Meadows, Illinois 60008, as
beneficiary, and as agent for itself, and for and on behalf of the other Lenders
(as hereinafter defined), and as assignee and secured party (together with any
successors or assigns, the "Beneficiary").
I
RECITALS
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation,
Beneficiary, and certain financial institutions (the "Lenders") from time to
time party to the Credit Agreement (as hereinafter defined) have executed of
even date herewith that certain Secured Credit Agreement (together with any and
all renewals, amendments, modifications, supplements, restatements, extensions
for any period, or increases or rearrangements thereof, the "Credit Agreement"),
pursuant to which Credit Agreement the Lenders have made and may in the future
make term and revolving loans and advances and other financial accommodations to
the Borrower (collectively, "Loans"; each, a "Loan") in the aggregate principal
amount of Forty-Two Million and no/100 Dollars ($42,000,000), upon the terms and
subject to the conditions set forth in the Credit Agreement;
WHEREAS, capitalized terms used herein without definitions shall have the
meaning assigned to such terms in the Credit Agreement;
WHEREAS, the Loans are in the form of: (i) a term loan in the aggregate
principal amount of Twenty Five Million and No/100 Dollars ($25,000,000) (the
"Term Loan"), (ii) a revolving credit loan in the aggregate principal amount of
Fifteen Million and No/100 Dollars ($15,000,000) (the "Revolving Credit Loan"),
(iii) a certain Letter of Credit (as defined in Section 1.1 of the Credit
Agreement) up to an amount not to exceed Two Million and No/100 Dollars
($2,000,000);
WHEREAS, the Revolving Credit Loans and Term Loans are evidenced by
certain promissory notes (the "Notes");
WHEREAS, Trustor has executed that certain Subsidiary Guaranty of even
date herewith in favor of Beneficiary and the Lenders (the "Guaranty", together
with any and all renewals, amendments, modifications, supplements, restatements,
extensions for any period, or increases or
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rearrangements thereof), to secure the Obligations (as defined in the Credit
Agreement) by pledging to Beneficiary the capital stock of Trustor and its
subsidiaries, if any, and by granting to Beneficiary a security interest in and
lien upon all of its personal and real property;
WHEREAS, Trustor wishes to provide further assurance and security to
Beneficiary and as a condition to Beneficiary and Lenders executing the Credit
Agreement, Beneficiary and Lenders are requiring that Trustor grant to
Beneficiary a mortgage lien on the Property (as hereinafter defined) to secure
the Trustor's obligations under the Guaranty;
WHEREAS, subject to the limitations set forth in Section 5.18 of this
Mortgage, this Mortgage is being given by Trustor to secure the performance of
all terms, covenants, conditions, agreements and liabilities of Trustor
contained in this Mortgage, the Guaranty, and other Loan Documents (hereinafter,
collectively, the "Obligations");
WHEREAS, Trustor derives substantial direct and indirect economic benefit
from the making of the Loans and other benefits to be provided to the Borrower
under the Credit Agreement, and other valuable consideration, the receipt and
adequacy of which are hereby acknowledged; and
WHEREAS, this Mortgage also secures the payment of and includes all
amounts owing in respect of all future or further advances of the Loans as shall
be made at all times, regardless of whether proceeds of the Loans have or shall
be disbursed by Beneficiary herein or its successors or assigns, to and for the
benefit of Trustor, its successors or assigns, to the same extent as if such
future advances were made on the date of the execution of this Mortgage. The
total amount of Indebtedness secured by this Mortgage may decrease or increase
from time to time but the total unpaid principal balance so secured at any one
time shall not exceed the lesser of: (i) the maximum principal sum permitted by
the laws of the State in which the Premises are located; or (ii) Eighty-Four
Million and No/100 Dollars ($84,000,000), together with interest thereon and any
and all disbursements made by Beneficiary for the payment of taxes, or insurance
on the Property covered by the lien of this Mortgage and for reasonable
attorneys' fees, loan commissions, service charges, liquidated damages, expenses
and court costs incurred in the collection of any or all of such sums of money.
Such further or future advances shall be considered obligatory advances and the
same shall bear interest at the same rate as specified in the Credit Agreement
unless such interest rate shall be modified by subsequent agreement. The parties
hereby acknowledge and intend that all advances, including future advances
whenever hereafter made, shall be secured by this Mortgage.
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II
THE GRANT
In consideration of the premises and for the foregoing purposes and for
other good and valuable consideration paid to Trustor by the Agent and Lenders,
the receipt and sufficiency of which is hereby acknowledged, Trustor hereby
grants, bargains, sells, assigns, releases, aliens, transfers, conveys, warrants
to the Trustee for the ratable benefit of the Agent, Lenders and Secured
Creditors (as defined in that certain Security Agreement ("Security Agreement")
of even date herewith from Trustor in favor of the Agent), a lien upon and
security interest in all Trustor's right, title and interest in and to the
following (collectively, the "Mortgaged Property"), whether now owned or held or
hereafter acquired:
NOW, THEREFORE, subject to the limitations set forth in Section 5.18 of
this Mortgage, in order to secure the payment of the Obligations and the
performance of all of the covenants, provisions, agreements and obligations
contained in this Mortgage or in the Loan Documents and also to secure the
payment of any and all Secured Indebtedness, direct or contingent, that may now
or hereafter become owing from Trustor to Beneficiary and the Lenders and the
performance of all other obligations under the Loan Documents, and in
consideration of the Premises described on Exhibit A, and all of its estate,
right, claim and interest therein, together with the following described
property, all of which other property is pledged primarily on a parity with the
Premises and not secondarily and for the foregoing purposes and for other good
and valuable consideration paid to Trustor by the Agent and Lenders, the receipt
and sufficiency of which is hereby acknowledged, Trustor hereby irrevocable
transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the
ratable benefit of the Agent and Lenders, a lien upon and security interest in
all Trustor's right, title and interest in and to the following (the Premises
and the following described rights, interests, claims and property collectively
referred to as the "Property"), whether now owned or held or hereafter acquired:
(a all buildings, structures and other improvements of every kind
and description now or hereafter erected, situated, or placed upon the
Premises (the "Improvements"), together with any and all Personal
Property (as defined in Paragraph (i) below) and all attachments now or
hereafter owned by Trustor and located in or on, forming part of,
attached to, used or intended to be used in connection with, or
incorporated in any such Improvements, including all extensions of,
additions to, betterments, renewals of, substitutions for and
replacements for any of the foregoing;
(b all estate, claim, demand, right, title and interest of Trustor
now owned or hereafter acquired, including without limitation, any
after-acquired title, franchise, license, remainder or reversion, in and
to any and all (i) land or vaults lying within the right-of-way of any
street, avenue, way, passage, highway, or alley, open or proposed,
vacated or otherwise, adjoining the Premises; (ii) alleys, sidewalks,
streets,
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avenues, strips and gores of land belonging, adjacent or pertaining to
the Premises or the Improvements; (iii) storm and sanitary sewer, water,
gas, electric, railway and telephone services relating to the Premises
and the Improvements; (iv) development rights, air rights, water, water
rights, water stock, gas, oil, minerals, coal and other substances of any
kind or character underlying or relating to the Premises or any part
thereof; and (v) tenements, hereditaments, easements, appurtenances,
other rights, liberties, reservations, allowances and privileges relating
to the Premises or the Improvements or in any way now or hereafter
appertaining thereto, including homestead and any other claims at law or
in equity;
(c all leasehold estates and right, title and interest of Trustor
in any and all leases, subleases, management agreements, arrangements,
concessions or agreements, written or oral, relating to the use and
occupancy of the Premises or the Improvements or any portion thereof, now
or hereafter existing or entered into (collectively "Leases");
(d all rents, issues, profits, royalties, revenue, advantages,
income, avails, claims against guarantors, all cash or security deposits,
advance rentals, deposits or payments given and other benefits now or
hereafter derived directly or indirectly from the Premises and
Improvements under the Leases or otherwise (collectively "Rents"),
subject to the right, power and authority to assign, collect and apply
the Rents;
(e all right, title and interest of Trustor in and to all options
to purchase or lease the Premises or the Improvements or any portion
thereof or interest therein, or any other rights, interests or greater
estates in the rights and properties comprising the Property now owned or
hereafter acquired by Trustor;
(f any interests, estates or other claims of every name, kind or
nature, both in law and in equity, which Trustor now has or may acquire
in the Premises and Improvements or other rights, interests or properties
comprising the Property now owned or hereafter acquired;
(g all rights of Trustor to any and all plans and specifications,
designs, drawings and other matters prepared for any construction on the
Premises or regarding the Improvements;
(h all rights of Trustor under any contracts executed by Trustor
with any provider of goods or services for or in connection with any
construction undertaken on or services performed or to be performed in
connection with the Premises or the Improvements;
(i all right, title and interest of Trustor in and to all the
following tangible personal property ("Personal Property") owned by
Trustor and now or at any time
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hereafter located in, on or at the Premises or the Improvements and used
or useful in connection therewith:
(i all building materials and equipment located upon the
Premises and intended for construction, reconstruction,
alteration, repair or incorporation in or to the Improvements now
or hereafter to be constructed thereon, whether or not yet
incorporated in such Improvements, (all of which shall be deemed
to be included in the Property upon delivery thereto);
(ii all machines, machinery, fixtures, apparatus, equipment
or articles used in supplying heating, gas, electricity,
air-conditioning, water, light, power, plumbing, sprinkler, waste
removal, refrigeration, ventilation, and all fire sprinklers,
alarm systems, protection, electronic monitoring equipment and
devices;
(iii all window, structural, maintenance and cleaning
equipment and rigs; and
(iv all fixtures now or hereafter owned by Trustor and
attached to or contained in and used or useful in connection with
the Premises or the Improvements. All such property owned by
Trustor and placed by it on the Premises or used in connection
with the operation or maintenance shall, so far as permitted by
law, be deemed for the purposes of this Mortgage to be part of the
real estate constituting and located on the Premises and covered
by this Mortgage. As to any of the property that is not part of
such real estate or does not constitute a "fixture," as such term
is defined in the Uniform Commercial Code of the State (the
"Code"), this Mortgage shall be deemed to be a security agreement
under the Code for the purpose of creating hereby a security
interest in property, which Trustor hereby grants to Beneficiary
as "secured party" as defined in the Code. The enumeration of any
specific items of Personal Property set forth herein shall in no
way exclude or be held to exclude any items of property not
specifically enumerated;
(j all the estate, interest, right, title or other claim or demand
which Trustor now has or may hereafter have or acquire with respect to
(i) proceeds of insurance in effect with respect to the Property and (ii)
any and all awards, claims for damages, judgments, settlements and other
compensation made for or consequent upon the taking by condemnation,
eminent domain or any like proceeding, or by any proceeding or purchase
in lieu thereof, of the whole or any part of the Property, including,
without limitation, any awards and compensation resulting from a change
of grade of streets and awards and compensation for severance damages
(collectively "Awards").
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TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and unto his
successors or substitutes in this trust, and unto his or their respective
successors and assigns, forever, IN TRUST, and for the uses and purposes
hereinafter set forth forev er, and Trustor does hereby bind itself and its
successors and assigns to WARRANT AND FOREVER DEFEND the Mortgaged Property unto
the Trustee and unto his respective successors and assigns against any and every
person lawfully claiming the same or any part thereof.
The Trustor hereby covenants with the Beneficiary and with the purchaser
at any foreclosure sale that at the execution and delivery hereof, Trustor owns
the Property and has good, indefeasible estate therein, in fee simple; that the
Property is free from all encumbrances and exceptions to title (and any claim of
any other person) other than the Permitted Liens as defined in Section 1.1 of
the Credit Agreement, (said encumbrances and Permitted Liens are hereinafter
collectively referred to as "Permitted Exceptions"); that it has good and
marketable title in and to the Property and good and lawful right to sell,
mortgage and convey the Property; and that Trustor and its successors and
assigns shall forever warrant and defend the Property against all claims and
demands whatsoever.
If and when Trustor has paid all of the Obligations, to the extent
secured hereby, as provided in Section 5.18 hereof, and there exist no
commitments of the Lender under the Loan Documents which could give rise to
Obligations, then this Mortgage and the estate, right and interest of
Beneficiary in and to the Property shall cease and shall be released by
Beneficiary delivering to Trustor a satisfaction of this Mortgage in proper
recordable form at the cost of Trustor, but until such time shall remain in full
force and effect.
III
GENERAL AGREEMENTS
III.1 Payment of Indebtedness. Trustor shall pay promptly and when due
all amounts owing in respect of the Obligations in the manner provided in the
Guaranty, this Mortgage or the other Loan Documents.
III.2 Impositions. Trustor shall pay immediately, when first due and
owing, all general taxes, special taxes, special assessments, water charges,
sewer charges, and any other charges, fees, taxes, claims, levies, expenses,
liens and assessments, ordinary or extraordinary, governmental or
nongovernmental, statutory or otherwise (all of the foregoing being herein
collectively referred to as "Impositions"), that may be asserted against the
Property or any part thereof or interest therein.
Trustor may, in good faith and with reasonable diligence, contest the
validity or amount of any Impositions; provided, that:
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(a Trustor shall pay all such Impositions so contested under
protest if such payment is required to prevent such contest from having
the effect of preventing the sale or forfeiture of the Property or any
sub-part or interest;
(b Trustor has notified Beneficiary in writing of the intention of
Trustor to prosecute the contest before any Impositions have been
materially increased by any interest, penalties, or costs; and
(c Trustor shall diligently prosecute the contest of such
Impositions by appropriate legal proceedings.
III.3 Payment of Impositions by Beneficiary. Upon Trustor's failure to
pay the Impositions as provided above, Beneficiary is hereby authorized to make
or advance, in the place and stead of Trustor, any payment relating to
Impositions, unless such Imposition is then being contested by Trustor pursuant
to Section 3.02. Beneficiary may do so according to any bill, statement, or
estimate procured from the appropriate public office without inquiry into the
accuracy or the validity of any Impositions, lien, sale, forfeiture, or related
title or claim. Beneficiary is further authorized to make or advance, in place
of Trustor, unless such matter is being contested by Trustor in accordance with
Section 3.02 or Section 3.08(a), any payment relating to any apparent adverse
title, lien, statement of lien, encumbrance, claim, charge, or payment otherwise
relating to any other purpose herein and hereby authorized (except the Permitted
Exceptions), but not enumerated in this Section, whenever, in Beneficiary's
reasonable judgment and discretion, such advance is necessary or desirable to
protect the full security intended to be created by this Mortgage. Subject to
the limitations set forth in Section 5.18, all such advances and indebtedness
authorized by this Section shall constitute Obligations and shall be repayable
by Trustor upon demand with interest at the rate of interest which may be due
and owing from time to time on any loan and payable pursuant to Section 4.2(a)
of the Credit Agreement (the "Default Rate").
III.4 Insurance and Insurance Proceeds. Trustor's insurance requirements
shall be as set forth in Section 11.4 of the Credit Agreement. Trustor's rights
to insurance proceeds shall be as set forth in Section 7.6 of the Credit
Agreement.
III.5 Condemnation Awards. In the event of any taking of the Property or
any part thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special, or by reason of the temporary
requisition of the use or occupancy of the Property or any part thereof, by any
governmental authority, civil or military (each, a "Taking"), Trustor shall
immediately notify Beneficiary upon receiving notice of such Taking or
commencement of proceedings therefor. All proceeds or any award or payment in
respect of any Taking are hereby assigned and shall be paid to Beneficiary and
Trustor shall take all steps necessary to notify the condemning authority of
such assignment. Such award or payment, less the amount of any expenses
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incurred in litigating, arbitrating, compromising or settling any claim arising
out of such Taking ("Net Award"), shall be applied in accordance with the
provisions of Section 3.06 hereafter.
III.6 Restoration. Trustor's rights with respect to restoring the
Premises with a Net Award of Net Proceeds shall be as set forth in the Credit
Agreement.
III.7 Maintenance of Property. Trustor shall:
(a promptly repair, restore, replace or rebuild any portion of the
Property which may become damaged, destroyed, altered, removed, severed,
or demolished, whether or not proceeds of insurance are available or
sufficient for the purpose, with replacements at least equal in quality
and condition as previously existed, free from any security interest in,
encumbrances on or reservation of title thereto;
(b keep the Property in good condition and repair, without waste,
and free from mechanics', materialmen's or like liens or claims except
for the Permitted Exceptions and as permitted under the Credit Agreement;
and
(c not make any material alterations in the Property, except as
permitted or not prohibited by the Credit Agreement.
III.8 Prohibited Liens and Transfers.
(a Except as otherwise provided in the Credit Agreement, and as
provided by operation of the laws of the State, Trustor shall not create,
suffer, or permit to be created or filed against the Property any
Mortgage lien or other lien superior or inferior to the lien created by
this Mortgage. To the extent that any lien, privilege or other security
device is created by operation of law, Trustor shall cause such security
device to be released as soon as practicable after its creation. Trustor
may contest any lien claim arising from any work performed, material
furnished, or obligation incurred by Trustor upon furnishing Beneficiary
security and indemnification reasonably satisfactory to Beneficiary for
the final payment and discharge of the lien.
(b Except as otherwise provided in the Credit Agreement, Trustor
may not sell, lease or convey all or any part of the Property.
III.9 Stamp Taxes. If at any time the United States government, or any
federal, state, or municipal governmental subdivision, requires Internal Revenue
or other documentary stamps or levies any tax on this Mortgage or on the Notes,
or requires payment of any tax in the nature of or comparable to the United
States Interest Equalization Tax on the Obligations, then Trustor shall pay such
tax, including interest and penalties, in the required manner.
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III.10 Change in Tax Laws. In the event of the enactment, after the date
of this Mortgage, of any law of the United States of America, or any state or
political subdivision thereof, (i) deducting from the value of the Premises, for
the purpose of taxation, the amount of any lien thereon; (ii) imposing upon
Beneficiary the payment of all or any part of the taxes, assessments, charges or
liens hereby required to be paid by Trustor; or (iii) changing in any way the
laws relating to the taxation of mortgages or debts secured by mortgages or
Trustor's interest in the Property, or the manner of collection of taxes, so as
to affect this Mortgage or the Obligations; then Trustor, upon demand by
Beneficiary, and as required by law, shall pay such taxes, assessments, charges,
or liens or reimburse Beneficiary therefor. If, in the opinion of counsel for
Beneficiary, it would be unlawful to require Trustor to make such payment or the
making of such payment might result in the imposition of interest beyond the
maximum amount permitted by law, then the applicable provisions of the Credit
Agreement shall apply. Nothing contained in this Section 3.10 shall be construed
as obligating Trustor to pay any portion of Beneficiary's federal, state and
local income tax.
III.11 Assignment of Leases and Rents. All right, title, and interest of
Trustor in and to all present Leases affecting the Property and including and
together with any and all future Leases, written or oral, upon all or any part
of the Property and together with all of the rents, income, receipts, revenues,
issues, avails and profits from or due or arising out of the Property are hereby
transferred and assigned simultaneously herewith to Beneficiary as further
security for the payment of the Obligations. All future Leases affecting the
Property shall be submitted by Trustor to Beneficiary for its approval prior to
execution, which approval shall not be unreasonably withheld or delayed. Each
Lease, including all future Leases shall be subordinate to this Mortgage,
provided that, upon the request of the Trustor and the lessee under any such
Lease, Beneficiary shall enter into a Subordination, Nondisturbance and
Attornment Agreement (or similar agreement) with such lessee in form and
substance reasonably satisfactory to Beneficiary, pursuant to which (i)
Beneficiary will agree that so long as such Lease shall be in full force and
effect and such lessee is not in default thereunder, Beneficiary will not
disturb, pursuant to a foreclosure action or otherwise, such lessee's possession
under such Lease, and (ii) such lessee shall agree that if Beneficiary or any
future holder of this Mortgage shall become the owner of the Property by reason
of foreclosure of the Mortgage or otherwise, or if the Property shall be sold as
a result of any foreclosure action or deed in lieu thereof, then such lease
shall continue in full force and effect as a direct lease between such lessee
and the then owner of the Property. Although it is the intention of the parties
that the assignment contained in this Section shall be a present and absolute
assignment, it is expressly understood and agreed, anything to the contrary
notwithstanding, that Beneficiary shall not exercise any of the rights or powers
conferred upon it by this Section until an Event of Default shall occur under
this Mortgage. From time to time, Trustor shall furnish Beneficiary with
executed copies of each of the Leases and shall use commercially reasonable
efforts to furnish Beneficiary with estoppel letters from each tenant under each
of the Leases in a form satisfactory to Beneficiary within thirty (30) days
after Beneficiary's written demand.
Following the occurrence of an Event of Default (a) Beneficiary shall
have the rights and powers as are provided herein, (b) this Mortgage shall
constitute a direction to each lessee under the Leases and each guarantor
thereof to pay all Rents directly to Beneficiary without proof of the Event
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of Default, and (c) Beneficiary shall have the authority, as Trustor's
attorney-in-fact (such authority being coupled with an interest and
irrevocable), to sign the name of Trustor and to bind Trustor on all papers and
documents relating to the operation, leasing and maintenance of the Property.
If Trustor, as lessor under any Lease, shall neglect or refuse to
perform, observe and keep all of the covenants, provisions and agreements
contained in such Lease, then Beneficiary may perform and comply with any such
Lease covenants, agreements and provisions. All costs and expenses incurred by
Beneficiary in complying with such covenants, agreements, and provisions shall
constitute Obligations and shall be payable upon demand with interest at the
Default Rate.
Beneficiary shall not be obligated to perform or discharge any
obligation, duty or liability under any Lease, and Trustor shall and does hereby
agree, except to the extent of Beneficiary's gross negligence or willful
misconduct, to indemnify and hold Beneficiary harmless of and from any and all
liability, loss or damage which it may or might incur under any Lease or under
or by reason of their assignments and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of all alleged obligations
or undertakings on its part to perform or discharge any of the terms, covenants
or agreements contained in such Lease. Should Beneficiary incur any such
liability, loss or damage under any Lease or under or by reason of its
assignment, or in the defense of any claims or demands, the amount thereof,
including costs, expenses and reasonable attorneys' fees, shall, subject to the
limitations set forth in Section 5.18 of this Mortgage, be secured hereby.
Trustor shall reimburse Beneficiary therefor immediately upon demand with
interest payable at the Default Rate.
III.12 Releases. Without notice and without regard to the consideration
therefor, and to the existence at that time of any inferior liens, Beneficiary
may release from the lien created hereby all or any part of the Property, or
release from liability any person obligated to repay any Obligations, without
affecting the liability of any party to any of the Notes, this Mortgage, or any
of the other Loan Documents (including without limitation any guaranty given as
additional security) and without in any way affecting the priority of the lien
created hereby. Beneficiary may agree with any liable party to extend the time
for payment of any part or all of the Obligations. Such agreement shall not in
any way release or impair the lien created by this Mortgage or reduce or modify
the liability of any person or entity obligated personally to repay the
Obligations, but shall extend the lien created by this Mortgage as against the
title of all parties having any interest, subject to the Obligations in the
Property.
III.13 Further Assurances. Trustor agrees that, upon request of
Beneficiary from time to time, it will, at Trustor's sole cost and expense,
execute, acknowledge and deliver all such additional instruments and further
assurances of title and will do or cause to be done all such further acts and
things as may reasonably be necessary to fully effectuate the intent of this
Mortgage, including without limitation, reimbursing Beneficiary for the
reasonable costs of appraisals of the Property, to the extent that Beneficiary
determines in good faith that such appraisals are required by any law or any
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation thereof, including, without
limitation, the provisions of Title
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XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
and any rules promulgated to implement such provisions. In the event that
Trustor shall fail to do any of the foregoing, Beneficiary may, in its sole
discretion, do so in the name of Trustor, and Trustor hereby appoints
Beneficiary as its attorney-in-fact to do any of the foregoing.
III.14 Environmental Provisions.
(a For the purposes of this Section the following terms shall have the
following meanings: (i) the term "Hazardous Material" shall mean any material or
substance that, whether by its nature or use, is now or hereafter defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Requirement, or which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
which is or contains petroleum, gasoline, diesel fuel or another petroleum
hydrocarbon product; (ii) the "Environmental Requirements" shall collectively
mean all applicable present and future laws, statutes, ordinances, rules,
regulations, orders, codes, licenses, permits, decrees, judgments, directives of
or by any Governmental Authority and relating to or addressing the protection of
the environment or human health; and (iii) the term "Governmental Authority"
shall mean the federal government, or any state or other political subdivision
thereof, or any agency, court or body of the federal government, any state or
other political subdivision thereof, exercising executive, legislative,
judicial, regulatory or administrative functions.
(b Trustor hereby represents and warrants to Beneficiary that to the best
of Trustor's knowledge after commercially reasonable inquiry and except as
disclosed in writing to Beneficiary or as set forth on Schedule 10.19 to the
Credit Agreement: (i) no Hazardous Material is currently located at or has been
disposed of on, in, under or about the Property in material violation of any
Environmental Requirement; (ii) no releasing, emitting, leaching, discharging,
dumping or disposing of any Hazardous Material from the Property onto any other
property or from any other property onto or into the Property has occurred or is
occurring in material violation of any Environmental Requirement; (iii) no
notice of violation, lien, complaint, suit, order or other notice with respect
to the Property is presently outstanding under any Environmental Requirement
which, if not resolved, is reasonably likely to have a Material Adverse Effect
(as defined in the Credit Agreement); and (iv) the Property and the operation
thereof are in material compliance with all applicable Environmental
Requirements.
(c Trustor shall comply, and shall use its best efforts to cause all
tenants or other lawful occupants of the Property to comply with all applicable
and material Environmental Requirements, and will not generate, store, handle,
process, dispose of or otherwise use, and will not grant permission to any
tenant or other occupant of the Property to generate, store, handle, process,
dispose of or otherwise use, Hazardous Materials at, in, on, or about the
Property in a manner that is reasonably likely to lead or potentially lead to
the imposition on Trustor, Beneficiary or the Property of any material liability
or lien of any nature whatsoever, based upon the assessed value of the Property,
or lien under any Environmental Requirement which is reasonably likely to have a
Material Adverse Effect. Trustor shall notify Beneficiary promptly in the event
of any spill or other
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release of any Hazardous Material at, in, on, under or about the Property which
is required to be reported to a Governmental Authority under any Environmental
Requirement, will promptly forward to Beneficiary copies of any notices received
by Trustor relating to alleged violations of any Environmental Requirement and
will promptly pay when due or contest in good faith within the applicable time
periods any fine or assessment against Beneficiary, Trustor or the Property
relating to any Environmental Requirement. If at any time it is it is determined
that the operation or use of the Property by Trustor violates any applicable and
material Environmental Requirement or that there are Hazardous Materials located
at, in, on, under or about the Property in violation of any applicable
Environmental Requirement or that there are Hazardous Materials located at, in,
on, under or about the Property which, under any Environmental Requirement,
require special handling in collection, storage, treatment or disposal, or any
other form of cleanup or corrective action, Trustor shall, within thirty (30)
days after receipt of notice thereof from any Governmental Authority or from
Beneficiary, take, at Trustor's sole cost and expense, such actions as may be
necessary to fully comply in all material respects with all applicable
Environmental Requirements or contest in good faith the requirement to take such
actions, provided, however, that if such compliance cannot reasonably be
completed within such thirty (30) day period, Trustor shall thereafter
diligently and expeditiously proceed to fully comply with or contest in good
faith in a timely fashion all Environmental Requirements.
(d If Trustor fails to timely take or contest, or to diligently and
expeditiously proceed to complete in a timely fashion, any such action described
in subsection (c) above, Beneficiary may, in its reasonable discretion, make
advances or payments toward the performance or satisfaction of any activities
required pursuant to any Environmental Requirement, but shall in no event be
under any obligation to do so. All sums so advanced and paid by Beneficiary
(including, without limitation, reasonable counsel and consultant fees and
expenses, investigation and laboratory fees and expenses, and fines or other
penalty payments) and all sums advanced or paid in connection with any judicial
or administrative investigation or proceeding relating thereto, will
immediately, upon demand, become due and payable from Trustor and shall bear
interest at the Default Rate from the date any such sums are so advanced or paid
by Beneficiary until the date any such sums are repaid by Trustor to
Beneficiary. Trustor will execute and deliver, promptly upon request, such
instruments as Beneficiary may reasonably deem necessary to permit Beneficiary
to take any such action, and such additional notes and mortgages, as Beneficiary
may require to secure all sums so advanced or paid by Beneficiary. If a lien is
filed against the Property by any Governmental Authority resulting from the need
to expend or the actual expending of monies arising from an action or omission,
whether intentional or unintentional, of Trustor or for which Trustor is
responsible, resulting in the releasing, spilling, leaking, leaching, pumping,
emitting, pouring, emptying or dumping of any Hazardous Material into the waters
or onto land located within or without the State where the Property is located,
then Trustor will, within thirty (30) days from the date that Trustor receives
notice that such lien has been placed against the Property (or within such
shorter period of time as may be specified by Beneficiary if such Governmental
Authority has commenced steps to cause the Property to be sold pursuant to such
lien), either (a) pay (or otherwise satisfy) the claim and remove the lien; or
(b) contest such lien in good faith; or (c) furnish a cash deposit, bond, or
such
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other security with respect thereto as is satisfactory in all respects to
Beneficiary and is sufficient to effect a complete discharge of such lien on the
Property.
(e Beneficiary may, at its option, at intervals of not less than one
year, or more frequently, if Beneficiary reasonably believes that a Hazardous
Material or other environmental condition violates or threatens to violate any
Environmental Requirement, cause an environmental audit of the Property or
portions thereof to be conducted to evaluate Trustor's compliance with the
provisions of this Section, and Trustor shall cooperate in all reasonable ways
with Beneficiary in connection with any such audit. If such audit discloses that
a violation of an Environmental Requirement exists or if such audit was required
or prescribed by law, regulation or governmental or quasi-governmental
authority, Trustor shall pay all costs and expenses incurred in connection with
such audit; otherwise, the costs and expenses of such audit shall,
notwithstanding anything to the contrary set forth in this Section, be paid by
Beneficiary.
(f Except for: (a) any Claims (as hereinafter defined) arising as a
result of the gross negligence of wilful misconduct of Beneficiary during the
term of this Mortgage; or (b) any Claims arising as a result of any acts of
Beneficiary or its successors and assigns or the occurrence of any acts by any
third parties after Beneficiary or its successor and assigns take possession of
the Property, in the event Beneficiary takes possession of the Property after an
Event of Default, Trustor will defend, indemnify, and hold harmless Beneficiary,
and its employees, agents, officers, and directors, from and against any and all
claims, demands, penalties, causes of action, fines, liabilities, settlements,
damages, costs, or expenses of whatever kind or nature, known or unknown,
foreseen or unforeseen, contingent or otherwise, including, without limitation,
reasonable counsel and consultant fees and expenses, investigation and
laboratory fees and expenses, court costs, and litigation expenses (all of the
foregoing collectively for purposes of this Section the "Claims"), arising out
of, or in any way related to: (i) any breach by Trustor of any of the provisions
of this Section; (ii) the presence, disposal, spillage, discharge, emission,
leakage, release, or threatened release of any Hazardous Material which is at,
in, on, under, about, from or affecting the Property, including, without
limitation, any damage or injury resulting from any such Hazardous Material to
or affecting the Property or the soil, water, air, vegetation, buildings,
personal property, persons or animals located on the Property, or in any other
property or otherwise; (iii) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to any such
Hazardous Material; (iv) any lawsuit brought or threatened, settlement reached,
or order or directive of or by any Governmental Authority relating to such
Hazardous Material; or (v) any violation of any Environmental Requirement or any
policy or requirement of Beneficiary hereunder. The aforesaid indemnification
shall, notwithstanding any exculpatory or other provision of any other document
or instrument now or hereafter executed and delivered in connection with the
loan evidenced by the Notes and secured by this Mortgage, constitute the
personal recourse undertakings, obligations and liabilities of Trustor, and
shall survive the foreclosure or satisfaction of this Mortgage and the discharge
of Trustor's other Obligations hereunder.
IV
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EVENT OF DEFAULT AND REMEDIES
IV.1 Event of Default. Each of the following shall constitute an event of
default ("Event of Default") under this Mortgage:
(a) The occurrence of an "Event of Default" as such term is defined in
the Credit Agreement (including, if applicable, the expiration of any grace
period provided therein); or
(b) Failure of Trustor to perform or observe any other covenant,
agreement, representation, warranty or other provision contained in this
Mortgage within thirty (30) days after written notice of the default from
Beneficiary to Trustor.
IV.2 Acceleration upon Default, Additional Remedies. If an Event of
Default occurs, Beneficiary may declare the Obligations secured hereby to be due
and payable and the same shall thereupon become due and payable without any
presentment, demand, protest or notice of any kind. Thereafter, Beneficiary may:
(a) Either in person or by agent, with or without bringing any action or
proceeding, or by a receiver appointed by a court and without regard to the
adequacy of its security, enter upon and take possession of the Property, or any
part thereof, in its own name or in the name of Trustee, and do any acts which
it deems necessary or desirable to preserve the value, marketability or
rentability of the Property, or part thereof or interest therein, increase the
income therefrom or protect the security hereof and, with or without taking
possession of the Property, sue for or otherwise collect the rents, issues and
profits therefrom, including those past due and unpaid, and apply the same, less
costs and expenses of operation and collection including attorney's fees, upon
any indebtedness secured hereby, all in such order as Beneficiary may determine.
The entering upon and taking possession of the Property, the collection of such
rents, issues and profits and the application thereof as aforesaid, shall not
cure or waive any default or notice of default hereunder or invalidate any act
done in response to such default or pursuant to such notice of default and,
notwithstanding the continuance in possession of the Property or the collection,
receipt and application of rents, issues or profits, Trustee or Beneficiary
shall be entitled to exercise every right provided for in any of the Loan
Documents or by law upon occurrence of any event of default, including the right
to exercise the power of sale.
(b) Commence an action to foreclose this Mortgage as a mortgage, appoint
a receiver or specifically enforce any of the covenants hereof;
(c) Deliver to Trustee a written declaration of default and demand for
sale, and a written notice of default and election to cause Trustor's interest
in the Property to be sold, which notice Trustee shall cause to be duly filed
for record in the appropriate offices of the County in which the Property is
located; or
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(d) Exercise any and all remedies permitted by the Nebraska Uniform
Commercial Code.
IV.3 Foreclosure by Power of Sale. If Beneficiary elects to foreclose by
exercise of the Power of Sale herein contained, Beneficiary shall notify Trustee
and shall deposit with Trustee this Mortgage and the Loan Documents and such
receipts and evidence of expenditures made and secured hereby as Trustee may
require.
(a) Upon receipt of such notice from Beneficiary, Trustee shall cause to
be recorded, published and delivered to Trustor such Notice of Default and
Notice of Sale as then required by law and by this Deed of Trust. Trustee shall,
without demand on Trustor, after such time as may then be required by law and
after recordation of such Notice of Default and after Notice of Sale having been
given as required by law, sell the Property at the time and place of sale fixed
by it in such Notice of Sale, either as a whole, or in separate lots or parcels
or items as Trustee shall deem expedient, and in such order as it may determine,
at public auction to the highest bidder for cash in lawful money of the United
States payable at the time of sale. Trustee shall deliver to such purchaser or
purchasers thereof its good and sufficient deed or deeds conveying the property
so sold, but without any covenant or warranty, express or implied. The recitals
in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including, without limitation, Trustor,
Trustee or Beneficiary, may purchase at such sale.
(b) As may be permitted by law, after deducting all costs, fees and
expenses of Trustee and of this Trust, including costs of evidence of title in
connection with sale, Trustee shall apply the proceeds of sale to payment of (i)
all sums expended under the terms hereof or under the terms of the Loan
Documents, not then repaid, including, but not limited to accrued interest and
late charges, (ii) all other sums then secured hereby, and (iii) the remainder,
if any, to the person or persons legally entitled thereto.
(c) Trustee may in the manner provided by law, postpone sale of all or
any portion of the Property.
IV.4 Beneficiary's Other Rights. Beneficiary shall have the right to take
such other steps to protect and enforce its rights, whether by action, suit or
proceeding at law or in equity for the specific performance of any covenant,
condition or agreement contained in this Mortgage, or in aid of the execution of
any power granted in this Mortgage, or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or equitable remedy or otherwise as
Beneficiary and/or the Trustees shall elect.
IV.5 Application of the Rents or Proceeds from Foreclosure or Sale. In
any foreclosure of this Mortgage by judicial action, or any sale of the Property
under the power of sale herein granted, the proceeds of such foreclosure
proceeding and/or sale and/or the Rents paid to Beneficiary shall, to the extent
permitted by law, be applied as follows:
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First: to the ratable payment of the costs and expenses of such sale,
including reasonable compensation to Beneficiary, its agents and attorneys, and
of any judicial or private proceedings in which such sale may be made, and,
subject to the limitations set forth in Section 5.18 of this Mortgage, of all
other expenses, liabilities and advances made or incurred by Beneficiary and its
agents and attorneys under this Mortgage, and the Guaranty, together with
interest at the Default Rate on such costs, expenses and liabilities and on all
advances made by Beneficiary from the date any such cost, expense or liability
is due, owing or unpaid or any such advance is made, in each case until paid in
full.
Second: to the payment of the Obligations, subject to the limitations set
forth in Section 5.18 of this Mortgage.
Third: the surplus, if any, to be paid to whomever may be lawfully
entitled to receive such surplus.
IV.6 Cumulative Remedies; Delay or Omission Not a Waiver. Each remedy or
right of Beneficiary shall not be exclusive of, but shall be in addition to,
every other remedy or right now or hereafter existing at law or in equity. No
delay in the exercise or omission to exercise any remedy or right accruing on
the occurrence or existence of any Event of Default under the Credit Agreement
shall impair any such remedy or right or be construed to be a waiver of any such
Event of Default or acquiescence therein, nor shall it affect any subsequent
Event of Default of the same or different nature. Every such remedy or right may
be exercised concurrently or independently and when and as often as may be
deemed expedient by Beneficiary.
IV.7 Beneficiary's Remedies Against Multiple Parcels. The Obligations
hereby secured are also secured by other properties, lots or parcels covered by
other mortgages or deeds of trust ("Other Mortgages") within and/or outside the
State. If this Mortgage or any of the Other Mortgages is foreclosed upon, or if
judgment is entered upon any Obligations secured hereby, or if Beneficiary
exercises its power of sale, execution may be made upon or Beneficiary may
exercise its power of sale against any one or more of the properties, lots or
parcels and not upon the others, or upon all of such properties or parcels,
either together or separately, and at different times or at the same time, and
execution sales or sales under the power of sale herein granted may likewise be
conducted separately or concurrently, in each case at the election of
Beneficiary. No event of enforcement taking place in any state other than the
State shall (and no failure to prosecute any such other enforcement) in any way
stay, preclude or bar enforcement of this Mortgage and Beneficiary may pursue
any or all of Beneficiary's rights and remedies under this Mortgage to the
maximum extent permitted by State law until the Obligations are paid and
discharged in full.
IV.8 No Merger. In the event of a foreclosure of this Mortgage, the
Obligations then due Beneficiary shall not be merged into any decree of
foreclosure entered by the court, and Beneficiary may concurrently or
subsequently seek to foreclose one or more mortgages or deeds of trust which
also secure said Obligations.
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IV.9 Insurance Upon Foreclosure. In case of an insured loss after
foreclosure proceedings have been instituted, the proceeds of any insurance
policy or policies, if not applied in Restoring the Property shall be used to
pay the amount due in accordance with any decree of foreclosure that may be
entered in any such proceedings, and the balance, if any, shall be paid as the
court may direct. In case of the foreclosure of this Mortgage, the court in its
judgment may provide that the judgment creditor may cause a new or additional
loss clause to be attached to each of said policies making the loss thereunder
payable to said judgment creditor; and any such foreclosure judgment may further
provide. In the event of foreclosure sale, Beneficiary is hereby authorized, but
not required, without the consent of Trustor, to assign or cause a receiver to
assign any and all insurance policies to the purchaser at the sale, or to take
such other action as Beneficiary may deem advisable, to cause the interest of
such purchaser to be protected by any of the said insurance policies.
IV.10 Waiver of Statutory Rights. Trustor shall not apply for or avail
itself of any appraisement, valuation, redemption, stay, extension, or exemption
laws, or any so-called "moratorium laws," now existing or hereafter enacted, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage, and
Trustor hereby waives the benefit of such laws (to the extent permitted by
applicable law). Trustor, for itself and all who may claim through or under it,
waives any and all rights to have the Property and estates comprising the
Property marshalled upon any foreclosure of the lien of this Mortgage, and
agrees that any court having jurisdiction to foreclose such lien may order the
Property sold in its entirety. Trustor further waives any and all rights of
redemption from foreclosure and from sale under any order or decree of
foreclosure of the lien created by this Mortgage, for itself and on behalf of:
(i) any trust estate of which the Premises are a part, all beneficially
interested persons; (ii) each and every person acquiring any interest in the
Property or title to the Premises subsequent to the date of this Mortgage; and
(iii) all other persons to the extent permitted by the provisions of laws of the
State in which the Premises are located.
V
MISCELLANEOUS
V.1 Notices. Any notice that Beneficiary or Trustor may desire or be
required to give to the other shall be in writing and shall be mailed or
delivered in the manner set forth in the Credit Agreement.
V.2 Time of Essence. Time is of the essence of this Mortgage.
V.3 Covenants Run with Land. All of the covenants of this Mortgage shall
run with the land constituting the Premises.
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V.4 GOVERNING LAW. THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED
ACCORDING TO THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REFERENCE TO CONFLICTS
OF LAWS PROVISIONS THEREOF) PROVIDED, HOWEVER, THAT MATTERS OF CREATION,
PERFECTION, PRIORITY OR ENFORCEABILITY OF ANY AND ALL RIGHTS AND REMEDIES
PROVIDED FOR HEREIN SHALL BE GOVERNED BY THE LAWS OF THE NEBRASKA. TO THE EXTENT
THAT THIS MORTGAGE MAY OPERATE AS A SECURITY AGREEMENT UNDER THE CODE,
BENEFICIARY SHALL HAVE ALL RIGHTS AND REMEDIES CONFERRED THEREIN FOR THE BENEFIT
OF A SECURED PARTY AS SUCH TERM IS DEFINED IN THE CODE.
V.5 Rights and Remedies Cumulative. All rights and remedies in this
Mortgage are cumulative. The holder of the Guaranty and of every other
obligation secured hereby may recover judgment, issue execution therefor, and
resort to every other right or remedy available at law or in equity, without
first exhausting and without affecting or impairing the security of any right or
remedy.
V.6 Severability. If any provision of this Mortgage, or any paragraph,
sentence, clause, phrase, or word, or their application, in any circumstance, is
held invalid, the validity of the remainder of this Mortgage shall be construed
as if such invalid part were never included.
V.7 Non-Waiver. Unless expressly provided in this Mortgage to the
contrary, no consent or waiver, express or implied, by any party, to or of any
breach or default by any other party shall be deemed a consent to or waiver of
the performance by such defaulting party of any other obligations or the
performance by any other party of the same, or of any other, obligations.
V.8 Headings. The headings of sections and paragraphs in this Mortgage
are for convenience or reference only and shall not be construed in any way to
limit or define the content, scope, or intent of the provisions.
V.9 Grammar. As used in this Mortgage, the singular shall include the
plural, and masculine, feminine, and neuter pronouns shall be fully
interchangeable, where the context so requires.
V.10 Deed in Trust. If title to the Property or any part thereof is now
or hereafter becomes vested in a trustee, any prohibition or restriction against
the creation of any lien on the Property shall be construed as a similar
prohibition or restriction against the creation of any lien on or security
interest in the beneficial interest of such trust.
V.11 Successors and Assigns. This Mortgage shall be binding upon Trustor,
its successors, assigns, legal representatives, and all other persons or
entities claiming under or through Trustor. The word "Beneficiary", when used
herein, shall include First Source Financial, LLP, in its capacity as
Administrative Agent and as Agent for the Lenders together with its successors,
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assigns and legal representatives. "Trustor", when used herein, shall include
all such persons and entities and any others liable for the payment of the
Obligations, or any part thereof, whether or not they have executed the notes or
this Mortgage.
V.12 Beneficiary in Possession. Nothing contained in this Mortgage shall
be construed as constituting Beneficiary a Beneficiary in possession in the
absence of the actual taking of possession of the Property.
V.13 Compliance with Applicable Law. Anything elsewhere herein contained
to the contrary notwithstanding,
(a) in the event that any provision in this Mortgage shall be
inconsistent with any provision of applicable law, the provisions of
applicable law shall take precedence over the provisions of this
Mortgage, but shall not invalidate or render unenforceable any other
provision of this Mortgage that can be construed in a manner consistent
with applicable law; and
(b) if any provision of this Mortgage shall grant to Beneficiary
any rights or remedies upon default of Trustor which are more limited
than the rights that would otherwise be vested in Beneficiary under
applicable law in the absence of said provision, Beneficiary shall be
vested with the rights granted under applicable law to the full extent
permitted by law.
V.14 Incorporation of Credit Agreement. The terms of the Credit Agreement
are incorporated by reference herein as though set forth in full detail. In the
event of any conflict between the terms and provisions of this Mortgage and any
other Loan Document, the terms and provisions of such other Loan Document shall
control.
V.15 Security Agreement. This Mortgage is hereby deemed to be as well a
Security Agreement for the purpose of creating hereby a security interest
securing the indebtedness secured hereby in and to the Personal Property.
Without derogating any of the provisions of this Mortgage, Trustor by this
Mortgage:
(a) grants to Beneficiary a security interest in all of Trustor's
right, title and interest in and to all Personal Property, including, but
not limited to, the items referred to above, together with all additions,
accessions and substitutions and all similar property hereafter acquired
and used or obtained for use on, or in connection with the Property. The
Personal Property and all proceeds thereof are intended to be secured
hereby; however, such intent shall never constitute an express or implied
consent on the part of Beneficiary to the sale of any or all Personal
Property;
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(b) agrees that, subject to the limitations contained in Section
5.18 of this Mortgage, the security interest hereby granted by this
Mortgage shall secure the payment of the Obligations;
(c) agrees not to sell, convey, Mortgage or grant a security
interest in, or otherwise dispose of or encumber, any of the Personal
Property or any of the Beneficiary's right, title or interest therein
except as permitted by the Credit Agreement without first securing
Beneficiary's written consent;
(d) agrees that upon or after the occurrence of any Event of
Default under this Mortgage, Beneficiary shall have all rights and
remedies granted by law and more particularly the Code, including, but
not limited to, the right to take possession of the Personal Property,
and for this purpose may enter upon any premises on which any or all of
the Personal Property is situated without being deemed guilty of trespass
and without liability for damages thereby occasioned (except for damages
caused by Beneficiary's gross negligence or wilful misconduct), and take
possession of and operate said Personal Property or remove it therefrom.
Beneficiary shall have the further right to take any action it deems
necessary, appropriate or desirable, at its option and in its discretion,
to repair, refurbish or otherwise prepare the Personal Property for sale,
lease or other use or disposition, and to sell at public or private sales
or otherwise dispose of, lease or utilize the Personal Property and any
part thereof in any manner authorized or permitted by law and to apply
the proceeds thereof, subject to the limitations set forth in Section
5.18 of this Mortgage, toward payment of any costs and expenses, to the
extent permitted by law, thereby incurred by Beneficiary and, subject to
the limitations set forth in Section 5.18 of this Mortgage, toward
payment of the Obligations and all other indebtedness described in this
Mortgage, in such order and manner as is provided in Section 4.05 hereof.
To the extent permitted by law, and only to the extent Trustor has waived
any of the following under that certain Security Agreement of even date
herewith by and between Trustor and Beneficiary ("Security Agreement"),
Trustor expressly waives any notice of sale or other disposition of the
Personal Property and any other rights or remedies of a debtor or
formalities prescribed by law relative to a sale or disposition of the
Personal Property or to exercise any other right or remedy existing after
default hereunder; and to the extent any notice is required and cannot be
waived, Trustor agrees that if such notice is deposited for mailing,
postage prepaid, certified mail or registered mail, return receipt
requested, to Trustor at the address designated in the first page of this
Mortgage at least fifteen (15) days before the time of sale or
disposition, such notice shall be deemed reasonable and shall fully
satisfy any requirements for giving of said notice; provided that if
Trustor has furnished Beneficiary with notice of a change of address in
accordance with Section 5.01, then any such notice shall not be
reasonable unless sent to the new address;
(e) agrees, to the extent permitted by law and without limiting
any rights and privileges herein granted to Beneficiary, that Beneficiary
may dispose of any or all of the Personal Property at the same time and
place upon giving the same notice provided
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for in this Mortgage, and in the same manner as the non-judicial
foreclosure sale provided under the terms and conditions of this
Mortgage; and
(f) authorizes Beneficiary to file, in the jurisdiction where this
Mortgage will be given effect, financing statements including renewal or
confirmation thereof, covering the Personal Property; and at the request
of Beneficiary, Trustor will join Beneficiary in executing one or more
such financing statement including renewal or confirmation thereof,
pursuant to the Code in a form reasonably satisfactory to Beneficiary,
and will pay the cost of filing the same in all public offices at any
time and from time to time wherever Beneficiary deems filing or recording
of any financing statements including renewal or confirmation thereof or
of this instrument to be desirable or necessary.
V.16 Additional Provisions. The following provisions shall also
constitute an integral part of this Mortgage. Furthermore, in the event that any
prior provisions of this Mortgage conflict with the following provisions of this
Section, the provisions of this Section shall control and shall be deemed a
modification of or amendment to the section or provision at issue:
(a) Payment of Taxes and Fees. Trustor agrees to pay all transfer
taxes, recordation taxes, recording fees, and any other fees required by
or imposed by the State or the county in which the Property is located in
order to record this Mortgage in the Land Records of Adams County.
(b) No Assumption of Obligations. In the event of a foreclosure of
the Property, Beneficiary shall not assume any liability of Trustor for
Trustor's violation of any environmental laws, statutes, codes,
regulations, or practices and Trustor's indemnifications as contained
herein and in the Credit Agreement shall survive said foreclosure.
(c) Expenses of Enforcement; Waiver. Trustor agrees to bear and
pay all reasonable expenses (including reasonable attorney fees and
appellate attorney fees), of or incidental to the enforcement of any
provision hereof, or the enforcement, compromise, or settlement of this
Mortgage or the Obligations, and for the curing thereof, or for defending
or asserting the rights and claims of Beneficiary in respect thereof, by
litigation or otherwise. All rights and remedies of Beneficiary shall be
cumulative and may be exercised singly or concurrently. Notwithstanding
anything herein contained to the contrary, Trustor to the extent
permitted by applicable law: (i) hereby waives trial by jury; (ii) will
not (a) at any time insist upon, or plead, or in any manner whatever
claim or take any benefit or advantage of any stay or execution or
moratorium law, any exemption for execution of sale of the Property or
any part thereof, wherever enacted, now or at any time hereafter
enforced, which may affect the covenants and terms of performance of this
Mortgage, nor (b) claim, take or insist upon any benefit or advantage of
any law now or hereafter enforced providing for the evaluation or
appraisal of the Property, or any part
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<PAGE>
thereof, prior to any sale or sales thereof which may be made pursuant to
any provision herein, or pursuant to the decree, judgment or order of any
court of competent jurisdiction, nor (c) after any such sale or sales,
claim, or exercise any right under any statute heretofore or hereafter
enacted to redeem the property so sold or any part thereof; (iii) hereby
expressly waives all benefit or advantage of any such law or laws
including but not limited to a waiver of the equity of redemption,
statutory right of redemption, and any other statutory or common law
right of redemption, homestead, dower, marital share and all other
exemptions; and (iv) covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to Beneficiary, but to
suffer and permit the execution of every power as though no such laws or
laws had been made or enacted. Trustor, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have
the Property marshalled upon any foreclosure hereof.
V.17 Intentionally Deleted.
V.18 Reduction of Secured Amount. The secured amount of the Obligations
shall be reduced only by the last and final sums that the Trustor repays with
respect to the Obligations and shall not be reduced by any intervening
repayments of any of the Obligations by the Trustor. As of the date hereof, the
total amount of the Obligations exceeds the secured amount, so that the secured
amount represents only a portion of the Obligations actually outstanding and due
to Beneficiary.
V.19 Application of Payments and Repayments. So long as the balance of
the Obligations exceeds the secured amount, any payments and repayments of the
Obligations by Trustor shall not be deemed to be applied against, or to reduce,
the portion of the Obligations secured by this Mortgage. Such payments shall
instead be deemed to reduce only such portions of the Obligations as are secured
by mortgages encumbering real property located outside the State of Nebraska,
which mortgages secure the entire Obligations (except to the extent, if any,
that specific mortgages in such states contain specific limitations on the
amount secured).
[Signature and Notary Page Follows]
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<PAGE>
IN WITNESS WHEREOF, Trustor has duly signed and delivered this Mortgage
as of the date first above written.
TRUSTOR:
GIBRALTAR PACKAGING GROUP, INC.
D/B/A GREAT PLAINS PACKAGING, INC.,
a Delaware corporation
By: /s/ John W. Lloyd
---------------------------------
Printed:
-----------------------------
Its: Secretary
---------------------------------
Secretary
EXHIBIT 10.27
This instrument was prepared by and after recording should
be returned to:
Stephen N. Sher, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
(North Carolina)
DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FINANCING STATEMENT
STANDARD PACKAGING AND PRINTING CORP.,
Mortgagor
TO
CHICAGO TITLE INSURANCE COMPANY,
Trustee
FOR THE BENEFIT OF
FIRST SOURCE FINANCIAL, LLP, as Agent,
Mortgagee
Relating to Premises in:
Montgomery County, North Carolina
DATED: As of July 31, 1998
COLLATERAL IS OR INCLUDES FIXTURES
<TABLE>
<S> <C>
THIS INSTRUMENT IS A FUTURE ADVANCES DEED OF TRUST AS PROVIDED IN N.C.G.S.s.s.45-68.
</TABLE>
<PAGE>
TABLE OF CONTENTS
TOPIC PAGE
----- ----
I RECITALS ............................................................1
II THE GRANT ...........................................................3
III GENERAL AGREEMENTS ..................................................6
3.01 Payment of Indebtedness .............................................6
3.02 Impositions .........................................................6
3.03 Payment of Impositions by Mortgagee .................................7
3.04 Insurance and Insurance Proceeds ....................................7
3.05 Condemnation Awards .................................................7
3.06 Restoration .........................................................8
3.07 Maintenance of Property .............................................8
3.08 Prohibited Liens and Transfers ......................................8
3.09 Stamp Taxes .........................................................8
3.10 Change in Tax Laws ..................................................8
3.11 Assignment of Leases and Rents ......................................9
3.12 Releases ...........................................................10
3.13 Further Assurances .................................................10
3.14 Environmental Provisions ...........................................11
IV EVENT OF DEFAULT AND REMEDIES ......................................13
4.01 Event of Default ...................................................13
4.02 Acceleration of Maturity ...........................................14
4.03 Intentionally Deleted ..............................................15
4.04 Cumulative Remedies; Delay or Omission Not a Waiver ................15
4.05 Mortgagee's Remedies Against Multiple Parcels ......................15
4.06 No Merger ..........................................................15
4.07 Insurance Upon Foreclosure .........................................15
4.08 Waiver of Statutory Rights .........................................16
V MISCELLANEOUS ......................................................16
5.01 Notices ............................................................16
5.02 Time of Essence ....................................................16
5.03 Covenants Run with Land ............................................16
5.04 GOVERNING LAW ......................................................17
5.05 Rights and Remedies Cumulative .....................................17
5.06 Severability .......................................................17
5.07 Non-Waiver .........................................................17
5.08 Headings ...........................................................17
5.09 Grammar ............................................................17
ii
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5.10 Deed in Trust ......................................................17
5.11 Successors and Assigns .............................................17
5.12 Mortgagee in Possession ............................................18
5.13 Compliance with Applicable Law .....................................18
5.14 Incorporation of Credit Agreement ..................................18
5.15 Security Agreement .................................................18
5.16 Additional Provisions ..............................................20
5.17 Future Disbursements. ..............................................21
5.18 Reduction of Secured Amount ........................................21
5.19 Application of Payments and Repayments .............................21
5.20 Removal of Trustee .................................................21
iii
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DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT Of
LEASES AND RENTS AND FINANCING STATEMENT
THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS,
AND FINANCING STATEMENT ("Mortgage") is made as of July 31, 1998 by STANDARD
PACKAGING AND PRINTING CORP., a North Carolina corporation ("Mortgagor") with
its principal office at 1140 Hayden Street, Fort Wayne, IN 46803 as trustor, to
Chicago Title Insurance Company, 1211 Avenue of the Americas, 28th Floor, New
York, New York 10036 ("Trustee"), for the ratable benefit of First Source
Financial, LLP ("First Source"), an Illinois Limited liability partnership with
its principal office at 2850 Golf Road, Rolling Meadows, Illinois 60008, as
mortgagee, and as agent for itself, and for and on behalf of the other Lenders
(as hereinafter defined), and as assignee and secured party (together with any
successors or assigns, the "Mortgagee").
I
RECITALS
WHEREAS, Mortgagor is the owner of that certain real property situated in
Montgomery County, North Carolina;
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation,
Mortgagee, and certain financial institutions (the "Lenders") from time to time
party to the Credit Agreement (as hereinafter defined) have executed of even
date herewith that certain Secured Credit Agreement (together with any and all
renewals, amendments, modifications, supplements, restatements, extensions for
any period, or increases or rearrangements thereof, the "Credit Agreement"),
pursuant to which Credit Agreement the Lenders have made and may in the future
make term and revolving loans and advances and other financial accommodations to
the Borrower (collectively, "Loans"; each, a "Loan") in the aggregate principal
amount of Forty-Two Million and no/100 Dollars ($42,000,000), upon the terms and
subject to the conditions set forth in the Credit Agreement;
WHEREAS, capitalized terms used herein without definitions shall have the
meaning assigned to such terms in the Credit Agreement;
WHEREAS, the Loans are in the form of: (i) a term loan in the aggregate
principal amount of Twenty Five Million and No/100 Dollars ($25,000,000) (the
"Term Loan"), (ii) a revolving credit loan in the aggregate principal amount of
Fifteen Million and No/100 Dollars ($15,000,000) (the "Revolving Credit Loan"),
(iii) a certain Letter of Credit (as defined in Section 1.1 of the Credit
Agreement) up to an amount not to exceed Two Million and No/100 Dollars
($2,000,000);
WHEREAS, the Revolving Credit Loans and Term Loans are evidenced by
certain promissory notes (the "Notes");
<PAGE>
WHEREAS, Mortgagor has executed that certain Subsidiary Guaranty of even
date herewith in favor of Mortgagee and the Lenders (the "Guaranty", together
with any and all renewals, amendments, modifications, supplements, restatements,
extensions for any period, or increases or rearrangements thereof), to secure
the "Obligations" (as defined in the Credit Agreement) by pledging to Mortgagee
the capital stock of Mortgagor and its subsidiaries, if any, and by granting to
Mortgagee a security interest in and lien upon all of its personal and real
property;
WHEREAS, Mortgagor wishes to provide further assurance and security to
Mortgagee and as a condition to Mortgagee and Lenders executing the Credit
Agreement, Mortgagee and Lenders are requiring that Mortgagor grant to Mortgagee
a mortgage lien on the Property (as hereinafter defined) to secure the
Mortgagor's obligations under the Guaranty;
WHEREAS, subject to the limitations set forth in Section 5.18 of this
Mortgage, this Mortgage is being given by Mortgagor to secure the performance of
all terms, covenants, conditions, agreements and liabilities of Mortgagor
contained in this Mortgage, the Guaranty and other Loan Documents (hereinafter,
collectively, the "Obligations");
WHEREAS, Mortgagor derives substantial direct and indirect economic
benefit from the making of the Loans and other benefits to be provided to the
Borrower under the Credit Agreement, and other valuable consideration, the
receipt and adequacy of which are hereby acknowledged; and
WHEREAS, this Mortgage also secures the payment of and includes all
amounts owing in respect of all future or further advances of the Loans as shall
be made at all times, regardless of whether proceeds of the Loans have or shall
be disbursed by Mortgagee herein or its successors or assigns, to and for the
benefit of Mortgagor, its successors or assigns, to the same extent as if such
future advances were made on the date of the execution of this Mortgage. The
total amount of Indebtedness secured by this Mortgage may decrease or increase
from time to time but the total unpaid principal balance so secured at any one
time shall not exceed the lesser of: (i) the maximum principal sum permitted by
the laws of the State in which the Premises are located; or (ii) Eighty-Four
Million and No/100 Dollars ($84,000,000), together with interest thereon and any
and all disbursements made by Mortgagee for the payment of taxes, or insurance
on the Property covered by the lien of this Mortgage and for reasonable
attorneys' fees, loan commissions, service charges, liquidated damages, expenses
and court costs incurred in the collection of any or all of such sums of money.
Such further or future advances shall be considered obligatory advances and the
same shall bear interest at the same rate as specified in the Credit Agreement
unless such interest rate shall be modified by subsequent agreement. The parties
hereby acknowledge and intend that all advances, including future advances
whenever hereafter made, shall be secured by this Mortgage.
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<PAGE>
II
THE GRANT
In consideration of the premises and for the foregoing purposes and for other
good and valuable consideration paid to Mortgagor by the Agent and Lenders, the
receipt and sufficiency of which is hereby acknowledged, Mortgagor hereby
grants, bargains, sells, assigns, releases, aliens, transfers, conveys, warrants
to the Trustee for the ratable benefit of the Agent, Lenders and Secured
Creditors (as defined in that certain Security Agreement ("Security Agreement")
of even date herewith from Mortgagor in favor of the Agent), a lien upon and
security interest in all Mortgagor's right, title and interest in and to the
following (collectively, the "Mortgaged Property"), whether now owned or held or
hereafter acquired:
NOW, THEREFORE, subject to the limitations set forth in Section 5.18 of
this Mortgage, in order to secure the payment of the Obligations and the
performance of all of the covenants, provisions, agreements and obligations
contained in this Mortgage or in the Loan Documents and also to secure the
payment of any and all Secured Indebtedness, direct or contingent, that may now
or hereafter become owing from Mortgagor to Mortgagee and the Lenders and the
performance of all other obligations under the Loan Documents, and in
consideration of the Premises described on Exhibit A, and all of its estate,
right, claim and interest therein, together with the following described
property, all of which other property is pledged primarily on a parity with the
Premises and not secondarily and for the foregoing purposes and for other good
and valuable consideration paid to Mortgagor by the Agent and Lenders, the
receipt and sufficiency of which is hereby acknowledged, Mortgagor hereby
grants, bargains, sells, assigns, releases, aliens, transfers, conveys, warrants
to the Trustee for the ratable benefit of the Agent and Lenders pursuant to the
that certain Security Agreement ("Security Agreement") of even date herewith
from Mortgagor in favor of the Agent, a lien upon and security interest in all
Mortgagor's right, title and interest in and to the following (the Premises and
the following described rights, interests, claims and property collectively
referred to as the "Property"), whether now owned or held or hereafter acquired:
(a) all buildings, structures and other improvements of every kind
and description now or hereafter erected, situated, or placed upon the
Premises (the "Improvements"), together with any and all Personal
Property (as defined in Paragraph (i) below) and all attachments now or
hereafter owned by Mortgagor and located in or on, forming part of,
attached to, used or intended to be used in connection with, or
incorporated in any such Improvements, including all extensions of,
additions to, betterments, renewals of, substitutions for and
replacements for any of the foregoing;
(b) all estate, claim, demand, right, title and interest of
Mortgagor now owned or hereafter acquired, including without limitation,
any after-acquired title, franchise, license, remainder or reversion, in
and to any and all (i) land or vaults lying within the right-of-way of
any street, avenue, way, passage, highway, or alley, open or proposed,
vacated or otherwise, adjoining the Premises; (ii) alleys, sidewalks,
streets,
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<PAGE>
avenues, strips and gores of land belonging, adjacent or pertaining to
the Premises or the Improvements; (iii) storm and sanitary sewer, water,
gas, electric, railway and telephone services relating to the Premises
and the Improvements; (iv) development rights, air rights, water, water
rights, water stock, gas, oil, minerals, coal and other substances of any
kind or character underlying or relating to the Premises or any part
thereof; and (v) tenements, hereditaments, easements, appurtenances,
other rights, liberties, reservations, allowances and privileges relating
to the Premises or the Improvements or in any way now or hereafter
appertaining thereto, including homestead and any other claims at law or
in equity;
(c) all leasehold estates and right, title and interest of
Mortgagor in any and all leases, subleases, management agreements,
arrangements, concessions or agreements, written or oral, relating to the
use and occupancy of the Premises or the Improvements or any portion
thereof, now or hereafter existing or entered into (collectively
"Leases");
(d) all rents, issues, profits, royalties, revenue, advantages,
income, avails, claims against guarantors, all cash or security deposits,
advance rentals, deposits or payments given and other benefits now or
hereafter derived directly or indirectly from the Premises and
Improvements under the Leases or otherwise (collectively "Rents"),
subject to the right, power and authority to assign, collect and apply
the Rents;
(e) all right, title and interest of Mortgagor in and to all
options to purchase or lease the Premises or the Improvements or any
portion thereof or interest therein, or any other rights, interests or
greater estates in the rights and properties comprising the Property now
owned or hereafter acquired by Mortgagor;
(f) any interests, estates or other claims of every name, kind or
nature, both in law and in equity, which Mortgagor now has or may acquire
in the Premises and Improvements or other rights, interests or properties
comprising the Property now owned or hereafter acquired;
(g) all rights of Mortgagor to any and all plans and
specifications, designs, drawings and other matters prepared for any
construction on the Premises or regarding the Improvements;
(h) all rights of Mortgagor under any contracts executed by
Mortgagor with any provider of goods or services for or in connection
with any construction undertaken on or services performed or to be
performed in connection with the Premises or the Improvements;
(i) all right, title and interest of Mortgagor in and to all the
following tangible personal property ("Personal Property") owned by
Mortgagor and now or at any
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<PAGE>
time hereafter located in, on or at the Premises or the Improvements and
used or useful in connection therewith:
(i) all building materials and equipment located upon the
Premises and intended for construction, reconstruction,
alteration, repair or incorporation in or to the Improvements now
or hereafter to be constructed thereon, whether or not yet
incorporated in such Improvements, (all of which shall be deemed
to be included in the Property upon delivery thereto);
(ii) all machines, machinery, fixtures, apparatus, equipment
or articles used in supplying heating, gas, electricity,
air-conditioning, water, light, power, plumbing, sprinkler, waste
removal, refrigeration, ventilation, and all fire sprinklers,
alarm systems, protection, electronic monitoring equipment and
devices;
(iii) all window, structural, maintenance and
cleaning equipment and rigs; and
(iv) all fixtures now or hereafter owned by Mortgagor and
attached to or contained in and used or useful in connection with
the Premises or the Improvements. All such property owned by
Mortgagor and placed by it on the Premises or used in connection
with the operation or maintenance shall, so far as permitted by
law, be deemed for the purposes of this Mortgage to be part of the
real estate constituting and located on the Premises and covered
by this Mortgage. As to any of the property that is not part of
such real estate or does not constitute a "fixture," as such term
is defined in the Uniform Commercial Code of the State (the
"Code"), this Mortgage shall be deemed to be a security agreement
under the Code for the purpose of creating hereby a security
interest in property, which Mortgagor hereby grants to Mortgagee
as "secured party" as defined in the Code. The enumeration of any
specific items of Personal Property set forth herein shall in no
way exclude or be held to exclude any items of property not
specifically enumerated;
(j) all the estate, interest, right, title or other claim or
demand which Mortgagor now has or may hereafter have or acquire with
respect to (i) proceeds of insurance in effect with respect to the
Property and (ii) any and all awards, claims for damages, judgments,
settlements and other compensation made for or consequent upon the taking
by condemnation, eminent domain or any like proceeding, or by any
proceeding or purchase in lieu thereof, of the whole or any part of the
Property, including, without limitation, any awards and compensation
resulting from a change of grade of streets and awards and compensation
for severance damages (collectively "Awards").
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and unto his
successors or substitutes in this trust, and unto his or their respective
successors and assigns, forever,
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<PAGE>
IN TRUST, and for the uses and purposes hereinafter set forth forev er, and
Mortgagor does hereby bind itself and its successors and assigns to WARRANT AND
FOREVER DEFEND the Mortgaged Property unto the Trustee and unto his respective
successors and assigns against any and every person lawfully claiming the same
or any part thereof.
The Mortgagor hereby covenants with the Mortgagee and with the purchaser
at any foreclosure sale that at the execution and delivery hereof, Mortgagor
owns the Property and has good, indefeasible estate therein, in fee simple; that
the Property is free from all encumbrances and exceptions to title (and any
claim of any other person) other than the Permitted Liens as defined in Section
1.1 of the Credit Agreement, (said encumbrances and Permitted Liens are
hereinafter collectively referred to as "Permitted Exceptions"); that it has
good and marketable title in and to the Property and good and lawful right to
sell, mortgage and convey the Property; and that Mortgagor and its successors
and assigns shall forever warrant and defend the Property against all claims and
demands whatsoever.
If and when Mortgagor has paid all of the Obligations, to the extent
secured hereby, as provided in Section 5.18 hereof, and there exist no
commitments of the Lender under the Loan Documents which could give rise to
Obligations, then this Mortgage and the estate, right and interest of Mortgagee
in and to the Property shall cease and shall be released by Mortgagee delivering
to Mortgagor a satisfaction of this Mortgage in proper recordable form at the
cost of Mortgagor, but until such time shall remain in full force and effect.
III
GENERAL AGREEMENTS
III.1 Payment of Indebtedness. Mortgagor shall pay promptly and when due
all amounts owing in respect of the Obligations in the manner provided in the
Guaranty, this Mortgage or the other Loan Documents.
III.2 Impositions. Mortgagor shall pay immediately, when first due and
owing, all general taxes, special taxes, special assessments, water charges,
sewer charges, and any other charges, fees, taxes, claims, levies, expenses,
liens and assessments, ordinary or extraordinary, governmental or
nongovernmental, statutory or otherwise (all of the foregoing being herein
collectively referred to as "Impositions"), that may be asserted against the
Property or any part thereof or interest therein.
Mortgagor may, in good faith and with reasonable diligence, contest the
validity or amount of any Impositions; provided, that:
-6-
<PAGE>
(a) Mortgagor shall pay all such Impositions so contested under
protest if such payment is required to prevent such contest from having
the effect of preventing the sale or forfeiture of the Property or any
sub-part or interest;
(b) Mortgagor has notified Mortgagee in writing of the intention
of Mortgagor to prosecute the contest before any Impositions have been
materially increased by any interest, penalties, or costs; and
(c) Mortgagor shall diligently prosecute the contest of such
Impositions by appropriate legal proceedings.
III.3 Payment of Impositions by Mortgagee. Upon Mortgagor's failure to
pay the Impositions as provided above, Mortgagee is hereby author ized to make
or advance, in the place and stead of Mortgagor, any payment relating to
Impositions, unless such Imposition is then being contested by Mortgagor
pursuant to Section 3.02. Mortgagee may do so according to any bill, statement,
or estimate procured from the appropriate public office without inquiry into the
accuracy or the validity of any Impositions, lien, sale, forfeiture, or related
title or claim. Mortgagee is further authorized to make or advance, in place of
Mortgagor, unless such matter is being contested by Mortgagor in accordance with
Section 3.02 or Section 3.08(a), any payment relating to any apparent adverse
title, lien, statement of lien, encumbrance, claim, charge, or payment otherwise
relating to any other purpose herein and hereby authorized (except the Permitted
Exceptions), but not enumerated in this Section, whenever, in Mortgagee's
reasonable judgment and discretion, such advance is necessary or desirable to
protect the full security intended to be created by this Mortgage. Subject to
the limitations set forth in Section 5.18, all such advances and indebtedness
authorized by this Section shall constitute Obligations and shall be repayable
by Mortgagor upon demand with interest at the rate of interest which may be due
and owing from time to time on any loan and payable pursuant to Section 4.2(a)
of the Credit Agreement (the "Default Rate").
III.4 Insurance and Insurance Proceeds. Mortgagor's insurance
requirements shall be as set forth in Section 11.4 of the Credit Agreement.
Mortgagor's rights to insurance proceeds shall be as set forth in Section 7.6 of
the Credit Agreement.
III.5 Condemnation Awards. In the event of any taking of the Property or
any part thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special, or by reason of the temporary
requisition of the use or occupancy of the Property or any part thereof, by any
governmental authority, civil or military (each, a "Taking"), Mortgagor shall
immediately notify Mortgagee upon receiving notice of such Taking or
commencement of proceedings therefor. All proceeds or any award or payment in
respect of any Taking are hereby assigned and shall be paid to Mortgagee and
Mortgagor shall take all steps necessary to notify the condemning authority of
such assignment. Such award or payment, less the amount of any expenses incurred
in litigating, arbitrating, compromising or settling any claim arising out of
such Taking ("Net Award"), shall be applied in accordance with the provisions of
Section 3.06 hereafter.
-7-
<PAGE>
III.6 Restoration. Mortgagor's rights with respect to restoring the
Premises with a Net Award of Net Proceeds shall be as set forth in the Credit
Agreement.2
III.7 Maintenance of Property. Mortgagor shall:
(a) promptly repair, restore, replace or rebuild any portion of
the Property which may become damaged, destroyed, altered, removed,
severed, or demolished, whether or not proceeds of insurance are
available or sufficient for the purpose, with replacements at least equal
in quality and condition as previously existed, free from any security
interest in, encumbrances on or reservation of title thereto;
(b) keep the Property in good condition and repair, without waste,
and free from mechanics', materialmen's or like liens or claims except
for the
Permitted Exceptions and as permitted under the Credit
Agreement; and
(c) not make any material alterations in the Property, except as
permitted or not prohibited by the Credit Agreement.
III.8 Prohibited Liens and Transfers.
(a) Except as otherwise provided in the Credit Agreement, and as
provided by operation of the laws of the State, Mortgagor shall not
create, suffer, or permit to be created or filed against the Property any
Mortgage lien or other lien superior or inferior to the lien created by
this Mortgage. To the extent that any lien, privilege or other security
device is created by operation of law, Mortgagor shall cause such
security device to be released as soon as practicable after its creation.
Mortgagor may contest any lien claim arising from any work performed,
material furnished, or obligation incurred by Mortgagor upon furnishing
Mortgagee security and indemnification reasonably satisfactory to
Mortgagee for the final payment and discharge of the lien.
(b) Except as otherwise provided in the Credit Agreement,
Mortgagor may not sell, lease or convey all or any part of the Property.
III.9 Stamp Taxes. If at any time the United States government, or any
federal, state, or municipal governmental subdivision, requires Internal Revenue
or other documentary stamps or levies any tax on this Mortgage or on the Notes,
or requires payment of any tax in the nature of or comparable to the United
States Interest Equalization Tax on the Obligations, then Mortgagor shall pay
such tax, including interest and penalties, in the required manner.
III.10 Change in Tax Laws. In the event of the enactment, after the date
of this Mortgage, of any law of the United States of America, or any state or
political subdivision thereof, (i) deducting from the value of the Premises, for
the purpose of taxation, the amount of any lien thereon; (ii) imposing upon
Mortgagee the payment of all or any part of the taxes, assessments, charges or
liens hereby required to be paid by Mortgagor; or (iii) changing in any way the
laws
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<PAGE>
relating to the taxation of mortgages or debts secured by mortgages or
Mortgagor's interest in the Property, or the manner of collection of taxes, so
as to affect this Mortgage or the Obligations; then Mortgagor, upon demand by
Mortgagee, and as required by law, shall pay such taxes, assessments, charges,
or liens or reimburse Mortgagee therefor. If, in the opinion of counsel for
Mortgagee, it would be unlawful to require Mortgagor to make such payment or the
making of such payment might result in the imposition of interest beyond the
maximum amount permitted by law, then the applicable provisions of the Credit
Agreement shall apply. Nothing contained in this Section 3.10 shall be construed
as obligating Mortgagor to pay any portion of Mortgagee's federal, state and
local income tax.
III.11 Assignment of Leases and Rents. All right, title, and interest of
Mortgagor in and to all present Leases affecting the Property and including and
together with any and all future Leases, written or oral, upon all or any part
of the Property and together with all of the rents, income, receipts, revenues,
issues, avails and profits from or due or arising out of the Property are hereby
transferred and assigned simultaneously herewith to Mortgagee as further
security for the payment of the Obligations. All future Leases affecting the
Property shall be submitted by Mortgagor to Mortgagee for its approval prior to
execution, which approval shall not be unreasonably withheld or delayed. Each
Lease, including all future Leases shall be subordinate to this Mortgage,
provided that, upon the request of the Mortgagor and the lessee under any such
Lease, Mortgagee shall enter into a Subordination, Nondisturbance and Attornment
Agreement (or similar agreement) with such lessee in form and substance
reasonably satisfactory to Mortgagee, pursuant to which (i) Mortgagee will agree
that so long as such Lease shall be in full force and effect and such lessee is
not in default thereunder, Mortgagee will not disturb, pursuant to a foreclosure
action or otherwise, such lessee's possession under such Lease, and (ii) such
lessee shall agree that if Mortgagee or any future holder of this Mortgage shall
become the owner of the Property by reason of foreclosure of the Mortgage or
otherwise, or if the Property shall be sold as a result of any foreclosure
action or deed in lieu thereof, then such lease shall continue in full force and
effect as a direct lease between such lessee and the then owner of the Property.
Although it is the intention of the parties that the assignment contained in
this Section shall be a present and absolute assignment, it is expressly
understood and agreed, anything to the contrary notwithstanding, that Mortgagee
shall not exercise any of the rights or powers conferred upon it by this Section
until an Event of Default shall occur under this Mortgage. From time to time,
Mortgagor shall furnish Mortgagee with executed copies of each of the Leases and
shall use commercially reasonable efforts to furnish Mortgagee with estoppel
letters from each tenant under each of the Leases in a form satisfactory to
Mortgagee within thirty (30) days after Mortgagee's written demand.
Following the occurrence of an Event of Default (a) Mortgagee shall have
the rights and powers as are provided herein, (b) this Mortgage shall constitute
a direction to each lessee under the Leases and each guarantor thereof to pay
all Rents directly to Mortgagee without proof of the Event of Default, and (c)
Mortgagee shall have the authority, as Mortgagor's attorney-in-fact (such
authority being coupled with an interest and irrevocable), to sign the name of
Mortgagor and to bind Mortgagor on all papers and documents relating to the
operation, leasing and maintenance of the Property.
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If Mortgagor, as lessor under any Lease, shall neglect or refuse to
perform, observe and keep all of the covenants, provisions and agreements
contained in such Lease, then Mortgagee may perform and comply with any such
Lease covenants, agreements and provisions. All costs and expenses incurred by
Mortgagee in complying with such covenants, agreements, and provisions shall
constitute Obligations and shall be payable upon demand with interest at the
Default Rate.
Mortgagee shall not be obligated to perform or discharge any obligation,
duty or liability under any Lease, and Mortgagor shall and does hereby agree,
except to the extent of Mortgagee's gross negligence or willful misconduct, to
indemnify and hold Mortgagee harmless of and from any and all liability, loss or
damage which it may or might incur under any Lease or under or by reason of
their assignments and of and from any and all claims and demands whatsoever
which may be asserted against it by reason of all alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in such Lease. Should Mortgagee incur any such liability,
loss or damage under any Lease or under or by reason of its assignment, or in
the defense of any claims or demands, the amount thereof, including costs,
expenses and reasonable attorneys' fees, shall, subject to the limitations set
forth in Section 5.18 of this Mortgage, be secured hereby. Mortgagor shall
reimburse Mortgagee therefor immediately upon demand with interest payable at
the Default Rate.
III.12 Releases. Without notice and without regard to the consideration
therefor, and to the existence at that time of any inferior liens, Mortgagee may
release from the lien created hereby all or any part of the Property, or release
from liability any person obligated to repay any Obligations, without affecting
the liability of any party to any of the Notes, this Mortgage, or any of the
other Loan Documents (including without limitation any guaranty given as
additional security) and without in any way affecting the priority of the lien
created hereby. Mortgagee may agree with any liable party to extend the time for
payment of any part or all of the Obligations. Such agreement shall not in any
way release or impair the lien created by this Mortgage or reduce or modify the
liability of any person or entity obligated personally to repay the Obligations,
but shall extend the lien created by this Mortgage as against the title of all
parties having any interest, subject to the Obligations in the Property.
III.13 Further Assurances. Mortgagor agrees that, upon request of
Mortgagee from time to time, it will, at Mortgagor's sole cost and expense,
execute, acknowledge and deliver all such additional instruments and further
assurances of title and will do or cause to be done all such further acts and
things as may reasonably be necessary to fully effectuate the intent of this
Mortgage, including without limitation, reimbursing Mortgagee for the reasonable
costs of appraisals of the Property, to the extent that Mortgagee determines in
good faith that such appraisals are required by any law or any governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof, including, without limitation, the
provisions of Title XI of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, and any rules promulgated to implement such provisions.
In the event that Mortgagor shall fail to do any of the foregoing, Mortgagee
may, in its sole discretion, do so in the name of Mortgagor, and Mortgagor
hereby appoints Mortgagee as its attorney-in-fact to do any of the foregoing.
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III.14 Environmental Provisions.
(a) For the purposes of this Section the following terms shall have the
following meanings: (i) the term "Hazardous Material" shall mean any material or
substance that, whether by its nature or use, is now or hereafter defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Requirement, or which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
which is or contains petroleum, gasoline, diesel fuel or another petroleum
hydrocarbon product; (ii) the "Environmental Requirements" shall collectively
mean all applicable present and future laws, statutes, ordinances, rules,
regulations, orders, codes, licenses, permits, decrees, judgments, directives of
or by any Governmental Authority and relating to or addressing the protection of
the environment or human health; and (iii) the term "Governmental Authority"
shall mean the federal government, or any state or other political subdivision
thereof, or any agency, court or body of the federal government, any state or
other political subdivision thereof, exercising executive, legislative,
judicial, regulatory or administrative functions.
(b) Mortgagor hereby represents and warrants to Mortgagee that to the
best of Mortgagor's knowledge after commercially reasonable inquiry and except
as disclosed in writing to Mortgagee or as set forth on Schedule 10.19 to the
Credit Agreement: (i) no Hazardous Material is currently located at or has been
disposed of on, in, under or about the Property in material violation of any
Environmental Requirement; (ii) no releasing, emitting, leaching, discharging,
dumping or disposing of any Hazardous Material from the Property onto any other
property or from any other property onto or into the Property has occurred or is
occurring in material violation of any Environmental Requirement; (iii) no
notice of violation, lien, complaint, suit, order or other notice with respect
to the Property is presently outstanding under any Environmental Requirement
which, if not resolved, is reasonably likely to have a Material Adverse Effect
(as defined in the Credit Agreement); and (iv) the Property and the operation
thereof are in material compliance with all applicable Environmental
Requirements.
(c) Mortgagor shall comply, and shall use its best efforts to cause all
tenants or other lawful occupants of the Property to comply with all applicable
and material Environmental Requirements, and will not generate, store, handle,
process, dispose of or otherwise use, and will not grant permission to any
tenant or other occupant of the Property to generate, store, handle, process,
dispose of or otherwise use, Hazardous Materials at, in, on, or about the
Property in a manner that is reasonably likely to lead or potentially lead to
the imposition on Mortgagor, Mortgagee or the Property of any material liability
or lien of any nature whatsoever, based upon the assessed value of the Property,
or lien under any Environmental Requirement which is reasonably likely to have a
Material Adverse Effect. Mortgagor shall notify Mortgagee promptly in the event
of any spill or other release of any Hazardous Material at, in, on, under or
about the Property which is required to be reported to a Governmental Authority
under any Environmental Requirement, will promptly forward to Mortgagee copies
of any notices received by Mortgagor relating to alleged violations of any
Environmental Requirement and will promptly pay when due or contest in good
faith within the applicable time periods any fine or assessment against
Mortgagee, Mortgagor or the Property relating to any Environmental Requirement.
If at any time it is it is determined that the operation or use of
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the Property by Mortgagor violates any applicable and material Environmental
Requirement or that there are Hazardous Materials located at, in, on, under or
about the Property in violation of any applicable Environmental Requirement or
that there are Hazardous Materials located at, in, on, under or about the
Property which, under any Environmental Requirement, require special handling in
collection, storage, treatment or disposal, or any other form of cleanup or
corrective action, Mortgagor shall, within thirty (30) days after receipt of
notice thereof from any Governmental Authority or from Mortgagee, take, at
Mortgagor's sole cost and expense, such actions as may be necessary to fully
comply in all material respects with all applicable Environmental Requirements
or contest in good faith the requirement to take such actions, provided,
however, that if such compliance cannot reasonably be completed within such
thirty (30) day period, Mortgagor shall thereafter diligently and expeditiously
proceed to fully comply with or contest in good faith in a timely fashion all
Environmental Requirements.
(d) If Mortgagor fails to timely take or contest, or to diligently and
expeditiously proceed to complete in a timely fashion, any such action described
in subsection (c) above, Mortgagee may, in its reasonable discretion, make
advances or payments toward the performance or satisfaction of any activities
required pursuant to any Environmental Requirement, but shall in no event be
under any obligation to do so. All sums so advanced and paid by Mortgagee
(including, without limitation, reasonable counsel and consultant fees and
expenses, investigation and laboratory fees and expenses, and fines or other
penalty payments) and all sums advanced or paid in connection with any judicial
or administrative investigation or proceeding relating thereto, will
immediately, upon demand, become due and payable from Mortgagor and shall bear
interest at the Default Rate from the date any such sums are so advanced or paid
by Mortgagee until the date any such sums are repaid by Mortgagor to Mortgagee.
Mortgagor will execute and deliver, promptly upon request, such instruments as
Mortgagee may reasonably deem necessary to permit Mortgagee to take any such
action, and such additional notes and mortgages, as Mortgagee may require to
secure all sums so advanced or paid by Mortgagee. If a lien is filed against the
Property by any Governmental Authority resulting from the need to expend or the
actual expending of monies arising from an action or omission, whether
intentional or unintentional, of Mortgagor or for which Mortgagor is
responsible, resulting in the releasing, spilling, leaking, leaching, pumping,
emitting, pouring, emptying or dumping of any Hazardous Material into the waters
or onto land located within or without the State where the Property is located,
then Mortgagor will, within thirty (30) days from the date that Mortgagor
receives notice that such lien has been placed against the Property (or within
such shorter period of time as may be specified by Mortgagee if such
Governmental Authority has commenced steps to cause the Property to be sold
pursuant to such lien), either (a) pay (or otherwise satisfy) the claim and
remove the lien; or (b) contest such lien in good faith; or (c) furnish a cash
deposit, bond, or such other security with respect thereto as is satisfactory in
all respects to Mortgagee and is sufficient to effect a complete discharge of
such lien on the Property.
(e) Mortgagee may, at its option, at intervals of not less than one year,
or more frequently, if Mortgagee reasonably believes that a Hazardous Material
or other environmental condition violates or threatens to violate any
Environmental Requirement, cause an environmental audit of the Property or
portions thereof to be conducted to evaluate Mortgagor's compliance with the
provisions of this Section, and Mortgagor shall cooperate in all reasonable ways
with Mortgagee
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in connection with any such audit. If such audit discloses that a violation of
an Environmental Requirement exists or if such audit was required or prescribed
by law, regulation or governmental or quasi-governmental authority, Mortgagor
shall pay all costs and expenses incurred in connection with such audit;
otherwise, the costs and expenses of such audit shall, notwithstanding anything
to the contrary set forth in this Section, be paid by Mortgagee.
(f) Except for: (a) any Claims (as hereinafter defined) arising as a
result of the gross negligence or wilful misconduct of Mortgagee during the term
of this Mortgage; or (b) any Claims arising as a result of any acts of Mortgagee
or its successors and assigns or the occurrence of any acts by any third parties
after Mortgagee or its successor and assigns take possession of the Property, in
the event Mortgagee takes possession of the Property after an Event of Default,
Mortgagor will defend, indemnify, and hold harmless Mortgagee, and its
employees, agents, officers, and directors, from and against any and all claims,
demands, penalties, causes of action, fines, liabilities, settlements, damages,
costs, or expenses of whatever kind or nature, known or unknown, foreseen or
unforeseen, contingent or otherwise, including, without limitation, reasonable
counsel and consultant fees and expenses, investigation and laboratory fees and
expenses, court costs, and litigation expenses (all of the foregoing
collectively for purposes of this Section the "Claims"), arising out of, or in
any way related to: (i) any breach by Mortgagor of any of the provisions of this
Section; (ii) the presence, disposal, spillage, discharge, emission, leakage,
release, or threatened release of any Hazardous Material which is at, in, on,
under, about, from or affecting the Property, including, without limitation, any
damage or injury resulting from any such Hazardous Material to or affecting the
Property or the soil, water, air, vegetation, buildings, personal property,
persons or animals located on the Property, or in any other property or
otherwise; (iii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to any such Hazardous
Material; (iv) any lawsuit brought or threatened, settlement reached, or order
or directive of or by any Governmental Authority relating to such Hazardous
Material; or (v) any violation of any Environmental Requirement or any policy or
requirement of Mortgagee hereunder. The aforesaid indemnification shall,
notwithstanding any exculpatory or other provision of any other document or
instrument now or hereafter executed and delivered in connection with the loan
evidenced by the Notes and secured by this Mortgage, constitute the personal
recourse undertakings, obligations and liabilities of Mortgagor, and shall
survive the foreclosure or satisfaction of this Mortgage and the discharge of
Mortgagor's other Obligations hereunder.
IV
EVENT OF DEFAULT AND REMEDIES
IV.1 Event of Default. Each of the following shall constitute an event of
default ("Event of Default") under this Mortgage:
(a) The occurrence of an "Event of Default" as such term is defined in
the Credit Agreement (including, if applicable, the expiration of any grace
period provided therein); or
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(b) Failure of Mortgagor to perform or observe any other covenant,
agreement, representation, warranty or other provision contained in this
Mortgage within thirty (30) days after written notice of the default from
Mortgagee to Mortgagor.
IV.2 Acceleration of Maturity. Following the occurrence of an Event of
Default, the Obligations shall become due and payable in accordance with the
terms of the Credit Agreement. Upon acceleration:
(a) Mortgagee's Power of Enforcement and Application of Proceeds. On the
application of the Mortgagee it shall be lawful for and the duty of the Trustee,
and the Trustee is hereby authorized and empowered to expose to sale and to sell
the Property or any part thereof at public auction to the highest bidder for
cash, after having first complied with all applicable requirements of North
Carolina law with respect to the exercise of powers of sale contained in deeds
of trust and upon such sale, the Trustee shall collect the purchase proceeds and
convey title to the portion of the Property so sold to the purchase in fee
simple. After retaining from the proceeds of such sale a commission for said
services as hereinafter provided and all expenses incurred by the Trustee,
including reasonable attorneys' fees for legal services actually performed, the
Trustee shall apply the residue of the proceeds, first to the reimbursement of
the Beneficiary for all sums expended or incurred by the Mortgagee under this
Mortgage or to establish, preserve or enforce this Deed of Trust; second to the
payment of the Loans and interest thereon; and the balance, if any, shall be
paid to the Mortgagor or other person lawfully entitled thereto. The Mortgagee
agrees that in the event of a sale hereunder, the Mortgagee shall have the right
to bid at such sale and shall have the right to credit the indebtedness secured
hereby against the purchase price. The Trustee shall have the right to designate
the place of sale in compliance with applicable law and the sale shall be held
at the place designated by the notice of sale. The Trustee may require the
successful bidder at any sale to deposit immediately with the Trustee cash or
certified check in an amount up to twenty-five percent (25%) of the bid,
provided notice of such requirement is contained in the advertisement of the
sale. The bid may be rejected if the deposit is not immediately made. Such
deposit shall be refunded in case a resale is had because of an upset bid or if
the Trustee is unable to convey the portion of the Property so sold to the
bidder because the power of sale has been terminated in accordance with
applicable law. If the purchaser fails to comply with its bid, the deposit shall
be applied to the expenses of the sale and the residue, if any, shall be applied
to the indebtedness secured hereby. In all other cases, the deposit shall be
applied to the purchase price. Pursuant to Section 25-9-501(4) of the North
Carolina General Statutes (or any amendment thereto), the Trustee is expressly
authorized and empowered to expose to sale and sell, together with the real
estate, any portion of the Property which constitutes personal property. If
personal property is sold hereunder, it need not be at the place of sale. The
notice of sale, however, shall state the time and place where such personal
property may be inspected prior to sale. The Property may be sold in such
parcels or lots as the Trustee may determine without regard to principles of
marshalling and the Property may be sold at one sale or in multiple sales as
determined by the Trustee. The exercise of the power of sale hereunder by the
Trustee on one or more occasions shall not be deemed to extinguish the power of
sale, which power of sale shall continue in full force and effect until all the
Property shall have been finally sold and property conveyed to the purchasers at
the sales. The Trustee's commission shall be two percent (2%) of the gross
proceeds of the sale for a completed foreclosure. In the event
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foreclosure is commenced, but not completed, the Mortgagor shall pay all
expenses incurred by the Trustee and a partial commission based upon the
services in fact rendered by the Trustee at its standard hourly rate.
(b) Mortgagee's Other Rights. Mortgagee shall have the right to take such
other steps to protect and enforce its rights, whether by action, suit or
proceeding at law or in equity for the specific performance of any covenant,
condition or agreement contained in this Mortgage, or in aid of the execution of
any power granted in this Mortgage, or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or equitable remedy or otherwise as
Mortgagee and/or the Trustees shall elect.
IV.3 Intentionally Deleted.
IV.4 Cumulative Remedies; Delay or Omission Not a Waiver. Each remedy or
right of Mortgagee shall not be exclusive of, but shall be in addition to, every
other remedy or right now or hereafter existing at law or in equity. No delay in
the exercise or omission to exercise any remedy or right accruing on the
occurrence or existence of any Event of Default under the Credit Agreement shall
impair any such remedy or right or be construed to be a waiver of any such Event
of Default or acquiescence therein, nor shall it affect any subsequent Event of
Default of the same or different nature. Every such remedy or right may be
exercised concurrently or independently and when and as often as may be deemed
expedient by Mortgagee.
IV.5 Mortgagee's Remedies Against Multiple Parcels. The Obligations
hereby secured are also secured by other properties, lots or parcels covered by
other mortgages or deeds of trust ("Other Mortgages") within and/or outside the
State. If this Mortgage or any of the Other Mortgages is foreclosed upon, or if
judgment is entered upon any Obligations secured hereby, or if Mortgagee
exercises its power of sale, execution may be made upon or Mortgagee may
exercise its power of sale against any one or more of the properties, lots or
parcels and not upon the others, or upon all of such properties or parcels,
either together or separately, and at different times or at the same time, and
execution sales or sales under the power of sale herein granted may likewise be
conducted separately or concurrently, in each case at the election of Mortgagee.
No event of enforcement taking place in any state other than the State shall
(and no failure to prosecute any such other enforcement) in any way stay,
preclude or bar enforcement of this Mortgage and Mortgagee may pursue any or all
of Mortgagee's rights and remedies under this Mortgage to the maximum extent
permitted by State law until the Obligations are paid and discharged in full.
IV.6 No Merger. In the event of a foreclosure of this Mortgage, the
Obligations then due Mortgagee shall not be merged into any decree of
foreclosure entered by the court, and Mortgagee may concurrently or subsequently
seek to foreclose one or more mortgages or deeds of trust which also secure said
Obligations.
IV.7 Insurance Upon Foreclosure. In case of an insured loss after
foreclosure proceedings have been instituted, the proceeds of any insurance
policy or policies, if not applied in Restoring the Property shall be used to
pay the amount due in accordance with any decree of
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foreclosure that may be entered in any such proceedings, and the balance, if
any, shall be paid as the court may direct. In case of the foreclosure of this
Mortgage, the court in its judgment may provide that the judgment creditor may
cause a new or additional loss clause to be attached to each of said policies
making the loss thereunder payable to said judgment creditor; and any such
foreclosure judgment may further provide, unless the right of redemption has
been waived, that in case of redemption under said judgment, pursuant to
applicable law, then, and in every such case, the redemptory may cause the
preceding loss clause attached to each insurance policy to be cancelled and a
new loss clause to be attached thereto, making the loss thereunder payable to
such redemptory. In the event of foreclosure sale, Mortgagee is hereby
authorized, but not required, without the consent of Mortgagor, to assign or
cause a receiver to assign any and all insurance policies to the purchaser at
the sale, or to take such other action as Mortgagee may deem advisable, to cause
the interest of such purchaser to be protected by any of the said insurance
policies.
IV.8 Waiver of Statutory Rights. Mortgagor shall not apply for or avail
itself of any appraisement, valuation, redemption, stay, extension, or exemption
laws, or any so-called "moratorium laws," now existing or hereafter enacted, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage, and
Mortgagor hereby waives the benefit of such laws (to the extent permitted by
applicable law). Mortgagor, for itself and all who may claim through or under
it, waives any and all rights to have the Property and estates comprising the
Property marshalled upon any foreclosure of the lien of this Mortgage, and
agrees that any court having jurisdiction to foreclose such lien may order the
Property sold in its entirety. Mortgagor further waives any and all rights of
redemption from foreclosure and from sale under any order or decree of
foreclosure of the lien created by this Mortgage, for itself and on behalf of:
(i) any trust estate of which the Premises are a part, all beneficially
interested persons; (ii) each and every person acquiring any interest in the
Property or title to the Premises subsequent to the date of this Mortgage; and
(iii) all other persons to the extent permitted by the provisions of laws of the
State in which the Premises are located.
V
MISCELLANEOUS
V.1 Notices. Any notice that Mortgagee or Mortgagor may desire or be
required to give to the other shall be in writing and shall be mailed or
delivered in the manner set forth in the Credit Agreement.
V.2 Time of Essence. Time is of the essence of this Mortgage.
V.3 Covenants Run with Land. All of the covenants of this Mortgage shall
run with the land constituting the Premises.
V.4 GOVERNING LAW. THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED
ACCORDING TO THE LAWS OF THE STATE OF ILLINOIS
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(WITHOUT REFERENCE TO CONFLICTS OF LAWS PROVISIONS THEREOF) PROVIDED, HOWEVER,
THAT MATTERS OF CREATION, PERFECTION, PRIORITY OR ENFORCEABILITY OF ANY AND ALL
RIGHTS AND REMEDIES PROVIDED FOR HEREIN SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NORTH CAROLINA. TO THE EXTENT THAT THIS MORTGAGE MAY OPERATE AS A
SECURITY AGREEMENT UNDER THE CODE, MORTGAGEE SHALL HAVE ALL RIGHTS AND REMEDIES
CONFERRED THEREIN FOR THE BENEFIT OF A SECURED PARTY AS SUCH TERM IS DEFINED IN
THE CODE.
V.5 Rights and Remedies Cumulative. All rights and remedies in this
Mortgage are cumulative. The holder of the Guaranty and of every other
obligation secured hereby may recover judgment, issue execution therefor, and
resort to every other right or remedy available at law or in equity, without
first exhausting and without affecting or impairing the security of any right or
remedy.
V.6 Severability. If any provision of this Mortgage, or any paragraph,
sentence, clause, phrase, or word, or their application, in any circumstance, is
held invalid, the validity of the remainder of this Mortgage shall be construed
as if such invalid part were never included.
V.7 Non-Waiver. Unless expressly provided in this Mortgage to the
contrary, no consent or waiver, express or implied, by any party, to or of any
breach or default by any other party shall be deemed a consent to or waiver of
the performance by such defaulting party of any other obligations or the
performance by any other party of the same, or of any other, obligations.
V.8 Headings. The headings of sections and paragraphs in this Mortgage
are for convenience or reference only and shall not be construed in any way to
limit or define the content, scope, or intent of the provisions.
V.9 Grammar. As used in this Mortgage, the singular shall include the
plural, and masculine, feminine, and neuter pronouns shall be fully
interchangeable, where the context so requires.
V.10 Deed in Trust. If title to the Property or any part thereof is now
or hereafter becomes vested in a trustee, any prohibition or restriction against
the creation of any lien on the Property shall be construed as a similar
prohibition or restriction against the creation of any lien on or security
interest in the beneficial interest of such trust.
V.11 Successors and Assigns. This Mortgage shall be binding upon
Mortgagor, its successors, assigns, legal representatives, and all other persons
or entities claiming under or through Mortgagor. The word "Mortgagee", when used
herein, shall include First Source Financial, LLP, in its capacity as
Administrative Agent and as Agent for the Lenders together with its successors,
assigns and legal representatives. "Mortgagor", when used herein, shall include
all such persons and entities and any others liable for the payment of the
Secured Indebtedness, or any part thereof, whether or not they have executed the
notes or this Mortgage.
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V.12 Mortgagee in Possession. Nothing contained in this Mortgage shall be
construed as constituting Mortgagee a mortgagee in possession in the absence of
the actual taking of possession of the Property.
V.13 Compliance with Applicable Law. Anything elsewhere herein contained
to the contrary notwithstanding,
(a) in the event that any provision in this Mortgage shall be
inconsistent with any provision of applicable law, the provisions of
applicable law shall take precedence over the provisions of this
Mortgage, but shall not invalidate or render unenforceable any other
provision of this Mortgage that can be construed in a manner consistent
with applicable law; and
(b) if any provision of this Mortgage shall grant to Mortgagee any
rights or remedies upon default of Mortgagor which are more limited than
the rights that would otherwise be vested in Mortgagee under applicable
law in the absence of said provision, Mortgagee shall be vested with the
rights granted under applicable law to the full extent permitted by law.
V.14 Incorporation of Credit Agreement. The terms of the Credit Agreement
are incorporated by reference herein as though set forth in full detail. In the
event of any conflict between the terms and provisions of this Mortgage and any
other Loan Document, the terms and provisions of such other Loan Document shall
control.
V.15 Security Agreement. This Mortgage is hereby deemed to be as well a
Security Agreement for the purpose of creating hereby a security interest
securing the indebtedness secured hereby in and to the Personal Property.
Without derogating any of the provisions of this Mortgage, Mortgagor by this
Mortgage:
(a) grants to Mortgagee a security interest in all of Mortgagor's
right, title and interest in and to all Personal Property, including, but
not limited to, the items referred to above, together with all additions,
accessions and substitutions and all similar property hereafter acquired
and used or obtained for use on, or in connection with the Property. The
Personal Property and all proceeds thereof are intended to be secured
hereby; however, such intent shall never constitute an express or implied
consent on the part of Mortgagee to the sale of any or all Personal
Property;
(b) agrees that, subject to the limitations contained in Section
5.18 of this Mortgage, the security interest hereby granted by this
Mortgage shall secure the payment of the Obligations;
(c) agrees not to sell, convey, Mortgage or grant a security
interest in, or otherwise dispose of or encumber, any of the Personal
Property or any of the Mortgagee's
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right, title or interest therein except as permitted by the Credit
Agreement without first securing Mortgagee's written consent;
(d) agrees that upon or after the occurrence of any Event of
Default under this Mortgage, Mortgagee shall have all rights and remedies
granted by law and more particularly the Code, including, but not limited
to, the right to take possession of the Personal Property, and for this
purpose may enter upon any premises on which any or all of the Personal
Property is situated without being deemed guilty of trespass and without
liability for damages thereby occasioned (except for damages caused by
Mortgagee's gross negligence or wilful misconduct), and take possession
of and operate said Personal Property or remove it therefrom. Mortgagee
shall have the further right to take any action it deems necessary,
appropriate or desirable, at its option and in its discretion, to repair,
refurbish or otherwise prepare the Personal Property for sale, lease or
other use or disposition, and to sell at public or private sales or
otherwise dispose of, lease or utilize the Personal Property and any part
thereof in any manner authorized or permitted by law and to apply the
proceeds thereof, subject to the limitations set forth in Section 5.18 of
this Mortgage, toward payment of any costs and expenses, to the extent
permitted by law, thereby incurred by Mortgagee and, subject to the
limitations set forth in Section 5.18 of this Mortgage, toward payment of
the Obligations and all other indebtedness described in this Mortgage, in
such order and manner as is provided in Section 4.03 hereof. To the
extent permitted by law, and only to the extent Mortgagor has waived any
of the following under that certain Subsidiary Security Agreement of even
date herewith by and between Mortgagor and Mortgagee, Mortgagor expressly
waives any notice of sale or other disposition of the Personal Property
and any other rights or remedies of a debtor or formalities prescribed by
law relative to a sale or disposition of the Personal Property or to
exercise any other right or remedy existing after default hereunder; and
to the extent any notice is required and cannot be waived, Mortgagor
agrees that if such notice is deposited for mailing, postage prepaid,
certified mail or registered mail, return receipt requested, to Mortgagor
at the address designated in the first page of this Mortgage at least
fifteen (15) days before the time of sale or disposition, such notice
shall be deemed reasonable and shall fully satisfy any requirements for
giving of said notice; provided that if Mortgagor has furnished Mortgagee
with notice of a change of address in accordance with Section 5.01, then
any such notice shall not be reasonable unless sent to the new address;
(e) agrees, to the extent permitted by law and without limiting
any rights and privileges herein granted to Mortgagee, that Mortgagee may
dispose of any or all of the Personal Property at the same time and place
upon giving the same notice provided for in this Mortgage, and in the
same manner as the non-judicial foreclosure sale provided under the terms
and conditions of this Mortgage; and
(f) authorizes Mortgagee to file, in the jurisdiction where this
Mortgage will be given effect, financing statements including renewal or
confirmation thereof, covering the Personal Property; and at the request
of Mortgagee, Mortgagor will join
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<PAGE>
Mortgagee in executing one or more such financing statement including
renewal or confirmation thereof, pursuant to the Code in a form
reasonably satisfactory to Mortgagee, and will pay the cost of filing the
same in all public offices at any time and from time to time wherever
Mortgagee deems filing or recording of any financing statements including
renewal or confirmation thereof or of this instrument to be desirable or
necessary.
V.16 Additional Provisions. The following provisions shall also
constitute an integral part of this Mortgage. Furthermore, in the event that any
prior provisions of this Mortgage conflict with the following provisions of this
Section, the provisions of this Section shall control and shall be deemed a
modification of or amendment to the section or provision at issue:
(a) Payment of Taxes and Fees. Mortgagor agrees to pay all
transfer taxes, recordation taxes, recording fees, and any other fees
required by or imposed by the State or the county in which the Property
is located in order to record this Mortgage in the Land Records of
Montgomery County.
(b) No Assumption of Obligations. In the event of a foreclosure of
the Property, Mortgagee shall not assume any liability of Mortgagor for
Mortgagor's violation of any environmental laws, statutes, codes,
regulations, or practices and Mortgagor's indemnifications as contained
herein and in the Credit Agreement shall survive said foreclosure.
(c) Expenses of Enforcement; Waiver. Mortgagor agrees to bear and
pay all reasonable expenses (including reasonable attorney fees and
appellate attorney fees), of or incidental to the enforcement of any
provision hereof, or the enforcement, compromise, or settlement of this
Mortgage or the Obligations, and for the curing thereof, or for defending
or asserting the rights and claims of Mortgagee in respect thereof, by
litigation or otherwise. All rights and remedies of Mortgagee shall be
cumulative and may be exercised singly or concurrently. Notwithstanding
anything herein contained to the contrary, Mortgagor to the extent
permitted by applicable law: (i) hereby waives trial by jury; (ii) will
not (a) at any time insist upon, or plead, or in any manner whatever
claim or take any benefit or advantage of any stay or execution or
moratorium law, any exemption for execution of sale of the Property or
any part thereof, wherever enacted, now or at any time hereafter
enforced, which may affect the covenants and terms of performance of this
Mortgage, nor (b) claim, take or insist upon any benefit or advantage of
any law now or hereafter enforced providing for the evaluation or
appraisal of the Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein, or
pursuant to the decree, judgment or order of any court of competent
jurisdiction, nor (c) after any such sale or sales, claim, or exercise
any right under any statute heretofore or hereafter enacted to redeem the
property so sold or any part thereof; (iii) hereby expressly waives all
benefit or advantage of any such law or laws including but not limited to
a waiver of the equity of redemption, statutory right of redemption, and
any other statutory or common law right of redemption, homestead, dower,
marital share and all other exemptions; and (iv) covenants not to hinder,
delay or
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<PAGE>
impede the execution of any power herein granted or delegated to
Mortgagee, but to suffer and permit the execution of every power as
though no such laws or laws had been made or enacted. Mortgagor, for
itself and all who may claim under it, waives, to the extent that it
lawfully may, all right to have the Property marshalled upon any
foreclosure hereof.
V.17 Future Disbursements. This Deed of Trust secures all present and
future indebtedness owing by the Mortgagor under the Credit Agreement pursuant
to N.C.G.S.s.s.45-68. The amount of the present disbursement secured hereby is
$25,000,000 and the maximum principal amount which may be secured hereby at any
one time is $42,000,000. The time period within which such future disbursements
are to be made is the period between the date hereof and the date fifteen (15)
years from the date hereof.
V.18 Reduction of Secured Amount. The Secured Amount shall be reduced
only by the last and final sums that the Mortgagor repays with respect to the
Obligations and shall not be reduced by any intervening repayments of any of the
Obligations by the Mortgagor. As of the date hereof, the total amount of the
Obligations exceeds the Secured Amount, so that the Secured Amount represents
only a portion of the Obligations actually outstanding and due Mortgagee.
V.19 Application of Payments and Repayments. So long as the balance of
the Obligations exceeds the Secured Amount, any payments and repayments of the
Obligations by Mortgagor shall not be deemed to be applied against, or to
reduce, the portion of the Obligations secured by this Mortgage. Such payments
shall instead be deemed to reduce only such portions of the Obligations as are
secured by mortgages encumbering real property located outside the State of
North Carolina, which mortgages secure the entire Obligations (except to the
extent, if any, that specific mortgages in such states contain specific
limitations on the amount secured).
V.20 Removal of Trustee. The Mortgagee shall at any time have the
irrevocable right to remove the Trustee herein named without notice or cause and
to appoint his successor by an instrument in writing, duly acknowledged, in such
form as to entitle such written instrument to record in this State, and in the
event of the death or resignation of the Trustee herein named, the Mortgagee
shall have the right to appoint his successor by such written instrument. Any
Trustee so appointed shall be vested with the title to the Mortgaged Premises,
and shall possess all the powers, duties and obligations herein conferred on the
Trustee in the same manner and to the same extent as though such appointed
trustee were named herein as Trustee.
[Signature and Notary Page Follows]
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<PAGE>
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly
executed by its Vice President and his signature attested by its Assistant
-------------- ----------
Secretary and its corporate seal to be affixed hereto, as of the date first set
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out above.
ATTEST: STANDARD PACKAGING AND PRINTING CORP., INC.,
a North Carolina corporation
/s/ Alan M. Rauss By /s/ John W. Lloyd
Title: Assistant Secretary Title: Vice President
PRINTED NAME: PRINTED NAME:
------------------- ----------------------------
CORPORATE SEAL
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EXHIBIT 10.28
EXECUTION
COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 31, 1998 between GIBRALTAR
PACKAGING GROUP, INC., a Delaware corporation ("Grantor") and FIRST SOURCE
FINANCIAL LLP, an Illinois registered limited liability partnership, as agent,
for its benefit and the benefit of Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Grantor, Agent and the Persons from time to time designated
as Lenders thereunder ("Lenders") have entered into that certain Secured Credit
Agreement dated as of the date hereof (including all annexes, exhibits and
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the "Credit Agreement"), providing for the extension of
loans and other financial accommodations from Lenders to Grantor;
WHEREAS, in connection with the making of the loans and other
extensions of credit under the Credit Agreement, and as security for the
obligations of Grantor under the Credit Agreement, Lenders and Agent are
requiring that Grantor shall have executed and delivered this Security Agreement
and granted the security interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement. All
other undefined terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
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2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Liabilities, Grantor hereby grants, assigns, conveys,
mortgages, pledges, hypothecates and transfers to Agent, for its benefit and the
benefit of Lenders, a Lien upon all of its right, title and interest in, to and
under the following property, whether now owned by or owing to, or hereafter
acquired by or arising in favor of Grantor (including under any trade names,
styles or derivations thereof), and whether owned or consigned by or to, or
leased from or to, Grantor, and regardless of where located (all of which being
hereinafter collectively referred to as the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all goods;
(x) all Inventory;
(xi) all Investment Property;
(xii) All Bank Accounts, and all other deposit and other
bank accounts and all deposits therein;
(xiii) all money, cash or cash equivalents of Grantor; and
(xiv) to the extent not otherwise included, all insurance
proceeds relating to any of the foregoing (including business interruption
insurance) and all cash and non-cash proceeds and products of the foregoing and
all accessions to, substitutions and replacements for, and rents and profits of,
each of the foregoing.
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<PAGE>
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Liabilities and in order to induce Lenders as
aforesaid, Grantor hereby grants to Agent, a right of setoff against the
property of Grantor held by Agent, consisting of property described above in
Section 2(a) now or hereafter in the possession or custody of or in transit to
Agent, for any purpose, including safekeeping, collection or pledge, for the
account of Grantor, or as to which such Grantor may have any right or power.
3. AGENT'S RIGHTS; LIMITATIONS ON AGENT'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder. Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting herein of a Lien thereon or the receipt by Agent of
any payment relating to any Contract pursuant hereto. Agent shall not be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) Agent may, in its sole discretion, at any time after an Event of
Default shall have occurred and be continuing, without prior notice to Grantor,
notify Account Debtors, parties to the Contracts and obligors in respect of
Instruments and Chattel Paper, that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to Agent, for the benefit of Lenders, and that payments shall
be made directly to Agent. Upon the request of Agent, Grantor shall so notify
Account Debtors, parties to Contracts and obligors in respect of Instruments and
Chattel Paper.
(c) Agent may at any time in Agent's own name or in the name of
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Grantor, at its own expense, shall cause
the independent certified public accountants then engaged by Grantor to prepare
and deliver to Agent at any time and from time to time promptly upon Agent's
request the following reports with respect to Grantor: (i) a reconciliation of
all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a
test verification of such Accounts as Agent may request. Grantor, at its own
expense, shall deliver to Agent the results of each physical verification, if
any, which Grantor may in its discretion have made, or caused any other Person
to have made on its behalf, of all or any portion of its Inventory.
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4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that:
(a) Grantor is the sole owner of each item of the Collateral upon
which it purports to grant a Lien hereunder, and has good and marketable title
thereto free and clear of any and all Liens other than Permitted Liens.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Grantor in favor of Agent pursuant to this Security
Agreement or the other Related Documents, and (ii) in connection with any other
Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, on the
Collateral with respect to which a Lien may be perfected by filing pursuant to
the Code. Such Lien is prior to all other Liens, except Permitted Liens that
would be prior to Liens in favor of Agent as a matter of law, and is enforceable
as such as against any and all creditors of and purchasers from Grantor (other
than purchasers of Inventory in the ordinary course of business). All action by
Grantor necessary or desirable to protect and perfect such Lien on each item of
the Collateral has been duly taken.
(d) Schedule II hereto lists all Instruments and Chattel Paper of
Grantor. All action by Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the delivery of
all originals thereof to Agent and the legending of all Chattel Paper as
required by Section 5(b) hereof) has been duly taken. The Lien of Agent, on the
Collateral listed on Schedule II hereto is prior to all other Liens, except
Permitted Liens that would be prior to the Liens in favor of Agent as a matter
of law, and is enforceable as such against any and all creditors of and
purchasers from Grantor.
(e) Grantor's chief executive office, principal place of business,
corporate offices, all warehouses and premises where Collateral is stored or
located, and the locations of all of its books and records concerning the
Collateral are set forth on Schedule III hereto.
(f) With respect to the Accounts, except as specifically disclosed
in the most recent Borrowing Base Certificate delivered to Agent: (i) they
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to
Grantor's knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or could reasonably be
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<PAGE>
expected to reduce the amount payable thereunder as shown on Grantor's books and
records and any invoices, statements and Borrowing Base Certificates delivered
to Agent with respect thereto; (iv) Grantor has not received any notice of
proceedings or actions which are threatened or pending against any Account
Debtor which might result in any adverse change in such Account Debtor's
financial condition; and (v) Grantor has no knowledge that any Account Debtor is
unable generally to pay its debts as they become due. Further with respect to
the Accounts (x) the amounts shown on all invoices, statements and Borrowing
Base Certificates which may be delivered to Agent with respect thereto are
actually and absolutely owing to Grantor as indicated thereon and are not in any
way contingent; (y) no payments have been or shall be made thereon except
payments immediately delivered to the applicable Bank Accounts or Agent as
required pursuant to the terms of the Credit Agreement; and (z) to Grantor's
knowledge, all Account Debtors have the capacity to contract.
(g) With respect to any Inventory scheduled or listed on the most
recent Borrowing Base Certificate delivered to Agent pursuant to the terms of
this Security Agreement or the Credit Agreement, (i) such Inventory is located
at one of the Grantor's locations set forth on Schedule III hereto (ii) no
Inventory is now, or shall at any time or times hereafter be stored at any other
location without Agent's prior consent, and if Agent gives such consent, Grantor
will concurrently therewith obtain, to the extent required by the Credit
Agreement, bailee, landlord and mortgagee agreements, (iii) Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or security interest or document whatsoever except for the
Lien granted to Agent, and except for Permitted Liens, (iv) except as
specifically disclosed in the most recent Borrowing Base Certificate delivered
to Agent, such Inventory is Eligible Inventory of good and merchantable quality,
free from any defects, (v) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies to any third party as
a precondition of such sale or other disposition, and (vi) the completion of
manufacture, sale or other disposition of such Inventory by Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which Grantor
is a party or to which such property is subject.
(h) Except as disclosed on Schedule IV hereto, each of Grantor and
its Subsidiaries owns or possesses rights to use all Intellectual Property
required to continue to conduct its business as heretofore conducted. All such
Intellectual Property required to continue to conduct Grantor's and each
Subsidiaries' businesses are disclosed on Schedule IV hereto; and no such
Intellectual Property has been declared invalid, been limited by order of any
Governmental Authority or by agreement. The use of such Intellectual Property by
Grantor or any Subsidiary does not infringe on the rights of any other Person
and may be transferred in connection with any sale of the Property or capital
stock of Grantor or any Subsidiary. As used in this Agreement, "Intellectual
Property" of a Person shall mean all of such Person's present and future
designs, patents, patent rights and applications therefor, technology,
trademarks and registrations or applications therefor, service marks, trade
names, inventions, copyrights and all applications and registrations therefor,
advertising matter, software or computer programs, license rights, trade
secrets, methods,
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<PAGE>
processes, logos, knowhow, drawings, specifications, descriptions and licenses
with respect thereto, and all memoranda, notes, and records with respect to any
research and development, whether now owned or hereafter acquired by such
Person, and proceeds of all of the foregoing, including proceeds of insurance
policies thereon.
5. COVENANTS. Grantor covenants and agrees with Agent that from and
after the date of this Security Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and from
time to time, upon the written request of Agent and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may
deem desirable to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (i) using its best efforts to secure
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Agent of any Contract held by Grantor or in which Grantor has any
rights not heretofore assigned, (ii) filing any financing or continuation
statements under the Code with respect to the Liens granted hereunder or under
any other Related Document, (iii) transferring Collateral to Agent's possession
(for the benefit of Agent and Lenders) if such Collateral consists of Chattel
Paper, Instruments or if a Lien on such Collateral can be perfected only by
possession, or if requested by Agent, and (iv) obtaining, or using its best
efforts to obtain, waivers of Liens, if any exist, from landlords and mortgagees
in accordance with the Credit Agreement. Grantor also hereby authorizes Agent to
file any such financing or continuation statements without the signature of
Grantor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral is or shall become evidenced by any
Instrument, such Instrument, other than checks and notes received in the
ordinary course of business, shall be duly endorsed in a manner satisfactory to
Agent immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain, at its
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. All
Chattel Paper shall be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
First Source Financial LLP, as Agent."
(c) Indemnification. In any suit, proceeding or action brought by
Agent relating to any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantor will save, indemnify and keep agent harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of, such
obligor or
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<PAGE>
its successors from Grantor, except in the case of Agent, to the extent such
expense, loss, or damage is attributable solely to the gross negligence or
willful misconduct of Agent as finally determined by a court of competent
jurisdiction. All such obligations of Grantor shall be and remain enforceable
against and only against Grantor and shall not be enforceable against Agent.
(d) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper and Contracts and all other agreements to which it is a
party or by which it is bound relating to the Collateral.
(e) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title and interest of Agent
in and to any of Grantor's rights under the Collateral against the claims and
demands of all Persons whomsoever.
(f) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(g) Further Identification of Collateral. Grantor will, if so
requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in such detail as Agent may specify.
(h) Notices. Grantor will advise Agent promptly, in reasonable
detail, (i) of any Lien (other than Permitted Liens) or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Related
Document.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date Grantor shall execute and deliver to Agent a
power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent under the Power of Attorney are
solely to protect Agent's interests in the Collateral and shall not impose any
duty upon Agent to exercise any such powers. Agent agrees that (a) it shall not
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing, and (b) Agent shall account for
any moneys received by Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that Agent shall not have
any duty as to any Collateral, and Agent shall be accountable only for amounts
that it actually receive as a result of the exercise of such powers. NEITHER
AGENT NOR ITS RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE
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TO GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR
OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Related Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Liabilities, if any Event of Default shall have occurred and be
continuing, Agent may exercise all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, Grantor expressly
agrees that in any such event Agent, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon Grantor or any other
Person (all and each of which demands, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the Code and other
applicable law), may forthwith enter upon the premises of Grantor where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving Grantor or any other Person notice and
opportunity for a hearing on Agent's claim or action and may collect, receive,
assemble, process, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. Agent shall have the right upon any such public sale or sales and, to the
extent permitted by law, upon any such private sale or sales, to purchase for
the benefit of Agent, the whole or any part of said Collateral so sold, free of
any right or equity of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from time to time with or
without notice. Agent shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use Grantor's premises without
charge for such time or times as Agent deems necessary or advisable.
Grantor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall select,
whether at Grantor's premises or elsewhere. Until Agent is able to effect a
sale, lease, or other disposition of Collateral, Agent shall have the right to
hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
Grantor to maintain or preserve the rights of Grantor as against third parties
with respect to Collateral while Collateral is in the possession of Agent. Agent
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of Agent's remedies, with respect to
such appointment without prior notice or hearing as to such appointment. Agent
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale to the Liabilities as provided in the Credit
Agreement, and only
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after so paying over such net proceeds, and after the payment by Agent of any
other amount required by any provision of law, need Agent account for the
surplus, if any, to Grantor. To the maximum extent permitted by applicable law,
Grantor waives all claims, damages, and demands against Agent arising out of the
repossession, retention or sale of the Collateral except such as arise solely
out of the gross negligence or willful misconduct of Agent as finally determined
by a court of competent jurisdiction. Grantor agrees that ten (10) days prior
notice by Agent of the time and place of any public sale or of the time after
which a private sale may take place is reasonable notification of such matters.
Grantor shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all Liabilities, including
any attorneys' fees and other expenses incurred by Agent to collect such
deficiency.
(b) Except as otherwise specifically provided herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, Grantor hereby grants to
Agent, an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by Grantor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.
9. LIMITATION ON AGENT'S DUTY IN RESPECT OF COLLATERAL. Agent shall
use reasonable care with respect to the Collateral in its possession or under
its control. Agent shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
Agent, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Liabilities,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Liabilities shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
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<PAGE>
11. NOTICES. 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 any other party, or whenever any of the parties desires to give and
serve upon any other party any communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the manner, and
deemed received, as provided for in the Credit Agreement.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Related Documents which, taken together,
set forth the complete understanding and agreement of Agent, Lenders and Grantor
with respect to the matters referred to herein and therein. In the event of an
inconsistency between the Credit Agreement and this Agreement, the terms of the
Credit Agreement shall control.
13. NO WAIVER; CUMULATIVE REMEDIES. Agent shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Agent and Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
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<PAGE>
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement and the Power of Attorney attached as Exhibit A
hereto shall terminate on the date (the "Termination Date") of the expiration or
termination of the Commitments and the payment and performance in full of the
Notes and all other Liabilities.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and
shall, together with the rights and remedies of Agent, hereunder, inure to the
benefit of Agent, all future holders of any instrument evidencing any of the
Liabilities and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Liabilities or any portion
thereof or interest therein shall in any manner affect the Lien granted to Agent
hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Security Agreement.
17. COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE RELATED DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY 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
THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GRANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND AGENT PERTAINING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS, PROVIDED, THAT AGENT AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK
COUNTY, CITY OF CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
GRANTOR HEREBY WAIVES ANY
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<PAGE>
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. GRANTOR HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR
AT THE ADDRESS SET FORTH BELOW ITS SIGNATURE TO THE CREDIT AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN AGENT AND GRANTOR
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF THE OTHER
RELATED DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
20. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.
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<PAGE>
23. Benefit of Agent and Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Liabilities in accordance with the terms of the Credit Agreement.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
GRANTOR
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
--------------------------------
Name:
--------------------------------
Title: Secretary
--------------------------------
AGENT:
FIRST SOURCE FINANCIAL LLP, as Agent
By: First Source Financial, Inc.
Its: Manager
By: /s/ Chester R. Zara
--------------------------------
Name:
--------------------------------
Title: Senior Vice President
--------------------------------
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EXHIBIT 10.29
EXECUTION
COPY
PLEDGE AGREEMENT
This PLEDGE AGREEMENT ("Pledge Agreement") is made as of this 31st
day of July, 1998 between GIBRALTAR PACKAGING GROUP, INC., a Delaware
corporation ("Pledgor"), and FIRST SOURCE FINANCIAL LLP, as agent, for its
benefit and the benefit of the Lenders (in such capacity, "Agent").
WHEREAS, Pledgor is the legal and beneficial owner of 100% of the
issued and outstanding capital Stock described on Exhibit 1 hereto issued by the
corporations named therein;
WHEREAS, Pledgor, Agent and the Persons from time to time designated
as lenders thereunder ("Lenders") have entered into that certain Secured Credit
Agreement dated as of the date hereof (as amended, supplemented, restated or
otherwise modified from time to time, the "Credit Agreement") providing for the
extension of loans and other financial accommodations from Lenders to Pledgor;
WHEREAS, in connection with the making of the loans and other
extensions of credit under the Credit Agreement and as security for the
obligations of Pledgor under the Credit Agreement, Lenders and Agent are
requiring that Pledgor shall have executed and delivered this Pledge Agreement
and granted the security interests contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Agent as follows:
1. Defined Terms. As used in this Pledge Agreement,
"Pledged Collateral" means the Pledged Stock and the Stock Rights,
including the proceeds of each.
"Pledged Stock" means the respective shares of capital stock
described on Exhibit 1 hereto, together with the certificates or other
instruments or securities representing such shares.
"Secured Obligations" shall have the meaning assigned to such term
in Section 2 hereof.
"Stock Rights" means any stock (including, without limitation,
securities entered on the books of any financial intermediaries), any dividend
or other distribution and any other right or
<PAGE>
property which Pledgor shall receive or shall become entitled to receive for any
reason whatsoever with respect to, in substitution for or in exchange for any
shares of the Pledged Stock and any stock, any right to receive stock and any
right to receive earnings, in which Pledgor now has or hereafter acquires any
right, issued by the issuer of the Pledged Stock.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. In addition, unless otherwise
defined herein, all defined terms herein shall have the respective meanings
ascribed thereto in the Credit Agreement as in effect on the date hereof.
2. Pledge. To secure all indebtedness, liabilities and obligations
of Pledgor now or hereafter existing under this Pledge Agreement and under the
Credit Agreement (collectively, the "Secured Obligations") Pledgor hereby
delivers to Agent and hereby pledges, assigns, transfers and grants to Agent a
first Lien on the Pledged Collateral. All of the Pledged Stock, together with
undated stock powers duly executed in blank by Pledgor, are being delivered to
Agent simultaneously herewith.
3. Representations and Warranties of Pledgor. Pledgor represents and
warrants to Agent that:
3.1 Existence and Standing. Pledgor is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
3.2 Authorization, Validity and Enforceability. Pledgor has full
power, authority and legal right to execute this Pledge Agreement and to pledge
the Pledged Collateral to Agent. The execution and delivery by Pledgor of this
Pledge Agreement have been duly authorized by all necessary corporate action and
this Pledge Agreement constitutes a legal, valid and binding obligation of
Pledgor enforceable against Pledgor in accordance with its terms, creates a
security interest which is enforceable against Pledgor in the Pledged Collateral
and will create a security interest enforceable against Pledgor in the Stock
Rights and the proceeds of the Pledged Stock and the Stock Rights at the time
Pledgor acquires any right therein, in each such case subject to bankruptcy,
insolvency, liquidation, reorganization and other laws of general application
affecting the rights and remedies of creditors.
3.3 Conflicting Laws and Contracts. Neither the execution and
delivery by Pledgor of this Pledge Agreement, nor the creation and perfection of
the Lien on the Pledged Collateral granted hereunder, nor compliance with the
terms and provisions hereof violates or will violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Pledgor or
Pledgor's Certificate of Incorporation or By-laws or the provisions of any
material indenture, instrument or agreement to which Pledgor is a party or is
subject, or by which it, or its property, is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
Lien pursuant to the terms of any such indenture, instrument or agreement.
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<PAGE>
3.4 Ownership of Pledged Stock. Pledgor is the direct legal and
beneficial owner of the Pledged Stock, and such Pledged Stock represents 100% of
the issued and outstanding stock of its issuer.
3.5 Other Agreements. Pledgor has not performed any act or executed
any instrument, agreement or other document that might prevent or hinder Agent
from obtaining and enjoying fully and completely all of the benefits, rights and
powers conferred, or sought to be conferred, upon Agent by this Pledge
Agreement.
3.6 Issuance of Pledged Stock. Each share of the Pledged Stock has
been duly and validly issued, is fully paid and non-assessable and is owned by
Pledgor free and clear of any Lien other than the Lien created by this Pledge
Agreement.
3.7 Consents. No consent, approval or authorization of, notice to,
designation or filing with, or other action by, any Person is required in
connection with the execution, delivery and performance of the pledge and Lien
granted under this Pledge Agreement by Pledgor, or in connection with the
exercise of remedies with respect to the Pledged Collateral pursuant to this
Pledge Agreement.
3.8 Priority. The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Pledge Agreement creates a valid first perfected
Lien on Pledgor's interest in such Pledged Collateral and the proceeds thereof
in favor of Agent, subject to no prior Lien of any other Person.
4. Covenants. From the date of this Pledge Agreement until the
Pledge Agreement is terminated pursuant to Section 7.13:
4.1 Pledgor shall:
4.1.1 Delivery of Certain Items. Except as otherwise permitted
by the Credit Agreement, hold in trust for Agent and deliver forthwith
(and without any necessity for any request or demand by Agent) to Agent,
in the exact form received, with the endorsement of Pledgor when necessary
and/or appropriate instruments of transfer, assignment or endorsement as
applicable, duly executed in blank, any additional stock certificates,
cash, checks, draft, remittances, documents, promissory notes,
instruments, debt securities or other proceeds evidencing or constituting
Pledged Collateral, whether as an addition to, in substitution for, or in
exchange for any of the Pledged Collateral, or otherwise. In case any
property shall be distributed upon or with respect to any Pledged
Collateral pursuant to the recapitalization or reclassification of the
capital of the issuer thereof or pursuant to the reorganization thereof,
except as otherwise permitted by the Credit Agreement, the property so
distributed shall be delivered to Agent to be held by it as additional
collateral security for the Secured Obligations. Except as otherwise
permitted by the Credit Agreement, all sums of money and property so paid
or distributed in respect of any Pledged Collateral which are received by
Pledgor shall, until paid or delivered to Agent in accordance with the
terms
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<PAGE>
hereof, be held by Pledgor in trust as additional collateral security for
the Secured Obligations.
4.1.2 Taxes. Pay when due all taxes, assessments and
governmental charges and levies upon the Pledged Collateral, except those
being contested in good faith by appropriate proceedings and with respect
to which no Lien exists.
4.1.3 Notice of Default. In accordance with the provisions of
Section 11.1(h) of the Credit Agreement, give prompt notice in writing to
Agent of the occurrence of any Unmatured Event of Default or Event of
Default and of any other development, financial or otherwise, which could
reasonably be expected to materially adversely affect the value of the
Pledged Collateral or the ability of Pledgor to perform the Secured
Obligations.
4.1.4 Stock Powers and Other Actions. Execute and deliver to
Agent all stock powers, assignments, financing statements, endorsements,
instruments and other documents and take all further action, at the
expense of Pledgor, from time to time requested by Agent in order to
perfect or maintain a first perfected Lien on the Pledged Collateral in
favor of Agent or to enable Agent to exercise and enforce its rights and
remedies hereunder with respect to the Pledged Collateral or to effect a
transfer of the Pledged Collateral, or any part thereof. All instruments
representing or evidencing the Pledged Collateral shall be delivered to
and held by Agent pursuant hereto and shall be in suitable form for
transfer or assignment in blank, all in form and substance satisfactory to
Agent.
4.1.5 Reports. Furnish to Agent such reports relating to the
Pledged Collateral as Agent shall from time to time may reasonably
request.
4.1.6 Defense of Collateral. Defend for the benefit of Agent,
Agent's right, title and Lien acquired by this Pledge Agreement in and to
the Pledged Collateral and the proceeds thereof against the claims and
demands of all other Persons except by, through or under Agent.
4.2 Pledgor shall not:
4.2.1 Liens. Create, incur, or suffer to exist any Lien on the
Pledged Collateral except the Lien created by this Pledge Agreement or
perform any act or execute any instrument that might prevent or hinder
Agent from obtaining and enjoying, fully and completely, all of the
benefits, rights and privileges conferred or sought to be conferred upon
Agent by this Pledge Agreement.
4.2.2 Disposition of Collateral. Except as otherwise provided
in the Credit Agreement, sell or otherwise dispose of all or any part of
the Pledged Collateral.
4.2.3 Changes in Capital Structure of Issuer. Except as
otherwise provided in the Credit Agreement, (a) permit or suffer any
issuer of the Pledged Stock to dissolve,
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<PAGE>
liquidate, retire any of its capital stock, reduce its capital or merge or
consolidate with any other Person, or (b) vote any of the Pledged Stock or
Stock Rights in favor of any of the foregoing.
4.2.4 Issuance of Additional Stock. Permit or suffer the
issuer of the Pledged Stock to issue any stock, any right to receive stock
or any right to receive earnings, except to Pledgor.
5. Remedies.
5.1 Acceleration and Remedies. If any Event of Default has occurred
and is continuing, then, upon the election of Agent, the Secured Obligations
shall immediately become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and Agent may (a)
exercise all rights set forth in Section 7.3 and (b) exercise any or all of the
rights and remedies provided (i) in this Pledge Agreement, (ii) in the Code to a
secured party when a debtor is in default under a security agreement and (iii)
by any other applicable law or agreement.
5.2 Foreclosure Sales. (a) Without limiting the provisions of
Section 5.1, Agent may, following the occurrence and during the continuance of
an Event of Default, without notice except as specified below, and to the extent
permitted under applicable law, sell the Pledged Collateral or any part thereof
in one or more transactions at public or private sale, for cash or property and
at such price or prices and upon such other terms as Agent may deem commercially
reasonable, irrespective of the impact of any of such sales on the value of any
of the Pledged Collateral. To the extent permitted under applicable law, Agent
may be the purchaser of any or all of the Pledged Collateral at any such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Pledgor, and Pledgor hereby waives (to
the extent permitted by law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Agent shall not be obligated to make
any sale with respect to the Pledged Collateral regardless of a notice of sale
having been given. Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Agent may be unable to effect a public sale or
disposition of any or all of the securities included within the Pledged
Collateral but may be compelled to resort to one or more private sales or
dispositions thereof to a restricted group of purchasers who will agree, among
other things, to acquire the Pledged Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Pledgor
acknowledges that any sales under such restrictions may be at prices and on
terms less favorable than those obtainable through a sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and notwithstanding such
circumstances, agrees that any sale under such restrictions shall be deemed to
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<PAGE>
have been made in a commercially reasonable manner and that Agent shall have no
obligation to engage in sales without such restrictions and no obligation to
delay the sale of any securities included within the Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if Pledgor would agree to do so.
6. Waivers, Amendments and Remedies. No course of dealing between
Agent and Pledgor and no delay or omission of Agent to exercise any right,
power, privilege or remedy granted under this Pledge Agreement, the Credit
Agreement or any other Related Document or any collateral document or guaranty
related thereto shall impair such right or remedy or be construed to be a waiver
of any Event of Default or an acquiescence therein, and any single or partial
exercise of any such right or remedy shall not preclude other or further
exercise thereof or the exercise of any other right, power, privilege or remedy,
and no waiver, amendment or other variation of the terms, conditions or
provisions of this Pledge Agreement whatsoever shall be valid unless in writing
signed by Agent, and then only to the extent in such writing specifically set
forth. All rights, power, privilege and remedies contained in this Pledge
Agreement shall be cumulative, are in addition to such other rights, power,
privileges and remedies Agent may have by law or otherwise and shall be
available to Agent until the Secured Obligations have been paid in full.
7. General Provisions.
7.1 Special Collateral Account. All cash received by Agent with
respect to the Pledged Collateral pursuant to Section 4.1.1 or upon the exercise
of the remedies provided for in Section 5.1, shall be deposited into a special
collateral account with Agent and shall be held by Agent as security for the
Secured Obligations. Pledgor shall have no control whatsoever over said special
collateral account. Agent shall apply any part of the credit balance in said
special collateral account to the payment of the Secured Obligations, whether or
not any of them shall be then due.
7.2 Application of Proceeds. All cash, property or other proceeds
received by Agent pursuant to the enforcement of this Pledge Agreement, the
Credit Agreement or any other Related Document or any collateral document or
guaranty related to any of the foregoing after acceleration of the Secured
Obligations shall be distributed in the manner set forth in the Credit
Agreement.
7.3 Exercise of Rights in Pledged Collateral. After the occurrence
and during the continuance of an Event of Default, Agent or its nominee may, but
shall not be obligated to, at any time and from time to time, without notice to
Pledgor, exercise all voting and corporate rights relating to the Pledged
Collateral including, without limitation, exchange, subscription or any other
rights, privileges, or options pertaining to any shares of the Pledged Stock and
the Stock Rights, as if it were the absolute owner thereof. Upon the occurrence
and during the continuance of an Event of Default, in the event that Pledgor, as
record and beneficial owner of the Pledged Stock, shall receive or shall become
entitled to receive, any cash dividends or other distributions, Pledgor shall
deliver to Agent, and Agent shall be entitled to receive and retain, all such
cash or other distributions. At all times when no Event of Default has occurred
and is continuing, Pledgor shall
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be entitled to vote its Pledged Stock and otherwise exercise the incidents of
ownership of the Pledged Stock.
7.4 Notice of Disposition of Collateral. Notice of the time and
place of any public sale or the time after which any private sale or other
disposition of all or any part of the Pledged Collateral may be made shall be
reasonable if sent to Pledgor, addressed as set forth in Section 8, at least ten
days prior to any such public sale or the time after which any such private sale
or other disposition may be made.
7.5 Possession of Collateral. Beyond the exercise of reasonable care
to assure the safe custody of the Pledged Collateral in the physical possession
of Agent pursuant hereto, neither Agent nor any nominee of Agent, shall have any
duty or liability to collect any sums due in respect thereof or to protect,
preserve or exercise any rights pertaining thereto, and shall be relieved of all
responsibility for the Pledged Collateral upon surrendering it to Pledgor.
7.6 Specific Performance of Certain Covenants. Pledgor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1.1,
4.1.4, 4.1.6, 4.2.2, 4.2.3 or 4.2.4 will cause irreparable injury to Agent and
that Agent has no adequate remedy at law in respect of such breaches and
therefore agrees, without limiting the right of Agent to seek and obtain
specific performance of other obligations of Pledgor contained in this Pledge
Agreement, that the covenants of Pledgor contained in the Sections referred to
in this Section 7.6 shall be specifically enforceable against Pledgor.
7.7 Definition of Certain Terms. Terms defined in the Code which are
not otherwise defined in this Pledge Agreement are used in this Pledge Agreement
as defined in the Code as in effect on the date hereof.
7.8 Benefit of Agreement. The terms and provisions of this Pledge
Agreement shall be binding upon and inure to the benefit of Agent and Pledgor
and their respective successors and assigns, except that Pledgor shall not have
the right to assign its rights or obligations under this Pledge Agreement or any
interest herein.
7.9 Survival of Representations. All representations and warranties
of Pledgor contained in this Pledge Agreement shall survive the execution and
delivery of this Pledge Agreement.
7.10 Taxes and Expenses. Pledgor will upon demand pay to Agent (a)
any taxes (excluding income taxes, franchise taxes or other taxes levied on
gross earnings, profits or the like) payable or ruled payable by any Federal or
State authority in respect of this Pledge Agreement, together with interest and
penalties, if any, and (b) all reasonable expenses, including the reasonable
fees and expenses of counsel for Agent and of any experts and agents that Agent
may incur in connection with (i) the administration of this Pledge Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the
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<PAGE>
exercise or enforcement of any of the rights of Agent hereunder, or (iv) the
failure of Pledgor to perform or observe any of the provisions hereof.
7.11 CHOICE OF LAW. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS.
7.12 Headings. The title of and section headings in this Pledge
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Pledge Agreement.
7.13 Termination. This Pledge Agreement shall continue in effect
until no Secured Obligations shall be outstanding.
7.14 Severability. The provisions of this Pledge Agreement are
severable and if any clause or provision thereof shall be held invalid or
unenforceable in whole or in part, then such invalidity or unenforceability
shall attach only to such clause or provision, or part thereof, and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision in this Pledge Agreement or any jurisdiction. In the
event of an inconsistency between the Credit Agreement and this Pledge
Agreement, the terms of the Credit Agreement shall control.
7.15 Attorney-In-Fact. Pledgor hereby irrevocably appoints Agent as
Pledgor's attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, from time to time in Collateral
Agent's discretion reasonably exercised, to take any action and to execute any
instrument that Agent deems reasonably necessary or advisable to accomplish the
purposes of this Pledge Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to Pledgor representing any
dividend, principal, interest payment or other proceeds or distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same, when and to the extent permitted by this Pledge Agreement.
7.16 Incorporation by Reference. The security interests granted
hereunder are granted in conjunction with the security interests granted to
Agent, for the benefit of Lenders, pursuant to the Credit Agreement. Pledgor
hereby acknowledges and affirms that the rights and remedies of Agent with
respect to the Pledged Collateral made and granted hereunder are more fully set
forth in the Credit Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
8. Notices. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder shall be
in writing, and shall be deemed to have been validly served, given or delivered
five (5) days after deposit in the United States mails (by certified mail,
return receipt requested), with proper postage prepaid, or upon delivery by
courier or upon transmission by telex, telecopy or similar electronic medium to
the following addresses:
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<PAGE>
(i) If to Agent, at:
First Source Financial LLP
2850 West Golf Road - Fifth Floor
Rolling Meadows, Illinois 60008
Attn: Contract Administration
Telecopy No.: (847) 734-7910, 7911
(ii) If to Pledgor at:
Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: Richard D. Hinrichs
Telecopy: (402) 463-2467
or to such other address as each Person designates to the other in the manner
herein prescribed.
9. Waivers. Pledgor waives presentment and demand for payment of any
of the Secured Obligations, protest and notice of dishonor or default with
respect to any of the Secured Obligations, and all other notices to which
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein.
10. Counterparts. This Pledge Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Pledge Agreement
by signing any such counterpart.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their duly authorized officers on
the date first above written.
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ John W. Lloyd
-------------------------------
Name:
------------------------------
Title: Secretary
------------------------------
ACCEPTED AS OF THE DATE
FIRST SET FORTH ABOVE:
FIRST SOURCE FINANCIAL LLP,
as Agent
By: /s/ Chester R. Zara
----------------------------
Name:
----------------------------
Title: Senior Vice President
----------------------------
EXHIBIT 10.30
EXECUTION
COPY
GUARANTY
This Guaranty (this "Guaranty") is dated as of July 31, 1998,
by the Persons listed on the signature pages hereof (each a "Guarantor"), in
favor of FIRST SOURCE FINANCIAL LLP, as agent, for its benefit and the benefit
of Lenders (in such capacity, the "Agent").
RECITALS:
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware
corporation ("Borrower"), Agent and the Persons designated as lenders from time
to time thereunder ("Lenders") have entered into that certain Secured Credit
Agreement dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement") providing for the extension
of loans and other financial accommodations from Lenders to Borrower (all
Liabilities being referred to herein as the "Guaranty Indebtedness");
WHEREAS, each Guarantor is a Subsidiary of Borrower and will
derive direct and indirect economic benefit from the financial accommodations to
Borrower set forth in the Credit Agreement, including, without limitation, the
loans and advances made and to be made to Borrower thereunder, and it will be to
each Guarantor's direct and indirect economic benefit to assist Borrower in
procuring such financial accommodations from Lenders; and
WHEREAS, a condition precedent to Agent and Lenders entering
into the Credit Agreement is that each Guarantor execute and deliver this
Guaranty;
NOW, THEREFORE, for and in consideration of the premises and
in order to induce Agent and Lenders to enter into the Credit Agreement and
Lenders to continue to make loans under the Credit Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby agrees as follows:
SECTION 1. Definitions.
Unless otherwise defined herein, all capitalized terms used
herein shall have the respective meanings assigned to such terms in the Credit
Agreement.
SECTION 2. Guaranty of Payment.
(a) Each Guarantor hereby absolutely and unconditionally
guarantees the full and prompt payment to Agent, for its benefit and the benefit
of Lenders, when due, upon demand, at
<PAGE>
maturity or by reason of acceleration or otherwise and at all times thereafter,
of any and all existing and future Guaranty Indebtedness.
(b) Each Guarantor acknowledges that valuable consideration
supports this Guaranty, including, without limitation, the consideration set
forth in the recitals above as well as any commitment to lend, extension of
credit or other financial accommodation, whether heretofore or hereafter made by
Lenders to Borrower; any extension, renewal or replacement of any of the
Guaranty Indebtedness; any forbearance with respect to any of the Guaranty
Indebtedness or otherwise; or any other valuable consideration.
(c) Guarantor agrees that all payments under this Guaranty
shall be made in United States currency and in the same manner as provided for
in the Guaranty Indebtedness.
SECTION 3. Costs and Expenses.
Each Guarantor agrees to pay or reimburse on demand, if not
paid by Borrower, all reasonable out of pocket costs and expenses of every kind
incurred by Agent or Lenders in connection with the Credit Agreement, including,
without limitation: (a) in enforcing this Guaranty, (b) in collecting any of the
Guaranty Indebtedness from Borrower or any Guarantor, (c) in realizing upon or
protecting any collateral for this Guaranty or for payment of any of the
Guaranty Indebtedness, and (d) for any other purpose related to the Guaranty
Indebtedness or this Guaranty. "Costs and expenses" as used in the preceding
sentence shall include, without limitation, reasonable attorneys' fees incurred
by Agent or any Lender in retaining counsel for advice, suit, appeal, any
insolvency or other proceedings under Title 11 of the United States Code (the
"Bankruptcy Code") or otherwise, or for any purpose specified in the preceding
sentence.
SECTION 4. Nature of Guaranty: Continuing, Absolute and
Unconditional.
(a) This Guaranty is and is intended to be a continuing
guaranty of payment of the Guaranty Indebtedness, independent of and in addition
to any other guaranty, indorsement, collateral or other agreement held by Agent
or Lenders therefor or with respect thereto, whether or not furnished by any
Guarantor. The obligations of each Guarantor to repay the Guaranty Indebtedness
hereunder shall be unconditional.
(b) Until the Guaranty Indebtedness has been paid in full in
cash, no Guarantor shall have a right, claim or remedy of subrogation,
reimbursement, contribution or any similar rights against Borrower or any other
guarantor with respect to the Guaranty Indebtedness and each Guarantor hereby
waives all such rights including, without limitation, any right to enforce any
remedy which Agent or any Lender now has or may hereafter have against Borrower,
any endorser or any other guarantor of all or any part of the Guaranty
Indebtedness, and each Guarantor hereby waives any benefit of, and any right to
participate in, any security or collateral given to Agent, on behalf of Lenders,
to secure payment of the Guaranty Indebtedness or any part thereof or any other
liability of Borrower to Agent or Lenders. If any amount shall be paid to any
Guarantor on account of any payment made hereunder at any time when the Guaranty
Indebtedness shall not have been paid in full in cash, such amount shall be held
in trust for the benefit of Agent and Lenders and shall
<PAGE>
forthwith be paid to Agent to be credited and applied, whether the Guaranty
Indebtedness is matured or unmatured, in accordance with the terms of the Credit
Agreement. Each Guarantor authorizes Agent, on behalf of itself and Lenders, to
take any action or exercise any remedy with respect to such collateral which
Agent, on behalf of itself and Lenders, in its sole discretion shall determine,
without notice to any Guarantor. Each Guarantor further agrees that any and all
claims of such Guarantor against Borrower, any endorser or any other guarantor
of all or any part of the Guaranty Indebtedness, or against any of their
respective properties, whether arising by reason of any payment by such
Guarantor to Agent, on behalf of itself and Lenders, pursuant to the provisions
hereof, or otherwise, shall be subordinate and subject in right of payment to
the prior payment, in full, of any and all principal and interest, all fees, all
reasonable costs of collection (including reasonable attorneys' fees and time
charges) and any other liabilities or obligations owing to Agent and Lenders by
Borrower which may arise either with respect to or on any note, instrument,
document, item, agreement or other writing heretofore, now or hereafter
delivered to any Lender or Agent. In the event Agent, on behalf of itself and
Lenders, in its sole discretion elects to give notice of any action with respect
to the collateral securing the Guaranty Indebtedness or any part thereof, ten
(10) days' written notice mailed to each Guarantor by ordinary mail at the
address shown hereon shall be deemed reasonable notice of any matters contained
in such notice. Each Guarantor consents and agrees that Agent, on behalf of
itself and Lenders, shall be under no obligation to marshall any assets in favor
of Guarantor or against or in payment of any or all of the Guaranty
Indebtedness.
(c) For the further security of Agent and Lenders and without
in any way diminishing the liability of Guarantor, following the occurrence of
an Event of Default and acceleration of the Guaranty Indebtedness of Borrower,
all debts and liabilities, present or future of Borrower to any Guarantor and
all monies received from Borrower or for its account by any Guarantor in respect
thereof shall be received in trust for Lenders and forthwith upon receipt shall
be paid over to Agent, for the benefit of itself and Lenders, until all of such
Guaranty Indebtedness has been paid in full. The obligations of each Guarantor
in the preceding sentence shall be independent of and severable from this
Guaranty and shall remain in full force and effect whether or not such Guarantor
is liable for any amount under this Guaranty.
(d) This Guaranty and each Guarantor's obligations hereunder
are absolute and unconditional and shall not be changed or affected by any
representation, oral agreement, act or thing whatsoever. This Guaranty is
intended by each Guarantor to be the final, complete and exclusive expression of
the guaranty agreement between such Guarantor and Agent, on behalf of Lenders.
No modification or amendment of any provision of this Guaranty shall be
effective unless in writing and signed by a duly authorized officer of Agent, on
behalf of Lenders.
SECTION 5. Certain Rights and Obligations.
(a) Each Guarantor authorizes Agent and Lenders, without
notice, demand or any reservation of rights against such Guarantor and without
impairing or affecting the validity or enforceability of this Guaranty or such
Guarantor's obligations hereunder, from time to time: (i) to renew, extend,
increase, accelerate or otherwise change the time for payment of, the terms of
or the interest on the Guaranty
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<PAGE>
Indebtedness or any part thereof or grant other indulgences to Borrower or other
Persons; (ii) to accept from any Person and hold collateral for the payment of
the Guaranty Indebtedness or any part thereof, and to modify, exchange, enforce
or refrain from enforcing, or release, compromise, settle, waive, subordinate or
surrender, with or without consideration, such collateral or any part thereof;
(iii) to accept and hold any endorsement or guaranty of payment of the Guaranty
Indebtedness or any part thereof, and to discharge, release or substitute any
such obligation of any such endorser or guarantor, or any Person who has given
any security interest in any collateral as security for the payment of the
Guaranty Indebtedness or any part thereof, or any other Person in any way
obligated to pay the Guaranty Indebtedness or any part thereof, and to enforce
or refrain from enforcing, or compromise or modify, the terms of any obligation
of any such indorser, guarantor, or Person; (iv) subject to the notice provision
set forth in Section 4(b) hereof, to dispose of any and all collateral securing
the Guaranty Indebtedness in any manner as Agent or Lenders, in its or their
sole discretion, may deem appropriate, and to direct the order or manner of such
disposition and the enforcement of any and all endorsements and guaranties
relating to the Guaranty Indebtedness or any part thereof as Agent or Lenders,
in its or their sole discretion, may determine; (v) except as otherwise provided
in the Credit Agreement, to determine the manner, amount and time of application
of payments and credits, if any, to be made on all or any part of any component
or components of the Guaranty Indebtedness (whether principal, interest, fees,
costs, and expenses, or otherwise) including, without limitation, the
application of payments received from any source to the payment of indebtedness
other than the Guaranty Indebtedness even though Agent and Lenders might
lawfully have elected to apply such payments to the Guaranty Indebtedness or to
amounts which are not covered by this Guaranty; and (vi) to take advantage or
refrain from taking advantage of any security or accept or make or refrain from
accepting or making any compositions or arrangements when and in such manner as
Agent or Lenders, in its or their sole discretion, may deem appropriate and
generally do or refrain from doing any act or thing which might otherwise, at
law or in equity, release the liability of such Guarantor as a guarantor or
surety in whole or in part, and in no case shall Agent or Lenders be responsible
or shall such Guarantor be released either in whole or in part for any act or
omission in connection with Agent or Lenders having sold any collateral at less
than fair market value.
(b) If any default shall be made in the payment of any of the
Guaranty Indebtedness and any grace period has expired with respect thereto,
each Guarantor hereby agrees to pay the same in full to the extent hereinafter
provided: (i) without deduction by reason of any setoff, defense (other than
payment) or counterclaim of Borrower; (ii) without requiring presentment,
protest or notice of nonpayment or notice of default to such Guarantor, to
Borrower or to any other Person; (iii) without demand for payment or proof of
such demand or filing of claims with a court in the event of receivership,
bankruptcy or reorganization of Borrower; (iv) without requiring Agent or
Lenders to resort first to Borrower (this being a guaranty of payment and not of
collection) or to any other guarantor or any other Person obligated with respect
to the Guaranty Indebtedness or any collateral which Lenders may hold; (v)
without requiring notice of acceptance hereof or assent hereto by Agent or
Lenders; and (vi) without requiring notice that any of the Guaranty Indebtedness
has been incurred, extended or continued or of the reliance by Agent or Lenders
upon this Guaranty; all of which such Guarantor hereby waives.
(c) This Guaranty and each Guarantor's obligation hereunder
shall at all times until the expiration or termination of the Commitments and
the payment and performance in full of the Guaranteed Obligations be valid and
enforceable and shall not be impaired or affected by any
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<PAGE>
other agreements or circumstances of any nature whatsoever which otherwise
constitute a defense to this Guaranty, including, without limitation, any of the
following, all of which each Guarantor hereby waives to the extent permitted by
law: (i) any failure or omission to perfect or continue the perfection of any
security interest in or other lien on, or preserve rights to, any collateral
securing payment of any of the Guaranty Indebtedness or such Guarantor's
obligation hereunder; (ii) the invalidity, unenforceability, propriety of manner
of enforcement of, or loss or change in priority of any such security interest
or other lien or guaranty of the Guaranty Indebtedness; (iii) any failure or
omission to protect, preserve or insure any such collateral; (iv) failure of
such Guarantor to receive notice of any intended disposition of such collateral;
(v) any defense arising by reason of the cessation from any cause whatsoever of
liability of Borrower including, without limitation, any failure, negligence or
omission by Agent or Lenders in enforcing their claims against Borrower; (vi)
any waiver of any right, remedy or power or of any default with respect to the
Guaranty Indebtedness or any part thereof or any release, settlement or
compromise of any obligation of Borrower; (vii) the invalidity or
unenforceability of any of the Guaranty Indebtedness or the invalidity or
unenforceability of any agreement relating thereto or with respect to any
collateral securing the Guaranty Indebtedness or any part thereof; (viii) any
change of ownership of Borrower or the insolvency, bankruptcy or any other
change in the legal status of Borrower; (ix) any change in, or the imposition
of, any law, decree, regulation or other governmental act which does or might
impair, delay or in any way affect the validity, enforceability or the payment
when due of the Guaranty Indebtedness; (x) the existence of any claim, setoff or
other right which such Guarantor may have at any time against Agent, any Lender,
Borrower or any other guarantor in connection herewith or any unrelated
transaction; (xi) the failure of Borrower or such Guarantor to maintain in full
force, validity or effect or to obtain or renew when required all governmental
and other approvals, licenses or consents required in connection with the
Guaranty Indebtedness or this Guaranty, or to take any other action required in
connection with the performance of all obligations pursuant to the Guaranty
Indebtedness or this Guaranty; (xii) Agent's election, on behalf of Lenders, in
any case instituted under chapter 11 of the Bankruptcy Code, of the application
of section 1111(b)(2) of the Bankruptcy Code; (xiii) any borrowing, use of cash
collateral, or grant of a security interest by Borrower, as debtor in
possession, under section 363 or 364 of the Bankruptcy Code; (xiv) the
disallowance of all or any portion of Agent's or any of Lenders' claims for
repayment of the Guaranty Indebtedness under section 502 or 506 of the
Bankruptcy Code; or (xv) any other fact or circumstance which might otherwise
constitute grounds at law or in equity for the discharge or release of such
Guarantor from its obligations hereunder, all whether or not such Guarantor
shall have had notice or knowledge of any act or omission referred to in the
foregoing clauses (i) through (xiv) of this subsection 5(c). It is agreed that
each Guarantor's liability hereunder is independent of any other guaranties or
other obligations at any time in effect with respect to the Guaranty
Indebtedness or any part thereof and that each Guarantor's liability hereunder
may be enforced regardless of the existence, validity, enforcement or
non-enforcement of any such other guaranties or other obligations or any
provision of any applicable law or regulation purporting to prohibit payment by
Borrower of the Guaranty Indebtedness in the manner agreed upon between Agent
and Lenders and Borrower.
(d) Credit may be granted or continued from time to time by
Agent and Lenders to Borrower without notice to or authorization from any
Guarantor regardless of Borrower's financial or other condition at the time of
any such grant or continuation. Neither Agent nor any Lender shall have an
obligation to disclose or discuss with any Guarantor its assessment of the
financial condition of Borrower.
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<PAGE>
SECTION 6. Representations and Warranties.
Each Guarantor represents and warrants that:
(a) Existence. Such Guarantor (i) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has been duly qualified to conduct business
and is in good standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification except
for such failures which could not reasonably be expected to have a Material
Adverse Effect; (ii) has the requisite authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease and to conduct its business as now, heretofore
and proposed to be conducted; (iii) has all licenses, permits, consents or
approvals from or by, and has made all filings with, and has given all notices
to, all governmental authorities having jurisdiction, to the extent required for
such ownership, operation and conduct except for such failures which could not
reasonably be expected to have a Material Adverse Effect; (iv) is in compliance
with its organizational documents; and (v) is in compliance with all applicable
provisions of law except where such non-compliance could not reasonably be
expected to have a Material Adverse Effect.
(b) Authority. Such Guarantor has full power, authority and
legal right to enter into this Guaranty and the Related Documents to which it is
a party. The execution, delivery and performance by such Guarantor of this
Guaranty and such Related Documents: (i) have been duly authorized by all
necessary corporate action on the part of such Guarantor; (ii) are not in
contravention of the terms of such Guarantor's articles of incorporation, bylaws
or of any indenture, agreement or undertaking to which such Guarantor is a party
or by which it or any of its property is bound; (iii) do not and will not
require any governmental consent, registration or approval or the consent of any
other Person that has not been obtained; (iv) do not and will not contravene any
contractual or governmental restriction to which such Guarantor or any of its
property may be subject; and (v) do not and will not, except as contemplated
herein, result in the imposition of any Lien upon any property of such Guarantor
under any existing indenture, mortgage, deed of trust, loan or credit agreement
or other material agreement or instrument to which it is a party or by which it
or any of its property may be bound or affected.
(c) Binding Effect. This Guaranty and all of the Related
Documents to which such Guarantor is a party have been duly executed and
delivered by such Guarantor, are the legal, valid and binding obligations of
such Guarantor and are enforceable against such Guarantor in accordance with
their terms except as enforceability may be limited by bankruptcy, insolvency,
or similar laws affecting the rights of creditors generally or by application of
general principles of equity.
(d) Solvency. Such Guarantor is solvent and will continue to
be solvent following the consummation of the transactions contemplated by this
Guaranty and the Related Documents.
(e) Tax Obligations. Such Guarantor has filed complete and
correct federal, state and local tax reports and returns required to be filed,
prepared in accordance with applicable laws
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<PAGE>
or regulations, and, except for extensions duly obtained, have either duly paid
all taxes, duties and charges owed, or made adequate provisions for the payment
thereof. There are no material unresolved questions or claims concerning any tax
liability of such Guarantor or any Subsidiary of such Guarantor.
(f) Litigation and Proceedings. Except as set forth on
Schedule 10.4 to the Credit Agreement, no action, claim or proceeding is now
pending or, to the best knowledge of such Guarantor, threatened against or
affecting such Guarantor or Borrower, before any governmental authority, or
before any arbitrator or panel of arbitrators, nor, to the best knowledge of
such Guarantor, does a state of facts exist which is reasonably likely to give
rise to such proceedings. None of the actions, claims or proceedings set forth
on Schedule 10.4 to the Credit Agreement challenges such Guarantor's or
Borrower's right or power to enter into or perform any of its obligations under
the Related Documents, or the validity or enforceability of any Related Document
or any action taken thereunder or (ii) if adversely determined, could reasonably
be expected to have a Material Adverse Effect.
(g) Compliance with Laws and Regulations. The execution and
delivery by such Guarantor of this Guaranty and all of the Related Documents to
which it is a party and the performance of such Guarantor's obligations
hereunder and thereunder are not in contravention of any order applicable to
such Guarantor or, to such Guarantor's best knowledge, any laws, regulations or
ordinances applicable to such Guarantor which could reasonably be expected to
have a Material Adverse Effect on such Guarantor. Such Guarantor is in
compliance in all material respects with all applicable laws, orders,
regulations and ordinances of all federal, foreign, state and local governmental
authorities relating to the business operations and the property of such
Guarantor or Borrower.
(h) Full Disclosure. This Guaranty and the representations and
warranties of such Guarantor in any Related Document delivered or to be
delivered by such Guarantor, do not and will not contain any untrue statement of
a material fact or omit a material fact known to such Guarantor necessary to
make the statements contained therein or herein, in light of the circumstances
under which they were made, not misleading. There is no material fact which such
Guarantor has not disclosed to Agent in writing which has had or could
reasonably be expected to have a Material Adverse Effect.
(i) Subsidiaries. Except for Niemand Holdings, Inc. ("Niemand
Holdings"), no Guarantor has any existing Subsidiaries. Niemand Holdings is the
owner of 100% of the issued and outstanding capital stock of Niemand Industries,
Inc., a Delaware corporation ("Niemand Industries").
(j) Negative Pledge. Such Guarantor is not a party to or bound
by any indenture, contract, instrument or other agreement which prohibits the
creation, incurrence or sufferance to exist of any Lien upon its property,
except the Related Documents and non-assignment provisions of any contract or
lease which provisions could not reasonably be expected to have a Material
Adverse Effect on such Guarantor.
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<PAGE>
(k) Incorporation and Survival of Representations and
Warranties. Each Guarantor represents and warrants that all representations and
warranties relating to such Guarantor contained in the Credit Agreement are true
and correct in all material respects. All representations and warranties
contained in this Guaranty or any of the Related Documents to which such
Guarantor is a party shall survive the execution and delivery of this Guaranty
and the termination hereof.
SECTION 7. Covenants
Each Guarantor covenants and agrees that until the Guaranty
Indebtedness is paid in full in cash and the commitments are terminated:
(a) Such Guarantor shall: (i) do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a corporation and its rights and franchises and (ii) continue to conduct its
business as permitted hereunder or under the Credit Agreement;
(b) Such Guarantor shall comply in all material respects with
all federal, state, local and foreign laws and regulations applicable to it,
including, without limitation, those relating to licensing, ERISA, Environmental
Laws and labor matters.
(c) Except as contemplated by the Credit Agreement, such
Guarantor shall not (i) engage in any business activity other than the business
described on Schedule 11.18 to the Credit Agreement, and the related activities
incidental thereto; (ii) directly or indirectly incur or assume or suffer to
exist any Indebtedness or other obligations, investments or guaranty (other than
this Guaranty); (iii) create or permit to exist any Lien on its assets; (iv)
merge or consolidate with, acquire any assets or capital stock of, or otherwise
combine with any Person; (v) make any change in its capital structure; (vi)
amend its articles of incorporation or bylaws other than any amendment that is
not, in the reasonable judgment of Agent, adverse in any material respect to the
value of the interests or rights of Agent or Lenders thereunder or the rights or
interests of Agent or Lenders; (vii) except as otherwise permitted by the Credit
Agreement with respect to Borrower, sell, transfer, convey, assign or otherwise
dispose of any of its property; (viii) execute any agreements or contracts that
would be prohibited by the Credit Agreement or the Related Documents; or (ix)
change its fiscal year. Notwithstanding the foregoing sentence, each Guarantor
may engage in any activity incidental to the maintenance of the existence of
such Guarantor.
(d) Such Guarantor shall not enter into any indenture,
agreement, instrument or other arrangement which, (i) directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence of the obligations of
such Guarantor hereunder, or (ii) contains any provisions which would be
violated or breached by the performance by such Guarantor of its obligations
hereunder.
(e) Such Guarantor shall comply with all of the covenants
relating to it and set forth in the Credit Agreement and shall cause Borrower to
comply with all covenants set forth in the Credit Agreement.
-8-
<PAGE>
SECTION 8. Termination.
This Guaranty shall remain in full force and effect until all
of the Guaranty Indebtedness shall be finally and irrevocably paid in full in
cash and the commitments under the Credit Agreement shall have been terminated.
Payment of all of the Guaranty Indebtedness from time to time shall not operate
as a discontinuance of this Guaranty. Each Guarantor further agrees that, to the
extent that Borrower makes a payment or payments to Agent or any Lender on the
Guaranty Indebtedness, or Agent or Lenders receive any proceeds of collateral
securing the Guaranty Indebtedness, which payment or receipt of proceeds or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be returned or repaid to Borrower, its
estate, trustee, receiver, debtor in possession or any other Person, including,
without limitation, any guarantor, under any insolvency or bankruptcy law,
state, federal or foreign law, common law or equitable cause, then to the extent
of such payment, return or repayment, the Guaranty Indebtedness or part thereof
which has been paid, reduced or satisfied by such amount shall be reinstated and
continued in full force and effect as of the date when such initial payment,
reduction or satisfaction occurred, and this Guaranty shall continue in full
force notwithstanding any contrary action which may have been taken by Agent or
Lenders in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to Agent's or Lenders' rights under this Guaranty and
shall be deemed to have been conditioned upon such payment having become final
and irrevocable.
SECTION 9. Guaranty of Performance.
Each Guarantor also guarantees the full, prompt and
unconditional performance of all obligations and agreements of every kind owed
or hereafter to be owed by Guarantor or Borrower to Agent or Lenders under or in
connection with the Related Documents. Every provision for the benefit of Agent
or Lenders contained in this Guaranty shall apply to the guaranty of performance
given in this Section 9.
SECTION 10. Taxes.
Subject to the provisions of the Credit Agreement, all
payments hereunder shall be made without any counterclaim or setoff, free and
clear of, and without reduction by reason of, any taxes (except income taxes of
Agent and Lenders), levies, imposts, charges and withholdings, restrictions or
conditions of any nature ("Taxes"), which are now or may hereafter be imposed,
levied or assessed by any country, political subdivision or taxing authority,
all of which will be for the account of and paid by each Guarantor. If for any
reason, any such reduction is made or any Taxes are paid by Agent or any Lender,
each Guarantor will pay to Agent, for its benefit and the benefit of Lenders,
such additional amounts as may be necessary to ensure that Agent and Lenders
receive the same net amount which they would have received had no reduction been
made or Taxes paid.
SECTION 11. Miscellaneous.
(a) In addition to and without limiting any other right, power
or remedy of Agent or any Lender, at any time after the occurrence and during
the continuance of an Event of Default,
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<PAGE>
Lenders at their sole election without notice to any Guarantor may appropriate
and setoff against the Guaranty Indebtedness: (i) any and all indebtedness or
other monies due or to become due to any Guarantor by Agent or Lenders in any
capacity; and (ii) any monies, credits or other property belonging to any
Guarantor (including all account balances, whether provisional or final and
whether or not collected or available) at any time held by or coming into the
possession of Agent or any of Lenders, or any affiliate of Agent or any of
Lenders, whether for deposit or otherwise, whether or not the Guaranty
Indebtedness or the obligation to pay such monies owed by Agent or Lenders is
then due, and Agent, on its behalf and on behalf of Lenders, is hereby granted a
security interest in and Lien upon such monies, credits and other property.
Agent or Lenders shall be deemed to have exercised such right of setoff
immediately at the time of such election even though any charge therefor is made
or entered on Agent's or Lenders' records subsequent thereto.
(b) In the event that acceleration of the time for payment of
any of the Guaranty Indebtedness is stayed, upon the insolvency, bankruptcy or
reorganization of Borrower, or otherwise, all such amounts shall nonetheless be
payable by each Guarantor forthwith upon demand by Agent, on its behalf and on
behalf of Lenders.
(c) No delay on the part of Agent or any Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, and no
single or partial exercise by Agent or any Lender of any right, power or remedy
shall preclude any further exercise thereof; nor shall any amendment,
supplement, modification or waiver of any of the terms or provisions of this
Guaranty be binding upon Agent or Lenders, except as expressly set forth in a
writing duly signed and delivered by Agent. The failure by Agent or any Lender
at any time or times hereafter to require strict performance by Borrower or any
Guarantor of any of the provisions, warranties, terms and conditions contained
in any Related Document or promissory note, security agreement, agreement,
indenture, guaranty, instrument or document now or at any time or times
hereafter executed by Borrower or any Guarantor and delivered to Agent or any
Lender shall not waive, affect or diminish any right of Agent or any Lender at
any time or times hereafter to demand strict performance thereof, and such right
shall not be deemed to have been waived by any act or knowledge of Agent or any
Lender, their agents, officers or employees, unless such waiver is contained in
an instrument in writing duly signed and delivered by Agent and/or Lenders, as
the case may be. No waiver by Agent or Lenders of any default shall operate as a
waiver of any other default hereunder or the same default on a future occasion,
and no action by Agent or Lenders permitted hereunder shall in any way affect or
impair Agent's or any Lender's rights, powers or remedies or the obligations of
any Guarantor under this Guaranty. Any determination by a court of competent
jurisdiction of the amount of any Guaranty Indebtedness owing by Borrower to
Lenders shall be conclusive and binding on each Guarantor irrespective of
whether Borrower was a party to the suit or action in which such determination
was made. The rights and remedies of Agent and Lenders hereunder are cumulative
and may be exercised singly or concurrently, and are not exclusive of any rights
or remedies provided by law.
(d) This Guaranty shall bind Guarantor and the successors and
assigns of such Guarantor and shall inure to the benefit of Agent and Lenders
and their successors and assigns. All references herein to any Lender shall for
all purposes also include all participants. All references
-10-
<PAGE>
herein to Borrower shall be deemed to include its successors and assigns
including, without limitation, a receiver, trustee or debtor in possession of or
for Borrower.
(e) Section headings in this Guaranty are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose or be given any substantive effect.
(f) Whenever possible, each provision of this Guaranty shall
be interpreted in such manner as to be effective and valid under applicable law.
Any provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remainder of such
provision or the remaining provisions of this Guaranty, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(g) It is understood that while the amount of the Guaranty
Indebtedness is not limited, if, in any action or proceeding involving any state
or federal bankruptcy, insolvency or other law affecting the rights of creditors
generally, this Guaranty would be held or determined to be void, invalid or
unenforceable on account of the amount of the aggregate liability under this
Guaranty, then, notwithstanding any other provision of this Guaranty to the
contrary, the aggregate amount of such liability shall, without any further
action of any Guarantor, Lenders, Agent or any other Person, be automatically
limited and reduced to the highest amount which is valid and enforceable as
determined in such action or proceeding.
(h) This Guaranty sets forth the entire understanding and
agreement of each Guarantor and Agent with respect to the subject matter hereof
and supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
(i) Each Guarantor agrees to pay all costs, fees and expenses
(including reasonable attorneys' fees) incurred by Agent or Lenders after a
default by such Guarantor under this Guaranty.
(J) EACH GUARANTOR AND AGENT HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS GUARANTY OR THE RELATED DOCUMENTS TO WHICH ANY GUARANTOR IS A
PARTY SHALL BE LITIGATED IN SUCH COURTS, AND EACH GUARANTOR AND AGENT EACH
WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND EACH WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS
SET FORTH IN SECTION 12 HEREOF AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
SUFFICIENT NOTICE. NOTHING CONTAINED IN THIS SECTION 11 SHALL AFFECT THE RIGHT
OF AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
-11-
<PAGE>
PERMITTED BY LAW OR AFFECT THE RIGHT OF AGENT TO BRING ANY ACTION OR PROCEEDING
AGAINST ANY GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION TO THE EXTENT
NECESSARY TO ENFORCE ITS LIENS AGAINST ASSETS LOCATED IN SUCH JURISDICTION.
(K) THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
UNDER AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
SECTION 12. Notices.
Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered (a)
if delivered in person, when delivered, (b) if delivered by telecopy or similar
electronic medium, on the date of confirmed transmission, (c) if delivered by
overnight courier, one (1) Business Day after delivery to such courier properly
addressed or (d) if by U.S. Mail, five (5) days after deposit in the United
States mails (by certified mail, return receipt requested), with proper postage
prepaid, to the following addresses:
Notices shall be addressed as follows:
(a) If to a Guarantor:
c/o Gibraltar Packaging Group, Inc.
2000 Summit Avenue
Hastings, Nebraska 68902-2148
Attn: Richard D. Hinrichs
Telecopy: (402) 463-2467
(b) If to Agent:
First Source Financial LLP
2850 West Golf Road
Fifth Floor
Rolling Meadows, Illinois 60008
Attention: Contract Administration
Telecopy: (847) 734-7910, 7911
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 12. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
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<PAGE>
SECTION 13. Waivers.
(a) EACH GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION,
APPRAISAL AND EXEMPTION LAWS.
(b) IN THE EVENT OF A DEFAULT UNDER THE CREDIT AGREEMENT, EACH
GUARANTOR HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE BY AGENT OR LENDERS OF THEIR RIGHTS TO REPOSSESS ANY COLLATERAL
WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON ANY COLLATERAL
WITHOUT PRIOR NOTICE OR HEARING. EACH GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS
GUARANTY.
(c) EACH GUARANTOR AND AGENT ACKNOWLEDGE THAT THE TIME AND
EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A
BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER, AND WAIVE ANY BOND OR
SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED
OF AGENT OR LENDERS.
(d) TO THE EXTENT PERMITTED BY LAW, EACH GUARANTOR ABSOLUTELY,
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY RIGHT TO ASSERT ANY DEFENSE, SETOFF,
NONCOMPULSORY COUNTERCLAIM OR CROSSCLAIM OF ANY NATURE WHATSOEVER WITH RESPECT
TO THIS GUARANTY OR THE OBLIGATIONS OF SUCH GUARANTOR HEREUNDER OR THE
OBLIGATIONS OF ANY OTHER PERSON OR PARTY (INCLUDING BORROWER) RELATING TO THIS
GUARANTY, THE GUARANTY INDEBTEDNESS OR THE OBLIGATIONS OF SUCH GUARANTOR IN ANY
ACTION OR PROCEEDING BROUGHT BY AGENT OR LENDERS TO COLLECT THE GUARANTY
INDEBTEDNESS OR TO ENFORCE THE OBLIGATIONS OF SUCH GUARANTOR HEREUNDER.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, this Guaranty has been executed as of the
date and year first written above.
RIDGEPAK CORPORATION
By: /s/ John W. Lloyd
----------------------------------
Name:____________________________________
Title: Secretary
----------------------------------
NIEMAND HOLDINGS, INC.
By: /s/ John W. Lloyd
----------------------------------
Name:____________________________________
Title: Secretary
----------------------------------
NIEMAND INDUSTRIES, INC.
By: /s/ John W. Lloyd
----------------------------------
Name:____________________________________
Title: Secretary
----------------------------------
GB LABELS, INC.
By: /s/ John W. Lloyd
----------------------------------
Name:____________________________________
Title: Secretary
----------------------------------
STANDARD PACKAGING AND PRINTING CORP.
By: /s/ John W. Lloyd
----------------------------------
Name:____________________________________
Title: Secretary
----------------------------------
[S-1]
EXHIBIT 10.31
(INDIANA)
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FINANCING STATEMENT
BY
RIDGEPAK CORPORATION D/B/A FLASHFOLD CARTON CO.
AN ILLINOIS CORPORATION
MORTGAGOR
TO
FIRST SOURCE FINANCIAL, LLP,
AS AGENT
MORTGAGEE
RELATING TO PREMISES IN:
ALLEN COUNTY, INDIANA
DATED: AS OF JULY 31, 1998
THIS INSTRUMENT WAS PREPARED BY
AND AFTER RECORDING SHOULD BE RETURNED TO:
STEPHEN N. SHER, ESQ.
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601
THIS INSTRUMENT CONSTITUTES A FINANCING STATEMENT FILED AS A FIXTURE FILING
PURSUANT TO SECTION 9-402 OF THE INDIANA UNIFORM COMMERCIAL CODE.
<PAGE>
TABLE OF CONTENTS
TOPIC PAGE
I RECITALS............................................................1
II THE GRANT...........................................................3
III GENERAL AGREEMENTS..................................................6
3.01 Payment of Indebtedness...................................6
3.02 Impositions.................................................6
3.03 Payment of Impositions by Mortgagee.........................7
3.04 Insurance and Insurance Proceeds............................7
3.05 Condemnation Awards.........................................7
3.06 Restoration.................................................8
3.07 Maintenance of Property.....................................8
3.08 Prohibited Liens and Transfers..............................8
3.09 Stamp Taxes.................................................8
3.10 Change in Tax Laws..........................................9
3.11 Assignment of Leases and Rents..............................9
3.12 Releases...................................................10
3.13 Further Assurances.........................................11
3.14 Environmental Provisions...................................11
IV EVENT OF DEFAULT AND REMEDIES......................................14
4.01 Event of Default...........................................14
4.02 Acceleration of Maturity...................................14
4.03 Application of the Rents or Proceeds from Foreclosure or
Sale .....................................................15
4.04 Cumulative Remedies; Delay or Omission Not a Waiver .......15
4.05 Mortgagee's Remedies Against Multiple Parcels..............16
4.06 No Merger..................................................16
4.07 Insurance Upon Foreclosure.................................16
4.08 Waiver of Statutory Rights.................................17
V MISCELLANEOUS......................................................17
5.01 Notices....................................................17
5.02 Time of Essence............................................17
5.03 Covenants Run with Land....................................17
5.04 GOVERNING LAW..............................................17
5.05 Rights and Remedies Cumulative.............................18
5.06 Severability...............................................18
5.07 Non-Waiver.................................................18
5.08 Headings...................................................18
5.09 Grammar....................................................18
5.10 Deed in Trust..............................................18
5.11 Successors and Assigns...................................18
5.12 Mortgagee in Possession....................................18
<PAGE>
5.13 Compliance with Applicable Law.............................18
5.14 Incorporation of Credit Agreement..........................19
5.15 Security Agreement.........................................19
5.16 Additional Provisions......................................21
5.17 Intentionally Deleted......................................22
5.18 Reduction of Secured Amount................................22
5.19 Application of Payments and Repayments.....................22
<PAGE>
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FINANCING STATEMENT
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND
FINANCING STATEMENT ("Mortgage") is made as of July 31, 1998, 1998 by RIDGEPAK
CORPORATION D/B/A FLASHFOLD CARTON CO., an Illinois corporation with its
principal office at 1140 Hayden Street, Fort Wayne, IN 46803 as Mortgagor
("Mortgagor"), for the benefit of First Source Financial, LLP ("First Source"),
an Illinois Limited liability partnership with its principal office at 2850 Golf
Road, Rolling Meadows, Illinois 60008, as mortgagee, and as agent for itself,
and for and on behalf of the other Lenders (as hereinafter defined), and as
assignee and secured party (together with any successors or assigns, the
"Mortgagee").
I
RECITALS
WHEREAS, Mortgagor is the owner of that certain real property situated
in Allen County, Indiana;
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation,
Mortgagee, and certain financial institutions (the "Lenders") from time to time
party to the Credit Agreement (as hereinafter defined) have executed of even
date herewith that certain Secured Credit Agreement (together with any and all
renewals, amendments, modifications, supplements, restatements, extensions for
any period, or increases or rearrangements thereof, the "Credit Agreement"),
pursuant to which Credit Agreement the Lenders have made and may in the future
make term and revolving loans and advances and other financial accommodations to
the Borrower (collectively, "Loans"; each, a "Loan") in the aggregate principal
amount of Forty-Two Million and no/100 Dollars ($42,000,000), upon the terms and
subject to the conditions set forth in the Credit Agreement;
WHEREAS, capitalized terms used herein without definitions shall have
the meaning assigned to such terms in the Credit Agreement;
WHEREAS, the Loans are in the form of: (i) a term loan in the aggregate
principal amount of Twenty Five Million and No/100 Dollars ($25,000,000) (the
"Term Loan"), (ii) a revolving credit loan in the aggregate principal amount of
Fifteen Million and No/100 Dollars ($15,000,000) (the "Revolving Credit Loan"),
(iii) a certain Letter of Credit (as defined in Section 1.1 of the Credit
Agreement) up to an amount not to exceed Two Million and No/100 Dollars
($2,000,000);
WHEREAS, the Revolving Credit Loans and Term Loans are evidenced by
certain promissory notes (the "Notes");
<PAGE>
WHEREAS, Mortgagor has executed that certain Subsidiary Guaranty of
even date herewith in favor of Mortgagee and the Lenders (the "Guaranty",
together with any and all renewals, amendments, modifications, supplements,
restatements, extensions for any period, or increases or rearrangements
thereof), to secure the "Obligations" (as defined in the Credit Agreement) by
pledging to Mortgagee the capital stock of Mortgagor and its subsidiaries, if
any, and by granting to Mortgagee a security interest in and lien upon all of
its personal and real property;
WHEREAS, Mortgagor wishes to provide further assurance and security to
Mortgagee and as a condition to Mortgagee and Lenders executing the Credit
Agreement, Mortgagee and Lenders are requiring that Mortgagor grant to Mortgagee
a mortgage lien on the Property (as hereinafter defined) to secure the
Mortgagor's obligations under the Guaranty;
WHEREAS, subject to the limitations set forth in Section 5.18 of this
Mortgage, this Mortgage is being given by Mortgagor to secure the performance of
all terms, covenants, conditions, agreements and liabilities of Mortgagor
contained in this Mortgage, the Guaranty, and other Loan Documents (hereinafter,
collectively, the "Obligations");
WHEREAS, Mortgagor derives substantial direct and indirect economic
benefit from the making of the Loans and other benefits to be provided to the
Borrower under the Credit Agreement, and other valuable consideration, the
receipt and adequacy of which are hereby acknowledged; and
WHEREAS, this Mortgage also secures the payment of and includes all
amounts owing in respect of all future or further advances of the Loans as shall
be made at all times, regardless of whether proceeds of the Loans have or shall
be disbursed by Mortgagee herein or its successors or assigns, to and for the
benefit of Mortgagor, its successors or assigns, to the same extent as if such
future advances were made on the date of the execution of this Mortgage. The
total amount of Indebtedness secured by this Mortgage may decrease or increase
from time to time but the total unpaid principal balance so secured at any one
time shall not exceed the lesser of: (i) the maximum principal sum permitted by
the laws of the State in which the Premises are located; or (ii) Eighty-Four
Million and No/100 Dollars ($84,000,000), together with interest thereon and any
and all disbursements made by Mortgagee for the payment of taxes, or insurance
on the Property covered by the lien of this Mortgage and for reasonable
attorneys' fees, loan commissions, service charges, liquidated damages, expenses
and court costs incurred in the collection of any or all of such sums of money.
Such further or future advances shall be considered obligatory advances and the
same shall bear interest at the same rate as specified in the Credit Agreement
unless such interest rate shall be modified by subsequent agreement. The parties
hereby acknowledge and intend that all advances, including future advances
whenever hereafter made, shall be secured by this Mortgage.
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<PAGE>
II
THE GRANT
NOW, THEREFORE, subject to the limitations set forth in Section 5.18 of
this Mortgage, in order to secure the payment of the Obligations and the
performance of all of the covenants, provisions, agreements and obligations
contained in this Mortgage or in the Loan Documents and also to secure the
payment of any and all Secured Indebtedness, direct or contingent, that may now
or hereafter become owing from Mortgagor to Mortgagee and the Lenders and the
performance of all other obligations under the Loan Documents, and in
consideration of Ten and No/100 Dollars ($10.00) in hand well and truly paid at
or before the sealing and delivery hereof by Agent, on behalf of the Lenders, to
Mortgagor, the Recitals above stated, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally and firmly bound, Mortgagor hereby GRANTS, BARGAINS,
SELLS, ASSIGNS, RELEASES, ALIENS, TRANSFERS, REMISES, WARRANTS, DEMISES, CONVEYS
and MORTGAGES to Mortgagee and its successors and assigns forever (and grants to
Mortgagee and its successors and assigns forever a continuing security interest
in and to) the Premises described on Exhibit A, and all of its estate, right,
claim and interest therein, together with the following described property, all
of which other property is pledged primarily on a parity with the Premises and
not secondarily (the Premises and the following described rights, interests,
claims and property collectively referred to as the Property"):
(a) all buildings, structures and other improvements of every
kind and description now or hereafter erected, situated, or placed upon
the Premises (the "Improvements"), together with any and all Personal
Property (as defined in Paragraph (i) below) and all attachments now or
hereafter owned by Mortgagor and located in or on, forming part of,
attached to, used or intended to be used in connection with, or
incorporated in any such Improvements, including all extensions of,
additions to, betterments, renewals of, substitutions for and
replacements for any of the foregoing;
(b) all estate, claim, demand, right, title and interest of
Mortgagor now owned or hereafter acquired, including without
limitation, any after-acquired title, franchise, license, remainder or
reversion, in and to any and all (i) land or vaults lying within the
right-of-way of any street, avenue, way, passage, highway, or alley,
open or proposed, vacated or otherwise, adjoining the Premises; (ii)
alleys, sidewalks, streets, avenues, strips and gores of land
belonging, adjacent or pertaining to the Premises or the Improvements;
(iii) storm and sanitary sewer, water, gas, electric, railway and
telephone services relating to the Premises and the Improvements; (iv)
development rights, air rights, water, water rights, water stock, gas,
oil, minerals, coal and other substances of any kind or character
underlying or relating to the Premises or any part thereof; and (v)
tenements, hereditaments, easements, appurtenances, other rights,
liberties, reservations, allowances and privileges relating to the
Premises or the Improvements or in any way now
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<PAGE>
or hereafter appertaining thereto, including homestead and any other
claims at law or in equity;
(c) all leasehold estates and right, title and interest of
Mortgagor in any and all leases, subleases, management agreements,
arrangements, concessions or agreements, written or oral, relating to
the use and occupancy of the Premises or the Improvements or any
portion thereof, now or hereafter existing or entered into
(collectively "Leases");
(d) all rents, issues, profits, royalties, revenue, advantages,
income, avails, claims against guarantors, all cash or security
deposits, advance rentals, deposits or payments given and other
benefits now or hereafter derived directly or indirectly from the
Premises and Improvements under the Leases or otherwise (collectively
"Rents"), subject to the right, power and authority to assign, collect
and apply the Rents;
(e) all right, title and interest of Mortgagor in and to all
options to purchase or lease the Premises or the Improvements or any
portion thereof or interest therein, or any other rights, interests or
greater estates in the rights and properties comprising the Property
now owned or hereafter acquired by Mortgagor;
(f) any interests, estates or other claims of every name, kind
or nature, both in law and in equity, which Mortgagor now has or may
acquire in the Premises and Improvements or other rights, interests or
properties comprising the Property now owned or hereafter acquired;
(g) all rights of Mortgagor to any and all plans and
specifications, designs, drawings and other matters prepared for any
construction on the Premises or regarding the Improvements;
(h) all rights of Mortgagor under any contracts executed by
Mortgagor with any provider of goods or services for or in connection
with any construction undertaken on or services performed or to be
performed in connection with the Premises or the Improvements;
(i) all right, title and interest of Mortgagor in and to all
the following tangible personal property ("Personal Property") owned by
Mortgagor and now or at any time hereafter located in, on or at the
Premises or the Improvements and used or useful in connection
therewith:
(i) all building materials and equipment located upon the
Premises and intended for construction, reconstruction,
alteration, repair or incorporation in or to the Improvements
now or hereafter to be constructed
-4-
<PAGE>
thereon, whether or not yet incorporated in such Improvements,
(all of which shall be deemed to be included in the Property
upon delivery thereto);
(ii) all machines, machinery, fixtures, apparatus,
equipment or articles used in supplying heating, gas,
electricity, air-conditioning, water, light, power, plumbing,
sprinkler, waste removal, refrigeration, ventilation, and all
fire sprinklers, alarm systems, protection, electronic
monitoring equipment and devices;
(iii) all window, structural, maintenance and cleaning
equipment and rigs; and
(iv) all fixtures now or hereafter owned by Mortgagor and
attached to or contained in and used or useful in connection
with the Premises or the Improvements. All such property owned
by Mortgagor and placed by it on the Premises or used in
connection with the operation or maintenance shall, so far as
permitted by law, be deemed for the purposes of this Mortgage
to be part of the real estate constituting and located on the
Premises and covered by this Mortgage. As to any of the
property that is not part of such real estate or does not
constitute a "fixture," as such term is defined in the Uniform
Commercial Code of the State (the "Code"), this Mortgage shall
be deemed to be a security agreement under the Code for the
purpose of creating hereby a security interest in property,
which Mortgagor hereby grants to Mortgagee as "secured party"
as defined in the Code. The enumeration of any specific items
of Personal Property set forth herein shall in no way exclude
or be held to exclude any items of property not specifically
enumerated;
(j) all the estate, interest, right, title or other claim or
demand which Mortgagor now has or may hereafter have or acquire with
respect to (i) proceeds of insurance in effect with respect to the
Property and (ii) any and all awards, claims for damages, judgments,
settlements and other compensation made for or consequent upon the
taking by condemnation, eminent domain or any like proceeding, or by
any proceeding or purchase in lieu thereof, of the whole or any part of
the Property, including, without limitation, any awards and
compensation resulting from a change of grade of streets and awards and
compensation for severance damages (collectively "Awards").
TO HAVE AND TO HOLD the Property hereby mortgaged and conveyed or so
intended, together with its rents, issues and profits, unto the Mortgagee, its
successors and assigns, forever, for the uses and purposes herein set forth.
The Mortgagor hereby covenants with the Mortgagee and with the
purchaser at any foreclosure sale that at the execution and delivery hereof,
Mortgagor owns the Property and has good, indefeasible estate therein, in fee
simple; that the Property is free from all encumbrances and
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exceptions to title (and any claim of any other person) other than the Permitted
Liens as defined in Section 1.1 of the Credit Agreement, (said encumbrances and
Permitted Liens are hereinafter collectively referred to as " Permitted
Exceptions"); that it has good and marketable title in and to the Property and
good and lawful right to sell, mortgage and convey the Property; and that
Mortgagor and its successors and assigns shall forever warrant and defend the
Property against all claims and demands whatsoever.
If and when Mortgagor has paid all of the Obligations, to the extent
secured hereby, as provided in Section 5.18 hereof, and there exist no
commitments of the Lender under the Loan Documents which could give rise to
Obligations, then this Mortgage and the estate, right and interest of Mortgagee
in and to the Property shall cease and shall be released by Mortgagee delivering
to Mortgagor a satisfaction of this Mortgage in proper recordable form at the
cost of Mortgagor, but until such time shall remain in full force and effect.
III
GENERAL AGREEMENTS
III.1 Payment of Indebtedness. Mortgagor shall pay promptly and when
due all amounts owing in respect of the Obligations in the manner provided in
the Guaranty, this Mortgage or the other Loan Documents.
III.2 Impositions. Mortgagor shall pay immediately, when first due and
owing, all general taxes, special taxes, special assessments, water charges,
sewer charges, and any other charges, fees, taxes, claims, levies, expenses,
liens and assessments, ordinary or extraordinary, governmental or
nongovernmental, statutory or otherwise (all of the foregoing being herein
collectively referred to as "Impositions"), that may be asserted against the
Property or any part thereof or interest therein.
Mortgagor may, in good faith and with reasonable diligence, contest the
validity or amount of any Impositions; provided, that:
(a) Mortgagor shall pay all such Impositions so contested under
protest if such payment is required to prevent such contest from having
the effect of preventing the sale or forfeiture of the Property or any
sub-part or interest;
(b) Mortgagor has notified Mortgagee in writing of the
intention of Mortgagor to prosecute the contest before any Impositions
have been materially increased by any interest, penalties, or costs;
and
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(c) Mortgagor shall diligently prosecute the contest of such
Impositions by appropriate legal proceedings.
III.3 Payment of Impositions by Mortgagee. Upon Mortgagor's failure to
pay the Impositions as provided above, Mortgagee is hereby authorized to make or
advance, in the place and stead of Mortgagor, any payment relating to
Impositions, unless such Imposition is then being contested by Mortgagor
pursuant to Section 3.02. Mortgagee may do so according to any bill, statement,
or estimate procured from the appropriate public office without inquiry into the
accuracy or the validity of any Impositions, lien, sale, forfeiture, or related
title or claim. Mortgagee is further authorized to make or advance, in place of
Mortgagor, unless such matter is being contested by Mortgagor in accordance with
Section 3.02 or Section 3.08(a), any payment relating to any apparent adverse
title, lien, statement of lien, encumbrance, claim, charge, or payment otherwise
relating to any other purpose herein and hereby authorized (except the Permitted
Exceptions), but not enumerated in this Section, whenever, in Mortgagee's
reasonable judgment and discretion, such advance is necessary or desirable to
protect the full security intended to be created by this Mortgage. Subject to
the limitations set forth in Section 5.18, all such advances and indebtedness
authorized by this Section shall constitute Obligations and shall be repayable
by Mortgagor upon demand with interest at the rate of interest which may be due
and owing from time to time on any loan and payable pursuant to Section 4.2(a)
of the Credit Agreement (the "Default Rate").
III.4 Insurance and Insurance Proceeds. Mortgagor's insurance
requirements shall be as set forth in Section 11.4 of the Credit Agreement.
Mortgagor's rights to insurance proceeds shall be as set forth in Section 7.6 of
the Credit Agreement.
III.5 Condemnation Awards. In the event of any taking of the Property
or any part thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special, or by reason of the temporary
requisition of the use or occupancy of the Property or any part thereof, by any
governmental authority, civil or military (each, a "Taking"), Mortgagor shall
immediately notify Mortgagee upon receiving notice of such Taking or
commencement of proceedings therefor. All proceeds or any award or payment in
respect of any Taking are hereby assigned and shall be paid to Mortgagee and
Mortgagor shall take all steps necessary to notify the condemning authority of
such assignment. Such award or payment, less the amount of any expenses incurred
in litigating, arbitrating, compromising or settling any claim arising out of
such Taking ("Net Award"), shall be applied in accordance with the provisions of
Section 3.06 hereafter.
III.6 Restoration. Mortgagor's rights with respect to restoring the
Premises with a Net Award of Net Proceeds shall be as set forth in the Credit
Agreement.
III.7 Maintenance of Property. Mortgagor shall:
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(a) promptly repair, restore, replace or rebuild any portion of
the Property which may become damaged, destroyed, altered, removed,
severed, or demolished, whether or not proceeds of insurance are
available or sufficient for the purpose, with replacements at least
equal in quality and condition as previously existed, free from any
security interest in, encumbrances on or reservation of title thereto;
(b) keep the Property in good condition and repair, without
waste, and free from mechanics', materialmen's or like liens or claims
except for the Permitted Exceptions and as permitted under the Credit
Agreement; and
(c) not make any material alterations in the Property, except
as permitted or not prohibited by the Credit Agreement.
III.8 Prohibited Liens and Transfers.
(a) Except as otherwise provided in the Credit Agreement, and
as provided by operation of the laws of the State, Mortgagor shall not
create, suffer, or permit to be created or filed against the Property
any Mortgage lien or other lien superior or inferior to the lien
created by this Mortgage. To the extent that any lien, privilege or
other security device is created by operation of law, Mortgagor shall
cause such security device to be released as soon as practicable after
its creation. Mortgagor may contest any lien claim arising from any
work performed, material furnished, or obligation incurred by Mortgagor
upon furnishing Mortgagee security and indemnification reasonably
satisfactory to Mortgagee for the final payment and discharge of the
lien.
(b) Except as otherwise provided in the Credit Agreement,
Mortgagor may not sell, lease or convey all or any part of the
Property.
III.9 Stamp Taxes. If at any time the United States government, or any
federal, state, or municipal governmental subdivision, requires Internal Revenue
or other documentary stamps or levies any tax on this Mortgage or on the Notes,
or requires payment of any tax in the nature of or comparable to the United
States Interest Equalization Tax on the Obligations, then Mortgagor shall pay
such tax, including interest and penalties, in the required manner.
III.10 Change in Tax Laws. In the event of the enactment, after the
date of this Mortgage, of any law of the United States of America, or any state
or political subdivision thereof, (i) deducting from the value of the Premises,
for the purpose of taxation, the amount of any lien thereon; (ii) imposing upon
Mortgagee the payment of all or any part of the taxes, assessments, charges or
liens hereby required to be paid by Mortgagor; or (iii) changing in any way the
laws relating to the taxation of mortgages or debts secured by mortgages or
Mortgagor's interest in the Property, or the manner of collection of taxes, so
as to affect this Mortgage or the Obligations; then Mortgagor, upon demand by
Mortgagee, and as required by law, shall pay such taxes, assessments, charges,
or liens or reimburse Mortgagee therefor. If, in the opinion of counsel for
Mortgagee, it
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would be unlawful to require Mortgagor to make such payment or the making of
such payment might result in the imposition of interest beyond the maximum
amount permitted by law, then the applicable provisions of the Credit Agreement
shall apply. Nothing contained in this Section 3.10 shall be construed as
obligating Mortgagor to pay any portion of Mortgagee's federal, state and local
income tax.
III.11 Assignment of Leases and Rents. All right, title, and interest
of Mortgagor in and to all present Leases affecting the Property and including
and together with any and all future Leases, written or oral, upon all or any
part of the Property and together with all of the rents, income, receipts,
revenues, issues, avails and profits from or due or arising out of the Property
are hereby transferred and assigned simultaneously herewith to Mortgagee as
further security for the payment of the Obligations. All future Leases affecting
the Property shall be submitted by Mortgagor to Mortgagee for its approval prior
to execution, which approval shall not be unreasonably withheld or delayed. Each
Lease, including all future Leases shall be subordinate to this Mortgage,
provided that, upon the request of the Mortgagor and the lessee under any such
Lease, Mortgagee shall enter into a Subordination, Nondisturbance and Attornment
Agreement (or similar agreement) with such lessee in form and substance
reasonably satisfactory to Mortgagee, pursuant to which (i) Mortgagee will agree
that so long as such Lease shall be in full force and effect and such lessee is
not in default thereunder, Mortgagee will not disturb, pursuant to a foreclosure
action or otherwise, such lessee's possession under such Lease, and (ii) such
lessee shall agree that if Mortgagee or any future holder of this Mortgage shall
become the owner of the Property by reason of foreclosure of the Mortgage or
otherwise, or if the Property shall be sold as a result of any foreclosure
action or deed in lieu thereof, then such lease shall continue in full force and
effect as a direct lease between such lessee and the then owner of the Property.
Although it is the intention of the parties that the assignment contained in
this Section shall be a present and absolute assignment, it is expressly
understood and agreed, anything to the contrary notwithstanding, that Mortgagee
shall not exercise any of the rights or powers conferred upon it by this Section
until an Event of Default shall occur under this Mortgage. From time to time,
Mortgagor shall furnish Mortgagee with executed copies of each of the Leases and
shall use commercially reasonable efforts to furnish Mortgagee with estoppel
letters from each tenant under each of the Leases in a form satisfactory to
Mortgagee within thirty (30) days after Mortgagee's written demand.
Following the occurrence of an Event of Default (a) Mortgagee shall
have the rights and powers as are provided herein, (b) this Mortgage shall
constitute a direction to each lessee under the Leases and each guarantor
thereof to pay all Rents directly to Mortgagee without proof of the Event of
Default, and (c) Mortgagee shall have the authority, as Mortgagor's
attorney-in-fact (such authority being coupled with an interest and
irrevocable), to sign the name of Mortgagor and to bind Mortgagor on all papers
and documents relating to the operation, leasing and maintenance of the
Property.
If Mortgagor, as lessor under any Lease, shall neglect or refuse to
perform, observe and keep all of the covenants, provisions and agreements
contained in such Lease, then Mortgagee may perform and comply with any such
Lease covenants, agreements and provisions. All costs and
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expenses incurred by Mortgagee in complying with such covenants, agreements, and
provisions shall constitute Obligations and shall be payable upon demand with
interest at the Default Rate.
Mortgagee shall not be obligated to perform or discharge any
obligation, duty or liability under any Lease, and Mortgagor shall and does
hereby agree, except to the extent of Mortgagee's gross negligence or willful
misconduct, to indemnify and hold Mortgagee harmless of and from any and all
liability, loss or damage which it may or might incur under any Lease or under
or by reason of their assignments and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of all alleged obligations
or undertakings on its part to perform or discharge any of the terms, covenants
or agreements contained in such Lease. Should Mortgagee incur any such
liability, loss or damage under any Lease or under or by reason of its
assignment, or in the defense of any claims or demands, the amount thereof,
including costs, expenses and reasonable attorneys' fees, shall, subject to the
limitations set forth in Section 5.18 of this Mortgage, be secured hereby.
Mortgagor shall reimburse Mortgagee therefor immediately upon demand with
interest payable at the Default Rate.
III.12 Releases. Without notice and without regard to the consideration
therefor, and to the existence at that time of any inferior liens, Mortgagee may
release from the lien created hereby all or any part of the Property, or release
from liability any person obligated to repay any Obligations, without affecting
the liability of any party to any of the Notes, this Mortgage, or any of the
other Loan Documents (including without limitation any guaranty given as
additional security) and without in any way affecting the priority of the lien
created hereby. Mortgagee may agree with any liable party to extend the time for
payment of any part or all of the Obligations. Such agreement shall not in any
way release or impair the lien created by this Mortgage or reduce or modify the
liability of any person or entity obligated personally to repay the Obligations,
but shall extend the lien created by this Mortgage as against the title of all
parties having any interest, subject to the Obligations in the Property.
III.13 Further Assurances. Mortgagor agrees that, upon request of
Mortgagee from time to time, it will, at Mortgagor's sole cost and expense,
execute, acknowledge and deliver all such additional instruments and further
assurances of title and will do or cause to be done all such further acts and
things as may reasonably be necessary to fully effectuate the intent of this
Mortgage, including without limitation, reimbursing Mortgagee for the reasonable
costs of appraisals of the Property, to the extent that Mortgagee determines in
good faith that such appraisals are required by any law or any governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof, including, without limitation, the
provisions of Title XI of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, and any rules promulgated to implement such provisions.
In the event that Mortgagor shall fail to do any of the foregoing, Mortgagee
may, in its sole discretion, do so in the name of Mortgagor, and Mortgagor
hereby appoints Mortgagee as its attorney-in-fact to do any of the foregoing.
III.14 Environmental Provisions.
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(a) For the purposes of this Section the following terms shall have the
following meanings: (i) the term "Hazardous Material" shall mean any material or
substance that, whether by its nature or use, is now or hereafter defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Requirement, or which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
which is or contains petroleum, gasoline, diesel fuel or another petroleum
hydrocarbon product; (ii) the "Environmental Requirements" shall collectively
mean all applicable present and future laws, statutes, ordinances, rules,
regulations, orders, codes, licenses, permits, decrees, judgments, directives of
or by any Governmental Authority and relating to or addressing the protection of
the environment or human health; and (iii) the term "Governmental Authority"
shall mean the federal government, or any state or other political subdivision
thereof, or any agency, court or body of the federal government, any state or
other political subdivision thereof, exercising executive, legislative,
judicial, regulatory or administrative functions.
(b) Mortgagor hereby represents and warrants to Mortgagee that to the
best of Mortgagor's knowledge after commercially reasonable inquiry and except
as disclosed in writing to Mortgagee or as set forth on Schedule 10.19 to the
Credit Agreement: (i) no Hazardous Material is currently located at or has been
disposed of on, in, under or about the Property in material violation of any
Environmental Requirement; (ii) no releasing, emitting, leaching, discharging,
dumping or disposing of any Hazardous Material from the Property onto any other
property or from any other property onto or into the Property has occurred or is
occurring in material violation of any Environmental Requirement; (iii) no
notice of violation, lien, complaint, suit, order or other notice with respect
to the Property is presently outstanding under any Environmental Requirement
which, if not resolved, is reasonably likely to have a Material Adverse Effect
(as defined in the Credit Agreement); and (iv) the Property and the operation
thereof are in material compliance with all applicable Environmental
Requirements.
(c) Mortgagor shall comply, and shall use its best efforts to cause all
tenants or other lawful occupants of the Property to comply with all applicable
and material Environmental Requirements, and will not generate, store, handle,
process, dispose of or otherwise use, and will not grant permission to any
tenant or other occupant of the Property to generate, store, handle, process,
dispose of or otherwise use, Hazardous Materials at, in, on, or about the
Property in a manner that is reasonably likely to lead or potentially lead to
the imposition on Mortgagor, Mortgagee or the Property of any material liability
or lien of any nature whatsoever, based upon the assessed value of the Property,
or lien under any Environmental Requirement which is reasonably likely to have a
Material Adverse Effect. Mortgagor shall notify Mortgagee promptly in the event
of any spill or other release of any Hazardous Material at, in, on, under or
about the Property which is required to be reported to a Governmental Authority
under any Environmental Requirement, will promptly forward to Mortgagee copies
of any notices received by Mortgagor relating to alleged violations of any
Environmental Requirement and will promptly pay when due or contest in good
faith within the applicable time periods any fine or assessment against
Mortgagee, Mortgagor or the Property relating to any Environmental Requirement.
If at any time it is it is determined that the operation or use of the Property
by Mortgagor violates any applicable and material Environmental Requirement or
that there are Hazardous Materials located at, in, on, under or about the
Property in violation of any
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applicable Environmental Requirement or that there are Hazardous Materials
located at, in, on, under or about the Property which, under any Environmental
Requirement, require special handling in collection, storage, treatment or
disposal, or any other form of cleanup or corrective action, Mortgagor shall,
within thirty (30) days after receipt of notice thereof from any Governmental
Authority or from Mortgagee, take, at Mortgagor's sole cost and expense, such
actions as may be necessary to fully comply in all material respects with all
applicable Environmental Requirements or contest in good faith the requirement
to take such actions, provided, however, that if such compliance cannot
reasonably be completed within such thirty (30) day period, Mortgagor shall
thereafter diligently and expeditiously proceed to fully comply with or contest
in good faith in a timely fashion all Environmental Requirements.
(d) If Mortgagor fails to timely take or contest, or to diligently and
expeditiously proceed to complete in a timely fashion, any such action described
in subsection (c) above, Mortgagee may, in its reasonable discretion, make
advances or payments toward the performance or satisfaction of any activities
required pursuant to any Environmental Requirement, but shall in no event be
under any obligation to do so. All sums so advanced and paid by Mortgagee
(including, without limitation, reasonable counsel and consultant fees and
expenses, investigation and laboratory fees and expenses, and fines or other
penalty payments) and all sums advanced or paid in connection with any judicial
or administrative investigation or proceeding relating thereto, will
immediately, upon demand, become due and payable from Mortgagor and shall bear
interest at the Default Rate from the date any such sums are so advanced or paid
by Mortgagee until the date any such sums are repaid by Mortgagor to Mortgagee.
Mortgagor will execute and deliver, promptly upon request, such instruments as
Mortgagee may reasonably deem necessary to permit Mortgagee to take any such
action, and such additional notes and mortgages, as Mortgagee may require to
secure all sums so advanced or paid by Mortgagee. If a lien is filed against the
Property by any Governmental Authority resulting from the need to expend or the
actual expending of monies arising from an action or omission, whether
intentional or unintentional, of Mortgagor or for which Mortgagor is
responsible, resulting in the releasing, spilling, leaking, leaching, pumping,
emitting, pouring, emptying or dumping of any Hazardous Material into the waters
or onto land located within or without the State where the Property is located,
then Mortgagor will, within thirty (30) days from the date that Mortgagor
receives notice that such lien has been placed against the Property (or within
such shorter period of time as may be specified by Mortgagee if such
Governmental Authority has commenced steps to cause the Property to be sold
pursuant to such lien), either (a) pay (or otherwise satisfy) the claim and
remove the lien; or (b) contest such lien in good faith; or (c) furnish a cash
deposit, bond, or such other security with respect thereto as is satisfactory in
all respects to Mortgagee and is sufficient to effect a complete discharge of
such lien on the Property.
(e) Mortgagee may, at its option, at intervals of not less than one
year, or more frequently, if Mortgagee reasonably believes that a Hazardous
Material or other environmental condition violates or threatens to violate any
Environmental Requirement, cause an environmental audit of the Property or
portions thereof to be conducted to evaluate Mortgagor's compliance with the
provisions of this Section, and Mortgagor shall cooperate in all reasonable ways
with Mortgagee in connection with any such audit. If such audit discloses that a
violation of an Environmental
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Requirement exists or if such audit was required or prescribed by law,
regulation or governmental or quasi-governmental authority, Mortgagor shall pay
all costs and expenses incurred in connection with such audit; otherwise, the
costs and expenses of such audit shall, notwithstanding anything to the contrary
set forth in this Section, be paid by Mortgagee.
(f) Except for: (a) any Claims (as hereinafter defined) arising as a
result of the gross negligence or wilful misconduct of Mortgagee during the term
of this Mortgage; or (b) any Claims arising as a result of any acts of Mortgagee
or its successors and assigns or the occurrence of any acts by any third parties
after Mortgagee or its successor and assigns take possession of the Property, in
the event Mortgagee takes possession of the Property after an Event of Default,
Mortgagor will defend, indemnify, and hold harmless Mortgagee, and its
employees, agents, officers, and directors, from and against any and all claims,
demands, penalties, causes of action, fines, liabilities, settlements, damages,
costs, or expenses of whatever kind or nature, known or unknown, foreseen or
unforeseen, contingent or otherwise, including, without limitation, reasonable
counsel and consultant fees and expenses, investigation and laboratory fees and
expenses, court costs, and litigation expenses (all of the foregoing
collectively for purposes of this Section the "Claims"), arising out of, or in
any way related to: (i) any breach by Mortgagor of any of the provisions of this
Section; (ii) the presence, disposal, spillage, discharge, emission, leakage,
release, or threatened release of any Hazardous Material which is at, in, on,
under, about, from or affecting the Property, including, without limitation, any
damage or injury resulting from any such Hazardous Material to or affecting the
Property or the soil, water, air, vegetation, buildings, personal property,
persons or animals located on the Property, or in any other property or
otherwise; (iii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to any such Hazardous
Material; (iv) any lawsuit brought or threatened, settlement reached, or order
or directive of or by any Governmental Authority relating to such Hazardous
Material; or (v) any violation of any Environmental Requirement or any policy or
requirement of Mortgagee hereunder. The aforesaid indemnification shall,
notwithstanding any exculpatory or other provision of any other document or
instrument now or hereafter executed and delivered in connection with the loan
evidenced by the Notes and secured by this Mortgage, constitute the personal
recourse undertakings, obligations and liabilities of Mortgagor, and shall
survive the foreclosure or satisfaction of this Mortgage and the discharge of
Mortgagor's other Obligations hereunder.
IV
EVENT OF DEFAULT AND REMEDIES
IV.1 Event of Default. Each of the following shall constitute an event
of default ("Event of Default") under this Mortgage:
(a) The occurrence of an "Event of Default" as such term is
defined in the Credit Agreement (including, if applicable, the
expiration of any grace period provided therein); or
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(b) Failure of Mortgagor to perform or observe any other
covenant, agreement, representation, warranty or other provision
contained in this Mortgage within thirty (30) days after written notice
of the default from Mortgagee to Mortgagor.
IV.2 Acceleration of Maturity. Following the occurrence of an Event of
Default, the Obligations shall become due and payable in accordance with the
terms of the Credit Agreement. Upon acceleration:
(a) Mortgagee's Power of Enforcement. Mortgagee may (i) immediately
sell the Property, either in whole or in separate parcels, as prescribed by
State law, under power of sale, which power is hereby granted to Mortgagee to
the full extent permitted by State law, and thereupon, to make and execute to
any purchaser(s) thereof deeds of conveyance pursuant to applicable law or (ii)
immediately foreclose this Mortgage by judicial or other action permitted by
applicable law. The court in which any proceeding is pending for the purpose of
foreclosure of this Mortgage may, at once or at any time thereafter, either
before or after sale, without notice and without requiring bond, and without
regard to the solvency or insolvency of any person liable for payment of the
Obligations secured hereby, and without regard to the then value of the Property
or the occupancy thereof as a homestead, appoint a receiver (to the extent
permitted by applicable law) (the provisions for the appointment of a receiver
and assignment of Rents being an express condition upon which the Loans are
made) for the benefit of Mortgagee, with power to collect the Rents, due and to
become due, during such foreclosure suit and the full statutory period of
redemption. The receiver, out of the Rents, when collected, may pay costs
incurred in the management and operation of the Property, prior and subordinate
liens, if any, and taxes, assessments, water and other utilities and insurance,
then due or thereafter accruing, and may make and pay for any necessary repairs
to the Property, and may pay all or any part of the Obligations or other sums
secured hereby or any deficiency decree entered in such foreclosure proceedings.
Upon or at any time after the filing of a suit to foreclose this Mortgage, the
court in which such suit is filed shall have full power to enter an order
placing Mortgagee in possession of the Property with the same power granted to a
receiver pursuant to this subsection and with all other rights and privileges of
a mortgagee-in-possession under applicable law.
(b) Mortgagee's Other Rights. Mortgagee shall have the right to
take such other steps to protect and enforce its rights, whether by
action, suit or proceeding at law or in equity for the specific
performance of any covenant, condition or agreement contained in this
Mortgage, or in aid of the execution of any power granted in this
Mortgage, or for any foreclosure hereunder, or for the enforcement of
any other appropriate legal or equitable remedy or otherwise as
Mortgagee and/or the Trustees shall elect.
IV.3 Application of the Rents or Proceeds from Foreclosure or Sale. In
any foreclosure of this Mortgage by judicial action, or any sale of the Property
under the power of sale herein granted, the proceeds of such foreclosure
proceeding and/or sale and/or the Rents paid to Mortgagee shall, to the extent
permitted by law, be applied as follows:
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First: to the ratable payment of the costs and expenses of such sale,
including reasonable compensation to Mortgagee, its agents and attorneys, and of
any judicial or private proceedings in which such sale may be made, and, subject
to the limitations set forth in Section 5.18 of this Mortgage, of all other
expenses, liabilities and advances made or incurred by Mortgagee and its agents
and attorneys under this Mortgage, and the Guaranty, together with interest at
the Default Rate on such costs, expenses and liabilities and on all advances
made by Mortgagee from the date any such cost, expense or liability is due,
owing or unpaid or any such advance is made, in each case until paid in full.
Second: to the payment of the Obligations, subject to the limitations
set forth in Section 5.18 of this Mortgage.
Third: the surplus, if any, to be paid to whomever may be lawfully
entitled to receive such surplus.
IV.4 Cumulative Remedies; Delay or Omission Not a Waiver. Each remedy
or right of Mortgagee shall not be exclusive of, but shall be in addition to,
every other remedy or right now or hereafter existing at law or in equity. No
delay in the exercise or omission to exercise any remedy or right accruing on
the occurrence or existence of any Event of Default under the Credit Agreement
shall impair any such remedy or right or be construed to be a waiver of any such
Event of Default or acquiescence therein, nor shall it affect any subsequent
Event of Default of the same or different nature. Every such remedy or right may
be exercised concurrently or independently and when and as often as may be
deemed expedient by Mortgagee.
IV.5 Mortgagee's Remedies Against Multiple Parcels. The Obligations
hereby secured are also secured by other properties, lots or parcels covered by
other mortgages or deeds of trust ("Other Mortgages") within and/or outside the
State. If this Mortgage or any of the Other Mortgages is foreclosed upon, or if
judgment is entered upon any Obligations secured hereby, or if Mortgagee
exercises its power of sale, execution may be made upon or Mortgagee may
exercise its power of sale against any one or more of the properties, lots or
parcels and not upon the others, or upon all of such properties or parcels,
either together or separately, and at different times or at the same time, and
execution sales or sales under the power of sale herein granted may likewise be
conducted separately or concurrently, in each case at the election of Mortgagee.
No event of enforcement taking place in any state other than the State shall
(and no failure to prosecute any such other enforcement) in any way stay,
preclude or bar enforcement of this Mortgage and Mortgagee may pursue any or all
of Mortgagee's rights and remedies under this Mortgage to the maximum extent
permitted by State law until the Obligations are paid and discharged in full.
IV.6 No Merger. In the event of a foreclosure of this Mortgage, the
Obligations then due Mortgagee shall not be merged into any decree of
foreclosure entered by the court, and Mortgagee may concurrently or subsequently
seek to foreclose one or more mortgages or deeds of trust which also secure said
Obligations.
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<PAGE>
IV.7 Insurance Upon Foreclosure. In case of an insured loss after
foreclosure proceedings have been instituted, the proceeds of any insurance
policy or policies, if not applied in Restoring the Property shall be used to
pay the amount due in accordance with any decree of foreclosure that may be
entered in any such proceedings, and the balance, if any, shall be paid as the
court may direct. In case of the foreclosure of this Mortgage, the court in its
judgment may provide that the judgment creditor may cause a new or additional
loss clause to be attached to each of said policies making the loss thereunder
payable to said judgment creditor; and any such foreclosure judgment may further
provide, unless the right of redemption has been waived, that in case of
redemption under said judgment, pursuant to applicable law, then, and in every
such case, the redemptory may cause the preceding loss clause attached to each
insurance policy to be cancelled and a new loss clause to be attached thereto,
making the loss thereunder payable to such redemptory. In the event of
foreclosure sale, Mortgagee is hereby authorized, but not required, without the
consent of Mortgagor, to assign or cause a receiver to assign any and all
insurance policies to the purchaser at the sale, or to take such other action as
Mortgagee may deem advisable, to cause the interest of such purchaser to be
protected by any of the said insurance policies.
IV.8 Waiver of Statutory Rights. Mortgagor shall not apply for or avail
itself of any appraisement, valuation, redemption, stay, extension, or exemption
laws, or any so-called "moratorium laws," now existing or hereafter enacted, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage, and
Mortgagor hereby waives the benefit of such laws (to the extent permitted by
applicable law). Mortgagor, for itself and all who may claim through or under
it, waives any and all rights to have the Property and estates comprising the
Property marshalled upon any foreclosure of the lien of this Mortgage, and
agrees that any court having jurisdiction to foreclose such lien may order the
Property sold in its entirety. Mortgagor further waives any and all rights of
redemption from foreclosure and from sale under any order or decree of
foreclosure of the lien created by this Mortgage, for itself and on behalf of:
(i) any trust estate of which the Premises are a part, all beneficially
interested persons; (ii) each and every person acquiring any interest in the
Property or title to the Premises subsequent to the date of this Mortgage; and
(iii) all other persons to the extent permitted by the provisions of laws of the
State in which the Premises are located.
V
MISCELLANEOUS
V.1 Notices. Any notice that Mortgagee or Mortgagor may desire or be
required to give to the other shall be in writing and shall be mailed or
delivered in the manner set forth in the Credit Agreement.
V.2 Time of Essence. Time is of the essence of this Mortgage.
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<PAGE>
V.3 Covenants Run with Land. All of the covenants of this Mortgage
shall run with the land constituting the Premises.
V.4 GOVERNING LAW. THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED
ACCORDING TO THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REFERENCE TO CONFLICTS
OF LAWS PROVISIONS THEREOF) PROVIDED, HOWEVER, THAT MATTERS OF CREATION,
PERFECTION, PRIORITY OF ENFORCEABILITY OF ANY AND ALL RIGHTS AND REMEDIES
PROVIDED FOR HEREIN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF INDIANA. TO
THE EXTENT THAT THIS MORTGAGE MAY OPERATE AS A SECURITY AGREEMENT UNDER THE
CODE, MORTGAGEE SHALL HAVE ALL RIGHTS AND REMEDIES CONFERRED THEREIN FOR THE
BENEFIT OF A SECURED PARTY AS SUCH TERM IS DEFINED IN THE CODE.
V.5 Rights and Remedies Cumulative. All rights and remedies in this
Mortgage are cumulative. The holder of the Guaranty and of every other
obligation secured hereby may recover judgment, issue execution therefor, and
resort to every other right or remedy available at law or in equity, without
first exhausting and without affecting or impairing the security of any right or
remedy.
V.6 Severability. If any provision of this Mortgage, or any paragraph,
sentence, clause, phrase, or word, or their application, in any circumstance, is
held invalid, the validity of the remainder of this Mortgage shall be construed
as if such invalid part were never included.
V.7 Non-Waiver. Unless expressly provided in this Mortgage to the
contrary, no consent or waiver, express or implied, by any party, to or of any
breach or default by any other party shall be deemed a consent to or waiver of
the performance by such defaulting party of any other obligations or the
performance by any other party of the same, or of any other, obligations.
V.8 Headings. The headings of sections and paragraphs in this Mortgage
are for convenience or reference only and shall not be construed in any way to
limit or define the content, scope, or intent of the provisions.
V.9 Grammar. As used in this Mortgage, the singular shall include the
plural, and masculine, feminine, and neuter pronouns shall be fully
interchangeable, where the context so requires.
V.10 Deed in Trust. If title to the Property or any part thereof is now
or hereafter becomes vested in a trustee, any prohibition or restriction against
the creation of any lien on the Property shall be construed as a similar
prohibition or restriction against the creation of any lien on or security
interest in the beneficial interest of such trust.
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<PAGE>
V.11 Successors and Assigns. This Mortgage shall be binding upon
Mortgagor, its successors, assigns, legal representatives, and all other persons
or entities claiming under or through Mortgagor. The word "Mortgagee", when used
herein, shall include First Source Financial, LLP, in its capacity as
Administrative Agent and as Agent for the Lenders together with its successors,
assigns and legal representatives. "Mortgagor", when used herein, shall include
all such persons and entities and any others liable for the payment of the
Secured Indebtedness, or any part thereof, whether or not they have executed the
notes or this Mortgage.
V.12 Mortgagee in Possession. Nothing contained in this Mortgage shall
be construed as constituting Mortgagee a mortgagee in possession in the absence
of the actual taking of possession of the Property.
V.13 Compliance with Applicable Law. Anything elsewhere herein
contained to the contrary notwithstanding,
(a) in the event that any provision in this Mortgage shall
be inconsistent with any provision of applicable law, the
provisions of applicable law shall take precedence over the
provisions of this Mortgage, but shall not invalidate or render
unenforceable any other provision of this Mortgage that can be
construed in a manner consistent with applicable law; and
(b) if any provision of this Mortgage shall grant to
Mortgagee any rights or remedies upon default of Mortgagor
which are more limited than the rights that would otherwise be
vested in Mortgagee under applicable law in the absence of said
provision, Mortgagee shall be vested with the rights granted
under applicable law to the full extent permitted by law.
V.14 Incorporation of Credit Agreement. The terms of the Credit
Agreement are incorporated by reference herein as though set forth in full
detail. In the event of any conflict between the terms and provisions of this
Mortgage and any other Loan Document, the terms and provisions of such other
Loan Document shall govern and control.
V.15 Security Agreement. This Mortgage is hereby deemed to be as well a
Security Agreement for the purpose of creating hereby a security interest
securing the indebtedness secured hereby in and to the Personal Property.
Without derogating any of the provisions of this Mortgage, Mortgagor by this
Mortgage:
(a) grants to Mortgagee a security interest in all of
Mortgagor's right, title and interest in and to all Personal Property,
including, but not limited to, the items referred to above, together
with all additions, accessions and substitutions and all similar
property hereafter acquired and used or obtained for use on, or in
connection with the Property. The Personal Property and all proceeds
thereof are intended to be secured hereby; however, such intent shall
never constitute an express or implied consent on the part of Mortgagee
to the sale of any or all Personal Property;
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<PAGE>
(b) agrees that, subject to the limitations contained in
Section 5.18 of this Mortgage, the security interest hereby granted by
this Mortgage shall secure the payment of the Obligations;
(c) agrees not to sell, convey, Mortgage or grant a security
interest in, or otherwise dispose of or encumber, any of the Personal
Property or any of the Mortgagee's right, title or interest therein
except as permitted by the Credit Agreement without first securing
Mortgagee's written consent;
(d) agrees that upon or after the occurrence of any Event of
Default under this Mortgage, Mortgagee shall have all rights and
remedies granted by law and more particularly the Code, including, but
not limited to, the right to take possession of the Personal Property,
and for this purpose may enter upon any premises on which any or all of
the Personal Property is situated without being deemed guilty of
trespass and without liability for damages thereby occasioned (except
for damages caused by Mortgagee's gross negligence or wilful
misconduct), and take possession of and operate said Personal Property
or remove it therefrom. Mortgagee shall have the further right to take
any action it deems necessary, appropriate or desirable, at its option
and in its discretion, to repair, refurbish or otherwise prepare the
Personal Property for sale, lease or other use or disposition, and to
sell at public or private sales or otherwise dispose of, lease or
utilize the Personal Property and any part thereof in any manner
authorized or permitted by law and to apply the proceeds thereof,
subject to the limitations set forth in Section 5.18 of this Mortgage,
toward payment of any costs and expenses, to the extent permitted by
law, thereby incurred by Mortgagee and, subject to the limitations set
forth in Section 5.18 of this Mortgage, toward payment of the
Obligations and all other indebtedness described in this Mortgage, in
such order and manner as is provided in Section 4.03 hereof. To the
extent permitted by law, and only to the extent Mortgagor has waived
any of the following under that certain Subsidiary Security Agreement
of even date herewith by and between Mortgagor and Mortgagee, Mortgagor
expressly waives any notice of sale or other disposition of the
Personal Property and any other rights or remedies of a debtor or
formalities prescribed by law relative to a sale or disposition of the
Personal Property or to exercise any other right or remedy existing
after default hereunder; and to the extent any notice is required and
cannot be waived, Mortgagor agrees that if such notice is deposited for
mailing, postage prepaid, certified mail or registered mail, return
receipt requested, to Mortgagor at the address designated in the first
page of this Mortgage at least fifteen (15) days before the time of
sale or disposition, such notice shall be deemed reasonable and shall
fully satisfy any requirements for giving of said notice; provided that
if Mortgagor has furnished Mortgagee with notice of a change of address
in accordance with Section 5.01, then any such notice shall not be
reasonable unless sent to the new address;
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<PAGE>
(e) agrees, to the extent permitted by law and without limiting
any rights and privileges herein granted to Mortgagee, that Mortgagee
may dispose of any or all of the Personal Property at the same time and
place upon giving the same notice provided for in this Mortgage, and in
the same manner as the non-judicial foreclosure sale provided under the
terms and conditions of this Mortgage; and
(f) authorizes Mortgagee to file, in the jurisdiction where
this Mortgage will be given effect, financing statements including
renewal or confirmation thereof, covering the Personal Property; and at
the request of Mortgagee, Mortgagor will join Mortgagee in executing
one or more such financing statement including renewal or confirmation
thereof, pursuant to the Code in a form reasonably satisfactory to
Mortgagee, and will pay the cost of filing the same in all public
offices at any time and from time to time wherever Mortgagee deems
filing or recording of any financing statements including renewal or
confirmation thereof or of this instrument to be desirable or
necessary.
V.16 Additional Provisions. The following provisions shall also
constitute an integral part of this Mortgage. Furthermore, in the event that any
prior provisions of this Mortgage conflict with the following provisions of this
Section, the provisions of this Section shall control and shall be deemed a
modification of or amendment to the section or provision at issue:
(a) Payment of Taxes and Fees. Mortgagor agrees to pay all
transfer taxes, recordation taxes, recording fees, and any other fees
required by or imposed by the State or the county in which the Property
is located in order to record this Mortgage in the Land Records of
Allen County.
(b) No Assumption of Obligations. In the event of a foreclosure
of the Property, Mortgagee shall not assume any liability of Mortgagor
for Mortgagor's violation of any environmental laws, statutes, codes,
regulations, or practices and Mortgagor's indemnifications as contained
herein and in the Credit Agreement shall survive said foreclosure.
(c) Expenses of Enforcement; Waiver. Mortgagor agrees to bear
and pay all reasonable expenses (including reasonable attorney fees and
appellate attorney fees), of or incidental to the enforcement of any
provision hereof, or the enforcement, compromise, or settlement of this
Mortgage or the Obligations, and for the curing thereof, or for
defending or asserting the rights and claims of Mortgagee in respect
thereof, by litigation or otherwise. All rights and remedies of
Mortgagee shall be cumulative and may be exercised singly or
concurrently. Notwithstanding anything herein contained to the
contrary, Mortgagor to the extent permitted by applicable law: (i)
hereby waives trial by jury; (ii) will not (a) at any time insist upon,
or plead, or in any manner whatever claim or take any benefit or
advantage of any stay or execution or moratorium law, any exemption for
execution of sale of the Property or any part thereof, wherever
enacted, now or at any time hereafter enforced, which may affect the
covenants and terms of
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<PAGE>
performance of this Mortgage, nor (b) claim, take or insist upon any
benefit or advantage of any law now or hereafter enforced providing for
the evaluation or appraisal of the Property, or any part thereof, prior
to any sale or sales thereof which may be made pursuant to any
provision herein, or pursuant to the decree, judgment or order of any
court of competent jurisdiction, nor (c) after any such sale or sales,
claim, or exercise any right under any statute heretofore or hereafter
enacted to redeem the property so sold or any part thereof; (iii)
hereby expressly waives all benefit or advantage of any such law or
laws including but not limited to a waiver of the equity of redemption,
statutory right of redemption, and any other statutory or common law
right of redemption, homestead, dower, marital share and all other
exemptions; and (iv) covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to Mortgagee, but to
suffer and permit the execution of every power as though no such laws
or laws had been made or enacted. Mortgagor, for itself and all who may
claim under it, waives, to the extent that it lawfully may, all right
to have the Property marshalled upon any foreclosure hereof.
V.17 Intentionally Deleted.
V.18 Reduction of Secured Amount. The Secured Amount shall be reduced
only by the last and final sums that the Mortgagor repays with respect to the
Obligations and shall not be reduced by any intervening repayments of any of the
Obligations by the Mortgagor. As of the date hereof, the total amount of the
Obligations exceeds the Secured Amount, so that the Secured Amount represents
only a portion of the Obligations actually outstanding and due Mortgagee.
V.19 Application of Payments and Repayments. So long as the balance of
the Obligations exceeds the Secured Amount, any payments and repayments of the
Obligations by Mortgagor shall not be deemed to be applied against, or to
reduce, the portion of the Obligations secured by this Mortgage. Such payments
shall instead be deemed to reduce only such portions of the Obligations as are
secured by mortgages encumbering real property located outside the State of
Indiana, which mortgages secure the entire Obligations (except to the extent, if
any, that specific mortgages in such states contain specific limitations on the
amount secured).
[Signature and Notary Page Follows]
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<PAGE>
IN WITNESS WHEREOF, Mortgagor has duly signed and delivered this
Mortgage as of the date first above written.
Attest:: Mortgagor:
RIDGEPAK CORPORATION D/B/A
FLASHFOLD CARTON CO., INC., an
Illinois corporation
/s/ Alan M. Rauss
- -------------------------------------
Title: Assistant Secretary
------------------------------
Printed:
--------------------------- By: /s/ John W. Lloyd
---------------------------------
Printed:
----------------------------
Its: Vice President
---------------------------------
EXHIBIT 10.32
THIS MORTGAGE SHALL BE LIMITED TO, AND WILL SECURE ONLY $2,505,000
OF THE TOTAL OBLIGATIONS.
(ALABAMA)
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FINANCING STATEMENT
BY
NIEMAND INDUSTRIES, INC.
AN DELAWARE CORPORATION
MORTGAGOR
TO
FIRST SOURCE FINANCIAL, LLP,
AS AGENT
MORTGAGEE
RELATING TO PREMISES IN:
PERRY COUNTY, ALABAMA
DATED: AS OF JULY 31, 1998
THIS INSTRUMENT WAS PREPARED BY
AND AFTER RECORDING SHOULD BE RETURNED TO:
STEPHEN N. SHER, ESQ.
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601
THIS INSTRUMENT CONSTITUTES A FINANCING STATEMENT FILED AS A FIXTURE FILING
PURSUANT TO SECTION 9-402 OF THE INDIANA UNIFORM COMMERCIAL CODE.
<PAGE>
TABLE OF CONTENTS
TOPIC PAGE
I RECITALS............................................................1
II THE GRANT...........................................................3
III GENERAL AGREEMENTS..................................................6
3.01 Payment of Indebtedness...................................6
3.02 Impositions.................................................6
3.03 Payment of Impositions by Mortgagee.........................7
3.04 Insurance and Insurance Proceeds............................7
3.05 Condemnation Awards.........................................7
3.06 Restoration.................................................8
3.07 Maintenance of Property.....................................8
3.08 Prohibited Liens and Transfers..............................8
3.09 Stamp Taxes.................................................8
3.10 Change in Tax Laws..........................................9
3.11 Assignment of Leases and Rents..............................9
3.12 Releases...................................................10
3.13 Further Assurances.........................................11
3.14 Environmental Provisions...................................11
IV EVENT OF DEFAULT AND REMEDIES......................................14
4.01 Event of Default...........................................14
4.02 Acceleration of Maturity...................................14
4.03 Application of the Rents or Proceeds from Foreclosure or
Sale .....................................................15
4.04 Cumulative Remedies; Delay or Omission Not a Waiver........15
4.05 Mortgagee's Remedies Against Multiple Parcels..............16
4.06 No Merger..................................................16
4.07 Insurance Upon Foreclosure.................................16
4.08 Waiver of Statutory Rights.................................17
V MISCELLANEOUS......................................................17
5.01 Notices....................................................17
5.02 Time of Essence............................................17
5.03 Covenants Run with Land....................................17
5.04 GOVERNING LAW..............................................17
5.05 Rights and Remedies Cumulative.............................18
5.06 Severability...............................................18
5.07 Non-Waiver.................................................18
5.08 Headings...................................................18
5.09 Grammar....................................................18
5.10 Deed in Trust..............................................18
5.11 Successors and Assigns...................................18
5.12 Mortgagee in Possession....................................18
<PAGE>
5.13 Compliance with Applicable Law.............................18
5.14 Incorporation of Credit Agreement..........................19
5.15 Security Agreement.........................................19
5.16 Additional Provisions......................................21
5.17 Intentionally Deleted......................................22
5.18 Reduction of Secured Amount................................22
5.19 Application of Payments and Repayments.....................22
<PAGE>
iii
<PAGE>
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FINANCING STATEMENT
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND
FINANCING STATEMENT ("Mortgage") is made as of July 31, 1998, 1998 by NIEMAND
INDUSTRIES, INC., an Delaware corporation with its principal office at 1140
Hayden Street, Fort Wayne, IN 46803 as Mortgagor ("Mortgagor"), for the benefit
of First Source Financial, LLP ("First Source"), an Illinois Limited liability
partnership with its principal office at 2850 Golf Road, Rolling Meadows,
Illinois 60008, as mortgagee, and as agent for itself, and for and on behalf of
the other Lenders (as hereinafter defined), and as assignee and secured party
(together with any successors or assigns, the "Mortgagee").
I
RECITALS
WHEREAS, Mortgagor is the owner of that certain real property situated
in Perry County, Alabama and has the right to mortgage, grant and convey said
real property;
WHEREAS, Gibraltar Packaging Group, Inc., a Delaware corporation,
Mortgagee, and certain financial institutions (the "Lenders") from time to time
party to the Credit Agreement (as hereinafter defined) have executed of even
date herewith that certain Secured Credit Agreement (together with any and all
renewals, amendments, modifications, supplements, restatements, extensions for
any period, or increases or rearrangements thereof, the "Credit Agreement"),
pursuant to which Credit Agreement the Lenders have made and may in the future
make term and revolving loans and advances and other financial accommodations to
the Borrower (collectively, "Loans"; each, a "Loan") in the aggregate principal
amount of Forty-Two Million and no/100 Dollars ($42,000,000), upon the terms and
subject to the conditions set forth in the Credit Agreement;
WHEREAS, capitalized terms used herein without definitions shall have
the meaning assigned to such terms in the Credit Agreement;
WHEREAS, the Loans are in the form of: (i) a term loan in the aggregate
principal amount of Twenty Five Million and No/100 Dollars ($25,000,000) (the
"Term Loan"), (ii) a revolving credit loan in the aggregate principal amount of
Fifteen Million and No/100 Dollars ($15,000,000) (the "Revolving Credit Loan"),
(iii) a certain Letter of Credit (as defined in Section 1.1 of the Credit
Agreement) up to an amount not to exceed Two Million and No/100 Dollars
($2,000,000);
WHEREAS, the Revolving Credit Loans and Term Loans are evidenced by
certain promissory notes (the "Notes");
<PAGE>
WHEREAS, Mortgagor has executed that certain Subsidiary Guaranty of
even date herewith in favor of Mortgagee and the Lenders (the "Guaranty",
together with any and all renewals, amendments, modifications, supplements,
restatements, extensions for any period, or increases or rearrangements
thereof), to secure the "Obligations" (as defined in the Credit Agreement) by
pledging to Mortgagee the capital stock of Mortgagor and its subsidiaries, if
any, and by granting to Mortgagee a security interest in and lien upon all of
its personal and real property;
WHEREAS, Mortgagor wishes to provide further assurance and security to
Mortgagee and as a condition to Mortgagee and Lenders executing the Credit
Agreement, Mortgagee and Lenders are requiring that Mortgagor grant to Mortgagee
a mortgage lien on the Property (as hereinafter defined) to secure the
Mortgagor's obligations under the Guaranty;
WHEREAS, subject to the limitations set forth in Section 5.18 of this
Mortgage, this Mortgage is being given by Mortgagor to secure the performance of
all terms, covenants, conditions, agreements and liabilities of Mortgagor
contained in this Mortgage, the Guaranty, and other Loan Documents (hereinafter,
collectively, the "Obligations");
WHEREAS, Mortgagor derives substantial direct and indirect economic
benefit from the making of the Loans and other benefits to be provided to the
Borrower under the Credit Agreement, and other valuable consideration, the
receipt and adequacy of which are hereby acknowledged; and
WHEREAS, this Mortgage also secures the payment of and includes all
amounts owing in respect of all future or further advances of the Loans as shall
be made at all times, regardless of whether proceeds of the Loans have or shall
be disbursed by Mortgagee herein or its successors or assigns, to and for the
benefit of Mortgagor, its successors or assigns, to the same extent as if such
future advances were made on the date of the execution of this Mortgage. The
total amount of Indebtedness secured by this Mortgage may decrease or increase
from time to time but the total unpaid principal balance so secured at any one
time shall not exceed the lesser of: (i) the maximum principal sum permitted by
the laws of the State in which the Premises are located; or (ii) Eighty-Four
Million and No/100 Dollars ($84,000,000), together with interest thereon and any
and all disbursements made by Mortgagee for the payment of taxes, or insurance
on the Property covered by the lien of this Mortgage and for reasonable
attorneys' fees, loan commissions, service charges, liquidated damages, expenses
and court costs incurred in the collection of any or all of such sums of money.
Such further or future advances shall be considered obligatory advances and the
same shall bear interest at the same rate as specified in the Credit Agreement
unless such interest rate shall be modified by subsequent agreement. The parties
hereby acknowledge and intend that all advances, including future advances
whenever hereafter made, shall be secured by this Mortgage.
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<PAGE>
II
THE GRANT
NOW, THEREFORE, subject to the limitations set forth in Section 5.18 of
this Mortgage, in order to secure the payment of the Obligations and the
performance of all of the covenants, provisions, agreements and obligations
contained in this Mortgage or in the Loan Documents and also to secure the
payment of any and all Secured Indebtedness, direct or contingent, that may now
or hereafter become owing from Mortgagor to Mortgagee and the Lenders and the
performance of all other obligations under the Loan Documents, and in
consideration of Ten and No/100 Dollars ($10.00) in hand well and truly paid at
or before the sealing and delivery hereof by Agent, on behalf of the Lenders, to
Mortgagor, the Recitals above stated, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally and firmly bound, Mortgagor hereby GRANTS, BARGAINS,
SELLS, ASSIGNS, RELEASES, ALIENS, TRANSFERS, REMISES, WARRANTS, DEMISES, CONVEYS
and MORTGAGES to Mortgagee and its successors and assigns forever (and grants to
Mortgagee and its successors and assigns forever a continuing security interest
in and to) the Premises described on Exhibit A, and all of its estate, right,
claim and interest therein, together with the following described property, all
of which other property is pledged primarily on a parity with the Premises and
not secondarily (the Premises and the following described rights, interests,
claims and property collectively referred to as the "Property"):
(a) all buildings, structures and other improvements of every
kind and description now or hereafter erected, situated, or placed upon
the Premises (the "Improvements"), together with any and all Personal
Property (as defined in Paragraph (i) below) and all attachments now or
hereafter owned by Mortgagor and located in or on, forming part of,
attached to, used or intended to be used in connection with, or
incorporated in any such Improvements, including all extensions of,
additions to, betterments, renewals of, substitutions for and
replacements for any of the foregoing;
(b) all estate, claim, demand, right, title and interest of
Mortgagor now owned or hereafter acquired, including without
limitation, any after-acquired title, franchise, license, remainder or
reversion, in and to any and all (i) land or vaults lying within the
right-of-way of any street, avenue, way, passage, highway, or alley,
open or proposed, vacated or otherwise, adjoining the Premises; (ii)
alleys, sidewalks, streets, avenues, strips and gores of land
belonging, adjacent or pertaining to the Premises or the Improvements;
(iii) storm and sanitary sewer, water, gas, electric, railway and
telephone services relating to the Premises and the Improvements; (iv)
development rights, air rights, water, water rights, water stock, gas,
oil, minerals, coal and other substances of any kind or character
underlying or relating to the Premises or any part thereof; and (v)
tenements, hereditaments, easements, appurtenances, other rights,
liberties, reservations, allowances and privileges relating to the
Premises or the Improvements or in any way now
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<PAGE>
or hereafter appertaining thereto, including homestead and any other
claims at law or in equity;
(c) all leasehold estates and right, title and interest of
Mortgagor in any and all leases, subleases, management agreements,
arrangements, concessions or agreements, written or oral, relating to
the use and occupancy of the Premises or the Improvements or any
portion thereof, now or hereafter existing or entered into
(collectively "Leases");
(d) all rents, issues, profits, royalties, revenue, advantages,
income, avails, claims against guarantors, all cash or security
deposits, advance rentals, deposits or payments given and other
benefits now or hereafter derived directly or indirectly from the
Premises and Improvements under the Leases or otherwise (collectively
"Rents"), subject to the right, power and authority to assign, collect
and apply the Rents;
(e) all right, title and interest of Mortgagor in and to all
options to purchase or lease the Premises or the Improvements or any
portion thereof or interest therein, or any other rights, interests or
greater estates in the rights and properties comprising the Property
now owned or hereafter acquired by Mortgagor;
(f) any interests, estates or other claims of every name, kind
or nature, both in law and in equity, which Mortgagor now has or may
acquire in the Premises and Improvements or other rights, interests or
properties comprising the Property now owned or hereafter acquired;
(g) all rights of Mortgagor to any and all plans and
specifications, designs, drawings and other matters prepared for any
construction on the Premises or regarding the Improvements;
(h) all rights of Mortgagor under any contracts executed by
Mortgagor with any provider of goods or services for or in connection
with any construction undertaken on or services performed or to be
performed in connection with the Premises or the Improvements;
(i) all right, title and interest of Mortgagor in and to all
the following tangible personal property ("Personal Property") owned by
Mortgagor and now or at any time hereafter located in, on or at the
Premises or the Improvements and used or useful in connection
therewith:
(i) all building materials and equipment located upon the
Premises and intended for construction, reconstruction,
alteration, repair or incorporation in or to the Improvements
now or hereafter to be constructed
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thereon, whether or not yet incorporated in such Improvements,
(all of which shall be deemed to be included in the Property
upon delivery thereto);
(ii) all machines, machinery, fixtures, apparatus, equipment
or articles used in supplying heating, gas, electricity,
air-conditioning, water, light, power, plumbing, sprinkler,
waste removal, refrigeration, ventilation, and all fire
sprinklers, alarm systems, protection, electronic monitoring
equipment and devices;
(iii) all window, structural, maintenance and
cleaning equipment and rigs; and
(iv) all fixtures now or hereafter owned by Mortgagor and
attached to or contained in and used or useful in connection
with the Premises or the Improvements. All such property owned
by Mortgagor and placed by it on the Premises or used in
connection with the operation or maintenance shall, so far as
permitted by law, be deemed for the purposes of this Mortgage
to be part of the real estate constituting and located on the
Premises and covered by this Mortgage. As to any of the
property that is not part of such real estate or does not
constitute a "fixture," as such term is defined in the Uniform
Commercial Code of the State (the "Code"), this Mortgage shall
be deemed to be a security agreement under the Code for the
purpose of creating hereby a security interest in property,
which Mortgagor hereby grants to Mortgagee as "secured party"
as defined in the Code. The enumeration of any specific items
of Personal Property set forth herein shall in no way exclude
or be held to exclude any items of property not specifically
enumerated;
(j) all the estate, interest, right, title or other claim or
demand which Mortgagor now has or may hereafter have or acquire with
respect to (i) proceeds of insurance in effect with respect to the
Property and (ii) any and all awards, claims for damages, judgments,
settlements and other compensation made for or consequent upon the
taking by condemnation, eminent domain or any like proceeding, or by
any proceeding or purchase in lieu thereof, of the whole or any part of
the Property, including, without limitation, any awards and
compensation resulting from a change of grade of streets and awards and
compensation for severance damages (collectively "Awards").
TO HAVE AND TO HOLD the Property hereby mortgaged and conveyed or so
intended, together with its rents, issues and profits, unto the Mortgagee, its
successors and assigns, forever, for the uses and purposes herein set forth.
The Mortgagor hereby covenants with the Mortgagee and with the
purchaser at any foreclosure sale that at the execution and delivery hereof,
Mortgagor owns the Property and has good, indefeasible estate therein, in fee
simple; that the Property is free from all encumbrances and
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exceptions to title (and any claim of any other person) other than the Permitted
Liens as defined in Section 1.1 of the Credit Agreement, (said encumbrances and
Permitted Liens are hereinafter collectively referred to as "Permitted
Exceptions"); that it has good and marketable title in and to the Property and
good and lawful right to sell, mortgage and convey the Property; and that
Mortgagor and its successors and assigns shall forever warrant and defend the
Property against all claims and demands whatsoever.
If and when Mortgagor has paid all of the Obligations, to the extent
secured hereby, as provided in Section 5.18 hereof, and there exist no
commitments of the Lender under the Loan Documents which could give rise to
Obligations, then this Mortgage and the estate, right and interest of Mortgagee
in and to the Property shall cease and shall be released by Mortgagee delivering
to Mortgagor a satisfaction of this Mortgage in proper recordable form at the
cost of Mortgagor, but until such time shall remain in full force and effect.
III
GENERAL AGREEMENTS
III.1 Payment of Indebtedness Mortgagor shall pay promptly and when due
all amounts owing in respect of the Obligations in the manner provided in the
Guaranty, this Mortgage or the other Loan Documents.
III.2 Impositions. Mortgagor shall pay immediately, when first due and
owing, all general taxes, special taxes, special assessments, water charges,
sewer charges, and any other charges, fees, taxes, claims, levies, expenses,
liens and assessments, ordinary or extraordinary, governmental or
nongovernmental, statutory or otherwise (all of the foregoing being herein
collectively referred to as "Impositions"), that may be asserted against the
Property or any part thereof or interest therein.
Mortgagor may, in good faith and with reasonable diligence, contest the
validity or amount of any Impositions; provided, that:
(a) Mortgagor shall pay all such Impositions so contested under
protest if such payment is required to prevent such contest from having
the effect of preventing the sale or forfeiture of the Property or any
sub-part or interest;
(b) Mortgagor has notified Mortgagee in writing of the
intention of Mortgagor to prosecute the contest before any Impositions
have been materially increased by any interest, penalties, or costs;
and
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(c) Mortgagor shall diligently prosecute the contest of such
Impositions by appropriate legal proceedings.
III.3 Payment of Impositions by Mortgagee. Upon Mortgagor's failure to
pay the Impositions as provided above, Mortgagee is hereby authorized to make or
advance, in the place and stead of Mortgagor, any payment relating to
Impositions, unless such Imposition is then being contested by Mortgagor
pursuant to Section 3.02. Mortgagee may do so according to any bill, statement,
or estimate procured from the appropriate public office without inquiry into the
accuracy or the validity of any Impositions, lien, sale, forfeiture, or related
title or claim. Mortgagee is further authorized to make or advance, in place of
Mortgagor, unless such matter is being contested by Mortgagor in accordance with
Section 3.02 or Section 3.08(a), any payment relating to any apparent adverse
title, lien, statement of lien, encumbrance, claim, charge, or payment otherwise
relating to any other purpose herein and hereby authorized (except the Permitted
Exceptions), but not enumerated in this Section, whenever, in Mortgagee's
reasonable judgment and discretion, such advance is necessary or desirable to
protect the full security intended to be created by this Mortgage. Subject to
the limitations set forth in Section 5.18, all such advances and indebtedness
authorized by this Section shall constitute Obligations and shall be repayable
by Mortgagor upon demand with interest at the rate of interest which may be due
and owing from time to time on any loan and payable pursuant to Section 4.2(a)
of the Credit Agreement (the "Default Rate").
III.4 Insurance and Insurance Proceeds. Mortgagor's insurance
requirements shall be as set forth in Section 11.4 of the Credit Agreement.
Mortgagor's rights to insurance proceeds shall be as set forth in Section 7.6 of
the Credit Agreement.
III.5 Condemnation Awards. In the event of any taking of the Property
or any part thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special, or by reason of the temporary
requisition of the use or occupancy of the Property or any part thereof, by any
governmental authority, civil or military (each, a "Taking"), Mortgagor shall
immediately notify Mortgagee upon receiving notice of such Taking or
commencement of proceedings therefor. All proceeds or any award or payment in
respect of any Taking are hereby assigned and shall be paid to Mortgagee and
Mortgagor shall take all steps necessary to notify the condemning authority of
such assignment. Such award or payment, less the amount of any expenses incurred
in litigating, arbitrating, compromising or settling any claim arising out of
such Taking ("Net Award"), shall be applied in accordance with the provisions of
Section 3.06 hereafter.
III.6 Restoration. Mortgagor's rights with respect to restoring the
Premises with a Net Award of Net Proceeds shall be as set forth in the Credit
Agreement.
III.7 Maintenance of Property Mortgagor shall:
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(a) promptly repair, restore, replace or rebuild any portion of
the Property which may become damaged, destroyed, altered, removed,
severed, or demolished, whether or not proceeds of insurance are
available or sufficient for the purpose, with replacements at least
equal in quality and condition as previously existed, free from any
security interest in, encumbrances on or reservation of title thereto;
(b) keep the Property in good condition and repair, without
waste, and free from mechanics', materialmen's or like liens or claims
except for the Permitted Exceptions and as permitted under the Credit
Agreement; and
(c) not make any material alterations in the Property, except
as permitted or not prohibited by the Credit Agreement.
III.8 Prohibited Liens and Transfers
(a) Except as otherwise provided in the Credit Agreement, and
as provided by operation of the laws of the State, Mortgagor shall not
create, suffer, or permit to be created or filed against the Property
any Mortgage lien or other lien superior or inferior to the lien
created by this Mortgage. To the extent that any lien, privilege or
other security device is created by operation of law, Mortgagor shall
cause such security device to be released as soon as practicable after
its creation. Mortgagor may contest any lien claim arising from any
work performed, material furnished, or obligation incurred by Mortgagor
upon furnishing Mortgagee security and indemnification reasonably
satisfactory to Mortgagee for the final payment and discharge of the
lien.
(b) Except as otherwise provided in the Credit Agreement,
Mortgagor may not sell, lease or convey all or any part of the
Property.
III.9 Stamp Taxes. If at any time the United States government, or any
federal, state, or municipal governmental subdivision, requires Internal Revenue
or other documentary stamps or levies any tax on this Mortgage or on the Notes,
or requires payment of any tax in the nature of or comparable to the United
States Interest Equalization Tax on the Obligations, then Mortgagor shall pay
such tax, including interest and penalties, in the required manner.
III.10 Change in Tax Laws. In the event of the enactment, after the
date of this Mortgage, of any law of the United States of America, or any state
or political subdivision thereof, (i) deducting from the value of the Premises,
for the purpose of taxation, the amount of any lien thereon; (ii) imposing upon
Mortgagee the payment of all or any part of the taxes, assessments, charges or
liens hereby required to be paid by Mortgagor; or (iii) changing in any way the
laws relating to the taxation of mortgages or debts secured by mortgages or
Mortgagor's interest in the Property, or the manner of collection of taxes, so
as to affect this Mortgage or the Obligations; then Mortgagor, upon demand by
Mortgagee, and as required by law, shall pay such taxes, assessments, charges,
or liens or reimburse Mortgagee therefor. If, in the opinion of counsel for
Mortgagee, it
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would be unlawful to require Mortgagor to make such payment or the
making of such payment might result in the imposition of interest beyond the
maximum amount permitted by law, then the applicable provisions of the Credit
Agreement shall apply. Nothing contained in this Section 3.10 shall be construed
as obligating Mortgagor to pay any portion of Mortgagee's federal, state and
local income tax.
III.11 Assignment of Leases and Rents. All right, title, and interest
of Mortgagor in and to all present Leases affecting the Property and including
and together with any and all future Leases, written or oral, upon all or any
part of the Property and together with all of the rents, income, receipts,
revenues, issues, avails and profits from or due or arising out of the Property
are hereby transferred and assigned simultaneously herewith to Mortgagee as
further security for the payment of the Obligations. All future Leases affecting
the Property shall be submitted by Mortgagor to Mortgagee for its approval prior
to execution, which approval shall not be unreasonably withheld or delayed. Each
Lease, including all future Leases shall be subordinate to this Mortgage,
provided that, upon the request of the Mortgagor and the lessee under any such
Lease, Mortgagee shall enter into a Subordination, Nondisturbance and Attornment
Agreement (or similar agreement) with such lessee in form and substance
reasonably satisfactory to Mortgagee, pursuant to which (i) Mortgagee will agree
that so long as such Lease shall be in full force and effect and such lessee is
not in default thereunder, Mortgagee will not disturb, pursuant to a foreclosure
action or otherwise, such lessee's possession under such Lease, and (ii) such
lessee shall agree that if Mortgagee or any future holder of this Mortgage shall
become the owner of the Property by reason of foreclosure of the Mortgage or
otherwise, or if the Property shall be sold as a result of any foreclosure
action or deed in lieu thereof, then such lease shall continue in full force and
effect as a direct lease between such lessee and the then owner of the Property.
Although it is the intention of the parties that the assignment contained in
this Section shall be a present and absolute assignment, it is expressly
understood and agreed, anything to the contrary notwithstanding, that Mortgagee
shall not exercise any of the rights or powers conferred upon it by this Section
until an Event of Default shall occur under this Mortgage. From time to time,
Mortgagor shall furnish Mortgagee with executed copies of each of the Leases and
shall use commercially reasonable efforts to furnish Mortgagee with estoppel
letters from each tenant under each of the Leases in a form satisfactory to
Mortgagee within thirty (30) days after Mortgagee's written demand.
Following the occurrence of an Event of Default (a) Mortgagee shall
have the rights and powers as are provided herein, (b) this Mortgage shall
constitute a direction to each lessee under the Leases and each guarantor
thereof to pay all Rents directly to Mortgagee without proof of the Event of
Default, and (c) Mortgagee shall have the authority, as Mortgagor's
attorney-in-fact (such authority being coupled with an interest and
irrevocable), to sign the name of Mortgagor and to bind Mortgagor on all papers
and documents relating to the operation, leasing and maintenance of the
Property.
If Mortgagor, as lessor under any Lease, shall neglect or refuse to
perform, observe and keep all of the covenants, provisions and agreements
contained in such Lease, then Mortgagee may perform and comply with any such
Lease covenants, agreements and provisions. All costs and
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expenses incurred by Mortgagee in complying with such covenants, agreements, and
provisions shall constitute Obligations and shall be payable upon demand with
interest at the Default Rate.
Mortgagee shall not be obligated to perform or discharge any
obligation, duty or liability under any Lease, and Mortgagor shall and does
hereby agree, except to the extent of Mortgagee's gross negligence or willful
misconduct, to indemnify and hold Mortgagee harmless of and from any and all
liability, loss or damage which it may or might incur under any Lease or under
or by reason of their assignments and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of all alleged obligations
or undertakings on its part to perform or discharge any of the terms, covenants
or agreements contained in such Lease. Should Mortgagee incur any such
liability, loss or damage under any Lease or under or by reason of its
assignment, or in the defense of any claims or demands, the amount thereof,
including costs, expenses and reasonable attorneys' fees, shall, subject to the
limitations set forth in Section 5.18 of this Mortgage, be secured hereby.
Mortgagor shall reimburse Mortgagee therefor immediately upon demand with
interest payable at the Default Rate.
III.12 Releases. Without notice and without regard to the consideration
therefor, and to the existence at that time of any inferior liens, Mortgagee may
release from the lien created hereby all or any part of the Property, or release
from liability any person obligated to repay any Obligations, without affecting
the liability of any party to any of the Notes, this Mortgage, or any of the
other Loan Documents (including without limitation any guaranty given as
additional security) and without in any way affecting the priority of the lien
created hereby. Mortgagee may agree with any liable party to extend the time for
payment of any part or all of the Obligations. Such agreement shall not in any
way release or impair the lien created by this Mortgage or reduce or modify the
liability of any person or entity obligated personally to repay the Obligations,
but shall extend the lien created by this Mortgage as against the title of all
parties having any interest, subject to the Obligations in the Property.
III.13 Further Assurances. Mortgagor agrees that, upon request of
Mortgagee from time to time, it will, at Mortgagor's sole cost and expense,
execute, acknowledge and deliver all such additional instruments and further
assurances of title and will do or cause to be done all such further acts and
things as may reasonably be necessary to fully effectuate the intent of this
Mortgage, including without limitation, reimbursing Mortgagee for the reasonable
costs of appraisals of the Property, to the extent that Mortgagee determines in
good faith that such appraisals are required by any law or any governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof, including, without limitation, the
provisions of Title XI of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, and any rules promulgated to implement such provisions.
In the event that Mortgagor shall fail to do any of the foregoing, Mortgagee
may, in its sole discretion, do so in the name of Mortgagor, and Mortgagor
hereby appoints Mortgagee as its attorney-in-fact to do any of the foregoing.
III.14 Environmental Provisions.
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(a) For the purposes of this Section the following terms shall have the
following meanings: (i) the term "Hazardous Material" shall mean any material or
substance that, whether by its nature or use, is now or hereafter defined as a
hazardous waste, hazardous substance, pollutant or contaminant under any
Environmental Requirement, or which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
which is or contains petroleum, gasoline, diesel fuel or another petroleum
hydrocarbon product; (ii) the "Environmental Requirements" shall collectively
mean all applicable present and future laws, statutes, ordinances, rules,
regulations, orders, codes, licenses, permits, decrees, judgments, directives of
or by any Governmental Authority and relating to or addressing the protection of
the environment or human health; and (iii) the term "Governmental Authority"
shall mean the federal government, or any state or other political subdivision
thereof, or any agency, court or body of the federal government, any state or
other political subdivision thereof, exercising executive, legislative,
judicial, regulatory or administrative functions.
(b) Mortgagor hereby represents and warrants to Mortgagee that to the
best of Mortgagor's knowledge after commercially reasonable inquiry and except
as disclosed in writing to Mortgagee or as set forth on Schedule 10.19 to the
Credit Agreement: (i) no Hazardous Material is currently located at or has been
disposed of on, in, under or about the Property in material violation of any
Environmental Requirement; (ii) no releasing, emitting, leaching, discharging,
dumping or disposing of any Hazardous Material from the Property onto any other
property or from any other property onto or into the Property has occurred or is
occurring in material violation of any Environmental Requirement; (iii) no
notice of violation, lien, complaint, suit, order or other notice with respect
to the Property is presently outstanding under any Environmental Requirement
which, if not resolved, is reasonably likely to have a Material Adverse Effect
(as defined in the Credit Agreement); and (iv) the Property and the operation
thereof are in material compliance with all applicable Environmental
Requirements.
(c) Mortgagor shall comply, and shall use its best efforts to cause all
tenants or other lawful occupants of the Property to comply with all applicable
and material Environmental Requirements, and will not generate, store, handle,
process, dispose of or otherwise use, and will not grant permission to any
tenant or other occupant of the Property to generate, store, handle, process,
dispose of or otherwise use, Hazardous Materials at, in, on, or about the
Property in a manner that is reasonably likely to lead or potentially lead to
the imposition on Mortgagor, Mortgagee or the Property of any material liability
or lien of any nature whatsoever, based upon the assessed value of the Property,
or lien under any Environmental Requirement which is reasonably likely to have a
Material Adverse Effect. Mortgagor shall notify Mortgagee promptly in the event
of any spill or other release of any Hazardous Material at, in, on, under or
about the Property which is required to be reported to a Governmental Authority
under any Environmental Requirement, will promptly forward to Mortgagee copies
of any notices received by Mortgagor relating to alleged violations of any
Environmental Requirement and will promptly pay when due or contest in good
faith within the applicable time periods any fine or assessment against
Mortgagee, Mortgagor or the Property relating to any Environmental Requirement.
If at any time it is it is determined that the operation or use of the Property
by Mortgagor violates any applicable and material Environmental Requirement or
that there are Hazardous Materials located at, in, on, under or about the
Property in violation of any
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applicable Environmental Requirement or that there are Hazardous Materials
located at, in, on, under or about the Property which, under any Environmental
Requirement, require special handling in collection, storage, treatment or
disposal, or any other form of cleanup or corrective action, Mortgagor shall,
within thirty (30) days after receipt of notice thereof from any Governmental
Authority or from Mortgagee, take, at Mortgagor's sole cost and expense, such
actions as may be necessary to fully comply in all material respects with all
applicable Environmental Requirements or contest in good faith the requirement
to take such actions, provided, however, that if such compliance cannot
reasonably be completed within such thirty (30) day period, Mortgagor shall
thereafter diligently and expeditiously proceed to fully comply with or contest
in good faith in a timely fashion all Environmental Requirements.
(d) If Mortgagor fails to timely take or contest, or to diligently and
expeditiously proceed to complete in a timely fashion, any such action described
in subsection (c) above, Mortgagee may, in its reasonable discretion, make
advances or payments toward the performance or satisfaction of any activities
required pursuant to any Environmental Requirement, but shall in no event be
under any obligation to do so. All sums so advanced and paid by Mortgagee
(including, without limitation, reasonable counsel and consultant fees and
expenses, investigation and laboratory fees and expenses, and fines or other
penalty payments) and all sums advanced or paid in connection with any judicial
or administrative investigation or proceeding relating thereto, will
immediately, upon demand, become due and payable from Mortgagor and shall bear
interest at the Default Rate from the date any such sums are so advanced or paid
by Mortgagee until the date any such sums are repaid by Mortgagor to Mortgagee.
Mortgagor will execute and deliver, promptly upon request, such instruments as
Mortgagee may reasonably deem necessary to permit Mortgagee to take any such
action, and such additional notes and mortgages, as Mortgagee may require to
secure all sums so advanced or paid by Mortgagee. If a lien is filed against the
Property by any Governmental Authority resulting from the need to expend or the
actual expending of monies arising from an action or omission, whether
intentional or unintentional, of Mortgagor or for which Mortgagor is
responsible, resulting in the releasing, spilling, leaking, leaching, pumping,
emitting, pouring, emptying or dumping of any Hazardous Material into the waters
or onto land located within or without the State where the Property is located,
then Mortgagor will, within thirty (30) days from the date that Mortgagor
receives notice that such lien has been placed against the Property (or within
such shorter period of time as may be specified by Mortgagee if such
Governmental Authority has commenced steps to cause the Property to be sold
pursuant to such lien), either (a) pay (or otherwise satisfy) the claim and
remove the lien; or (b) contest such lien in good faith; or (c) furnish a cash
deposit, bond, or such other security with respect thereto as is satisfactory in
all respects to Mortgagee and is sufficient to effect a complete discharge of
such lien on the Property.
(e) Mortgagee may, at its option, at intervals of not less than one
year, or more frequently, if Mortgagee reasonably believes that a Hazardous
Material or other environmental condition violates or threatens to violate any
Environmental Requirement, cause an environmental audit of the Property or
portions thereof to be conducted to evaluate Mortgagor's compliance with the
provisions of this Section, and Mortgagor shall cooperate in all reasonable ways
with Mortgagee in connection with any such audit. If such audit discloses that a
violation of an Environmental
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Requirement exists or if such audit was required or prescribed by law,
regulation or governmental or quasi-governmental authority, Mortgagor shall pay
all costs and expenses incurred in connection with such audit; otherwise, the
costs and expenses of such audit shall, notwithstanding anything to the contrary
set forth in this Section, be paid by Mortgagee.
(f) Except for: (a) any Claims (as hereinafter defined) arising as a
result of the gross negligence or wilful misconduct of Mortgagee during the term
of this Mortgage; or (b) any Claims arising as a result of any acts of Mortgagee
or its successors and assigns or the occurrence of any acts by any third parties
after Mortgagee or its successor and assigns take possession of the Property, in
the event Mortgagee takes possession of the Property after an Event of Default,
Mortgagor will defend, indemnify, and hold harmless Mortgagee, and its
employees, agents, officers, and directors, from and against any and all claims,
demands, penalties, causes of action, fines, liabilities, settlements, damages,
costs, or expenses of whatever kind or nature, known or unknown, foreseen or
unforeseen, contingent or otherwise, including, without limitation, reasonable
counsel and consultant fees and expenses, investigation and laboratory fees and
expenses, court costs, and litigation expenses (all of the foregoing
collectively for purposes of this Section the "Claims"), arising out of, or in
any way related to: (i) any breach by Mortgagor of any of the provisions of this
Section; (ii) the presence, disposal, spillage, discharge, emission, leakage,
release, or threatened release of any Hazardous Material which is at, in, on,
under, about, from or affecting the Property, including, without limitation, any
damage or injury resulting from any such Hazardous Material to or affecting the
Property or the soil, water, air, vegetation, buildings, personal property,
persons or animals located on the Property, or in any other property or
otherwise; (iii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to any such Hazardous
Material; (iv) any lawsuit brought or threatened, settlement reached, or order
or directive of or by any Governmental Authority relating to such Hazardous
Material; or (v) any violation of any Environmental Requirement or any policy or
requirement of Mortgagee hereunder. The aforesaid indemnification shall,
notwithstanding any exculpatory or other provision of any other document or
instrument now or hereafter executed and delivered in connection with the loan
evidenced by the Notes and secured by this Mortgage, constitute the personal
recourse undertakings, obligations and liabilities of Mortgagor, and shall
survive the foreclosure or satisfaction of this Mortgage and the discharge of
Mortgagor's other Obligations hereunder.
IV
EVENT OF DEFAULT AND REMEDIES
IV.1 Event of Default. Each of the following shall constitute an event
of default ("Event of Default") under this Mortgage:
(a) The occurrence of an "Event of Default" as such term is defined in
the Credit Agreement (including, if applicable, the expiration of any grace
period provided therein); or
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(b) Failure of Mortgagor to perform or observe any other covenant,
agreement, representation, warranty or other provision contained in this
Mortgage within thirty (30) days after written notice of the default from
Mortgagee to Mortgagor.
IV.2 Acceleration of Maturity. Following the occurrence of an Event of
Default, the Obligations shall become due and payable in accordance with the
terms of the Credit Agreement. Upon acceleration:
(a) Mortgagee's Power of Enforcement. Mortgagee may (i) immediately
sell the Property, either in whole or in separate parcels, as prescribed by
State law, under power of sale, which power is hereby granted to Mortgagee to
the full extent permitted by State law, and thereupon, to make and execute to
any purchaser(s) thereof deeds of conveyance pursuant to applicable law or (ii)
immediately foreclose this Mortgage by judicial or other action permitted by
applicable law. The court in which any proceeding is pending for the purpose of
foreclosure of this Mortgage may, at once or at any time thereafter, either
before or after sale, without notice and without requiring bond, and without
regard to the solvency or insolvency of any person liable for payment of the
Obligations secured hereby, and without regard to the then value of the Property
or the occupancy thereof as a homestead, appoint a receiver (to the extent
permitted by applicable law) (the provisions for the appointment of a receiver
and assignment of Rents being an express condition upon which the Loans are
made) for the benefit of Mortgagee, with power to collect the Rents, due and to
become due, during such foreclosure suit and the full statutory period of
redemption. The receiver, out of the Rents, when collected, may pay costs
incurred in the management and operation of the Property, prior and subordinate
liens, if any, and taxes, assessments, water and other utilities and insurance,
then due or thereafter accruing, and may make and pay for any necessary repairs
to the Property, and may pay all or any part of the Obligations or other sums
secured hereby or any deficiency decree entered in such foreclosure proceedings.
Upon or at any time after the filing of a suit to foreclose this Mortgage, the
court in which such suit is filed shall have full power to enter an order
placing Mortgagee in possession of the Property with the same power granted to a
receiver pursuant to this subsection and with all other rights and privileges of
a mortgagee-in-possession under applicable law.
(b) Mortgagee's Other Rights. Mortgagee shall have the right to take
such other steps to protect and enforce its rights, whether by action, suit or
proceeding at law or in equity for the specific performance of any covenant,
condition or agreement contained in this Mortgage, or in aid of the execution of
any power granted in this Mortgage, or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or equitable remedy or otherwise as
Mortgagee and/or the Trustees shall elect.
IV.3 Application of the Rents or Proceeds from Foreclosure or Sale. In
any foreclosure of this Mortgage by judicial action, or any sale of the Property
under the power of sale herein granted, the proceeds of such foreclosure
proceeding and/or sale and/or the Rents paid to Mortgagee shall, to the extent
permitted by law, be applied as follows:
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First: to the ratable payment of the costs and expenses of such sale,
including reasonable compensation to Mortgagee, its agents and attorneys, and of
any judicial or private proceedings in which such sale may be made, and, subject
to the limitations set forth in Section 5.18 of this Mortgage, of all other
expenses, liabilities and advances made or incurred by Mortgagee and its agents
and attorneys under this Mortgage, and the Guaranty, together with interest at
the Default Rate on such costs, expenses and liabilities and on all advances
made by Mortgagee from the date any such cost, expense or liability is due,
owing or unpaid or any such advance is made, in each case until paid in full.
Second: to the payment of the Obligations, subject to the
limitations set forth in Section 5.18 of this Mortgage.
Third: the surplus, if any, to be paid to whomever may be lawfully
entitled to receive such surplus.
IV.4 Cumulative Remedies; Delay or Omission Not a Waiver. Each remedy
or right of Mortgagee shall not be exclusive of, but shall be in addition to,
every other remedy or right now or hereafter existing at law or in equity. No
delay in the exercise or omission to exercise any remedy or right accruing on
the occurrence or existence of any Event of Default under the Credit Agreement
shall impair any such remedy or right or be construed to be a waiver of any such
Event of Default or acquiescence therein, nor shall it affect any subsequent
Event of Default of the same or different nature. Every such remedy or right may
be exercised concurrently or independently and when and as often as may be
deemed expedient by Mortgagee.
IV.5 Mortgagee's Remedies Against Multiple Parcels. The Obligations
hereby secured are also secured by other properties, lots or parcels covered by
other mortgages or deeds of trust ("Other Mortgages") within and/or outside the
State. If this Mortgage or any of the Other Mortgages is foreclosed upon, or if
judgment is entered upon any Obligations secured hereby, or if Mortgagee
exercises its power of sale, execution may be made upon or Mortgagee may
exercise its power of sale against any one or more of the properties, lots or
parcels and not upon the others, or upon all of such properties or parcels,
either together or separately, and at different times or at the same time, and
execution sales or sales under the power of sale herein granted may likewise be
conducted separately or concurrently, in each case at the election of Mortgagee.
No event of enforcement taking place in any state other than the State shall
(and no failure to prosecute any such other enforcement) in any way stay,
preclude or bar enforcement of this Mortgage and Mortgagee may pursue any or all
of Mortgagee's rights and remedies under this Mortgage to the maximum extent
permitted by State law until the Obligations are paid and discharged in full.
IV.6 No Merger. In the event of a foreclosure of this Mortgage, the
Obligations then due Mortgagee shall not be merged into any decree of
foreclosure entered by the court, and Mortgagee may concurrently or subsequently
seek to foreclose one or more mortgages or deeds of trust which also secure said
Obligations.
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<PAGE>
IV.7 Insurance Upon Foreclosure. In case of an insured loss after
foreclosure proceedings have been instituted, the proceeds of any insurance
policy or policies, if not applied in Restoring the Property shall be used to
pay the amount due in accordance with any decree of foreclosure that may be
entered in any such proceedings, and the balance, if any, shall be paid as the
court may direct. In case of the foreclosure of this Mortgage, the court in its
judgment may provide that the judgment creditor may cause a new or additional
loss clause to be attached to each of said policies making the loss thereunder
payable to said judgment creditor; and any such foreclosure judgment may further
provide, unless the right of redemption has been waived, that in case of
redemption under said judgment, pursuant to applicable law, then, and in every
such case, the redemptory may cause the preceding loss clause attached to each
insurance policy to be cancelled and a new loss clause to be attached thereto,
making the loss thereunder payable to such redemptory. In the event of
foreclosure sale, Mortgagee is hereby authorized, but not required, without the
consent of Mortgagor, to assign or cause a receiver to assign any and all
insurance policies to the purchaser at the sale, or to take such other action as
Mortgagee may deem advisable, to cause the interest of such purchaser to be
protected by any of the said insurance policies.
IV.8 Waiver of Statutory Rights. Mortgagor shall not apply for or avail
itself of any appraisement, valuation, redemption, stay, extension, or exemption
laws, or any so-called "moratorium laws," now existing or hereafter enacted, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage, and
Mortgagor hereby waives the benefit of such laws (to the extent permitted by
applicable law). Mortgagor, for itself and all who may claim through or under
it, waives any and all rights to have the Property and estates comprising the
Property marshalled upon any foreclosure of the lien of this Mortgage, and
agrees that any court having jurisdiction to foreclose such lien may order the
Property sold in its entirety. Mortgagor further waives any and all rights of
redemption from foreclosure and from sale under any order or decree of
foreclosure of the lien created by this Mortgage, for itself and on behalf of:
(i) any trust estate of which the Premises are a part, all beneficially
interested persons; (ii) each and every person acquiring any interest in the
Property or title to the Premises subsequent to the date of this Mortgage; and
(iii) all other persons to the extent permitted by the provisions of laws of the
State in which the Premises are located.
V
MISCELLANEOUS
V.1 Notices. Any notice that Mortgagee or Mortgagor may desire or be
required to give to the other shall be in writing and shall be mailed or
delivered in the manner set forth in the Credit Agreement.
V.2 Time of Essence. Time is of the essence of this Mortgage.
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<PAGE>
V.3 Covenants Run with Land. All of the covenants of this Mortgage
shall run with the land constituting the Premises.
V.4 GOVERNING LAW. THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED
ACCORDING TO THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REFERENCE TO CONFLICTS
OF LAWS PROVISIONS THEREOF) PROVIDED, HOWEVER, THAT MATTERS OF CREATION,
PERFECTION, PRIORITY OF ENFORCEABILITY OF ANY AND ALL RIGHTS AND REMEDIES
PROVIDED FOR HEREIN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF INDIANA. TO
THE EXTENT THAT THIS MORTGAGE MAY OPERATE AS A SECURITY AGREEMENT UNDER THE
CODE, MORTGAGEE SHALL HAVE ALL RIGHTS AND REMEDIES CONFERRED THEREIN FOR THE
BENEFIT OF A SECURED PARTY AS SUCH TERM IS DEFINED IN THE CODE.
V.5 Rights and Remedies Cumulative. All rights and remedies in this
Mortgage are cumulative. The holder of the Guaranty and of every other
obligation secured hereby may recover judgment, issue execution therefor, and
resort to every other right or remedy available at law or in equity, without
first exhausting and without affecting or impairing the security of any right or
remedy.
V.6 Severability. If any provision of this Mortgage, or any paragraph,
sentence, clause, phrase, or word, or their application, in any circumstance, is
held invalid, the validity of the remainder of this Mortgage shall be construed
as if such invalid part were never included.
V.7 Non-Waiver. Unless expressly provided in this Mortgage to the
contrary, no consent or waiver, express or implied, by any party, to or of any
breach or default by any other party shall be deemed a consent to or waiver of
the performance by such defaulting party of any other obligations or the
performance by any other party of the same, or of any other, obligations.
V.8 Headings. The headings of sections and paragraphs in this Mortgage
are for convenience or reference only and shall not be construed in any way to
limit or define the content, scope, or intent of the provisions.
V.9 Grammar. As used in this Mortgage, the singular shall include the
plural, and masculine, feminine, and neuter pronouns shall be fully
interchangeable, where the context so requires.
V.10 Deed in Trust. If title to the Property or any part thereof is now
or hereafter becomes vested in a trustee, any prohibition or restriction against
the creation of any lien on the Property shall be construed as a similar
prohibition or restriction against the creation of any lien on or security
interest in the beneficial interest of such trust.
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<PAGE>
V.11 Successors and Assigns. This Mortgage shall be binding upon
Mortgagor, its successors, assigns, legal representatives, and all other persons
or entities claiming under or through Mortgagor. The word "Mortgagee", when used
herein, shall include First Source Financial, LLP, in its capacity as
Administrative Agent and as Agent for the Lenders together with its successors,
assigns and legal representatives. "Mortgagor", when used herein, shall include
all such persons and entities and any others liable for the payment of the
Secured Indebtedness, or any part thereof, whether or not they have executed the
notes or this Mortgage.
V.12 Mortgagee in Possession. Nothing contained in this Mortgage shall
be construed as constituting Mortgagee a mortgagee in possession in the absence
of the actual taking of possession of the Property.
V.13 Compliance with Applicable Law. Anything elsewhere herein
contained to the contrary notwithstanding,
(a) in the event that any provision in this Mortgage shall be
inconsistent with any provision of applicable law, the provisions of
applicable law shall take precedence over the provisions of this
Mortgage, but shall not invalidate or render unenforceable any other
provision of this Mortgage that can be construed in a manner consistent
with applicable law; and
(b) if any provision of this Mortgage shall grant to Mortgagee
any rights or remedies upon default of Mortgagor which are more limited
than the rights that would otherwise be vested in Mortgagee under
applicable law in the absence of said provision, Mortgagee shall be
vested with the rights granted under applicable law to the full extent
permitted by law.
V.14 Incorporation of Credit Agreement The terms of the Credit
Agreement are incorporated by reference herein as though set forth in full
detail. In the event of any conflict between the terms and provisions of this
Mortgage and any other Loan Document, the terms and provisions of such other
Loan Document shall govern and control.
V.15 Security Agreement.This Mortgage is hereby deemed to be as well a
Security Agreement for the purpose of creating hereby a security interest
securing the indebtedness secured hereby in and to the Personal Property.
Without derogating any of the provisions of this Mortgage, Mortgagor by this
Mortgage:
(a) grants to Mortgagee a security interest in all of
Mortgagor's right, title and interest in and to all Personal Property,
including, but not limited to, the items referred to above, together
with all additions, accessions and substitutions and all similar
property hereafter acquired and used or obtained for use on, or in
connection with the Property. The Personal Property and all proceeds
thereof are intended to be secured hereby; however, such intent shall
never constitute an express or implied consent on the part of Mortgagee
to the sale of any or all Personal Property;
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<PAGE>
(b) agrees that, subject to the limitations contained in
Section 5.18 of this Mortgage, the security interest hereby granted by
this Mortgage shall secure the payment of the Obligations;
(c) agrees not to sell, convey, Mortgage or grant a security
interest in, or otherwise dispose of or encumber, any of the Personal
Property or any of the Mortgagee's right, title or interest therein
except as permitted by the Credit Agreement without first securing
Mortgagee's written consent;
(d) agrees that upon or after the occurrence of any Event of
Default under this Mortgage, Mortgagee shall have all rights and
remedies granted by law and more particularly the Code, including, but
not limited to, the right to take possession of the Personal Property,
and for this purpose may enter upon any premises on which any or all of
the Personal Property is situated without being deemed guilty of
trespass and without liability for damages thereby occasioned (except
for damages caused by Mortgagee's gross negligence or wilful
misconduct), and take possession of and operate said Personal Property
or remove it therefrom. Mortgagee shall have the further right to take
any action it deems necessary, appropriate or desirable, at its option
and in its discretion, to repair, refurbish or otherwise prepare the
Personal Property for sale, lease or other use or disposition, and to
sell at public or private sales or otherwise dispose of, lease or
utilize the Personal Property and any part thereof in any manner
authorized or permitted by law and to apply the proceeds thereof,
subject to the limitations set forth in Section 5.18 of this Mortgage,
toward payment of any costs and expenses, to the extent permitted by
law, thereby incurred by Mortgagee and, subject to the limitations set
forth in Section 5.18 of this Mortgage, toward payment of the
Obligations and all other indebtedness described in this Mortgage, in
such order and manner as is provided in Section 4.03 hereof. To the
extent permitted by law, and only to the extent Mortgagor has waived
any of the following under that certain Subsidiary Security Agreement
of even date herewith by and between Mortgagor and Mortgagee, Mortgagor
expressly waives any notice of sale or other disposition of the
Personal Property and any other rights or remedies of a debtor or
formalities prescribed by law relative to a sale or disposition of the
Personal Property or to exercise any other right or remedy existing
after default hereunder; and to the extent any notice is required and
cannot be waived, Mortgagor agrees that if such notice is deposited for
mailing, postage prepaid, certified mail or registered mail, return
receipt requested, to Mortgagor at the address designated in the first
page of this Mortgage at least fifteen (15) days before the time of
sale or disposition, such notice shall be deemed reasonable and shall
fully satisfy any requirements for giving of said notice; provided that
if Mortgagor has furnished Mortgagee with notice of a change of address
in accordance with Section 5.01, then any such notice shall not be
reasonable unless sent to the new address;
-19-
<PAGE>
(e) agrees, to the extent permitted by law and without limiting
any rights and privileges herein granted to Mortgagee, that Mortgagee
may dispose of any or all of the Personal Property at the same time and
place upon giving the same notice provided for in this Mortgage, and in
the same manner as the non-judicial foreclosure sale provided under the
terms and conditions of this Mortgage; and
(f) authorizes Mortgagee to file, in the jurisdiction where
this Mortgage will be given effect, financing statements including
renewal or confirmation thereof, covering the Personal Property; and at
the request of Mortgagee, Mortgagor will join Mortgagee in executing
one or more such financing statement including renewal or confirmation
thereof, pursuant to the Code in a form reasonably satisfactory to
Mortgagee, and will pay the cost of filing the same in all public
offices at any time and from time to time wherever Mortgagee deems
filing or recording of any financing statements including renewal or
confirmation thereof or of this instrument to be desirable or
necessary.
V.16 Additional Provisions. The following provisions shall also
constitute an integral part of this Mortgage. Furthermore, in the event that any
prior provisions of this Mortgage conflict with the following provisions of this
Section, the provisions of this Section shall control and shall be deemed a
modification of or amendment to the section or provision at issue:
(a) Payment of Taxes and Fees. Mortgagor agrees to pay all
transfer taxes, recordation taxes, recording fees, and any other fees
required by or imposed by the State or the county in which the Property
is located in order to record this Mortgage in the Land Records of
Allen County.
(b) No Assumption of Obligations. In the event of a foreclosure
of the Property, Mortgagee shall not assume any liability of Mortgagor
for Mortgagor's violation of any environmental laws, statutes, codes,
regulations, or practices and Mortgagor's indemnifications as contained
herein and in the Credit Agreement shall survive said foreclosure.
(c) Expenses of Enforcement; Waiver. Mortgagor agrees to bear
and pay all reasonable expenses (including reasonable attorney fees and
appellate attorney fees), of or incidental to the enforcement of any
provision hereof, or the enforcement, compromise, or settlement of this
Mortgage or the Obligations, and for the curing thereof, or for
defending or asserting the rights and claims of Mortgagee in respect
thereof, by litigation or otherwise. All rights and remedies of
Mortgagee shall be cumulative and may be exercised singly or
concurrently. Notwithstanding anything herein contained to the
contrary, Mortgagor to the extent permitted by applicable law: (i)
hereby waives trial by jury; (ii) will not (a) at any time insist upon,
or plead, or in any manner whatever claim or take any benefit or
advantage of any stay or execution or moratorium law, any exemption for
execution of sale of the Property or any part thereof, wherever
enacted, now or at any time hereafter enforced, which may affect the
covenants and terms of
-20-
<PAGE>
performance of this Mortgage, nor (b) claim, take or insist upon any
benefit or advantage of any law now or hereafter enforced providing for
the evaluation or appraisal of the Property, or any part thereof, prior
to any sale or sales thereof which may be made pursuant to any
provision herein, or pursuant to the decree, judgment or order of any
court of competent jurisdiction, nor (c) after any such sale or sales,
claim, or exercise any right under any statute heretofore or hereafter
enacted to redeem the property so sold or any part thereof; (iii)
hereby expressly waives all benefit or advantage of any such law or
laws including but not limited to a waiver of the equity of redemption,
statutory right of redemption, and any other statutory or common law
right of redemption, homestead, dower, marital share and all other
exemptions; and (iv) covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to Mortgagee, but to
suffer and permit the execution of every power as though no such laws
or laws had been made or enacted. Mortgagor, for itself and all who may
claim under it, waives, to the extent that it lawfully may, all right
to have the Property marshalled upon any foreclosure hereof.
V.17 Intentionally Deleted.
V.18 Reduction of Secured Amount. The Secured Amount shall be reduced
only by the last and final sums that the Mortgagor repays with respect to the
Obligations and shall not be reduced by any intervening repayments of any of the
Obligations by the Mortgagor. As of the date hereof, the total amount of the
Obligations exceeds the Secured Amount, so that the Secured Amount represents
only a portion of the Obligations actually outstanding and due Mortgagee.
V.19 Application of Payments and Repayments. So long as the balance of
the Obligations exceeds the Secured Amount, any payments and repayments of the
Obligations by Mortgagor shall not be deemed to be applied against, or to
reduce, the portion of the Obligations secured by this Mortgage. Such payments
shall instead be deemed to reduce only such portions of the Obligations as are
secured by mortgages encumbering real property located outside the State of
Indiana, which mortgages secure the entire Obligations (except to the extent, if
any, that specific mortgages in such states contain specific limitations on the
amount secured).
[Signature and Notary Page Follows]
-21-
<PAGE>
IN WITNESS WHEREOF, Mortgagor has duly signed and delivered this
Mortgage as of the date first above written.
Attest:: Mortgagor:
RIDGEPAK CORPORATION D/B/A
FLASHFOLD CARTON CO., INC., an
Illinois corporation
/s/ Alan M. Rauss
- -------------------------------------
Title: Assistant Secretary
------------------------------
Printed:
----------------------------- By: /s/ John W. Lloyd
----------------------------------
Printed:
-----------------------------
Its: Vice President
---------------------------------
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-66790 and 33-66844 of Gibraltar Packaging Group, Inc. on Form S-8 of our
report dated September 23, 1998, appearing in this Annual Report on Form 10-K of
Gibraltar Packaging Group, Inc. for the year ended June 27, 1998.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Stamford, Connecticut
September 23, 1998
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