<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K-A
[x] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended July 31, 1998
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____ to ____
Commission file number: 0-22974
CMC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1434910
(State of incorporation) (IRS Employer Identification No.)
4950 PATRICK HENRY DRIVE, SANTA CLARA, CA 95054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 982-9999
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] 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 this
Form 10-K [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $18,629,507 at October 9, 1998.
Shares of Common Stock, $.01 par value per shares outstanding at September 30,
1998: 7,593,556
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference and the Part of the Form 10-K into which the
document is incorporated:
Portions of the Proxy Statement relating to the 1998 Annual Meeting of
Shareholders: Part III
Portions of the 1998 Annual Report to Shareholders: Part II , Part IV (2)
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(1) EXHIBITS
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Exhibit Description
Number -----------
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3.1* Restated Certificate of Incorporation.
3.2* Amended and Restated Bylaws.
4.1* Form of Common Stock Certificate.
4.2*** Securities Purchase Agreement, dated as of May 15, 1996, by and
between the Company and each of the investors listed therein.
10.1* Agreement and Plan of Reorganization between CMC Industries, Inc.
and International Telecommunication Asia PTE, Ltd. dated as of
October 2, 1993.
10.2* Lease Agreement between The Board of Supervisors of Alcorn County,
Mississippi and International Telephone and Telegraph Corp. dated
August 1, 1961, as amended and supplemented and related documents.
10.3* Lease Agreement between Corinth Telecommunications Corp. (now known
as CMC Manufacturing, Inc.) and Douglas Jumper and Truitt Stockton
d/b/a Jumper-Stockton Warehouses for the Pinecrest Road warehouse
dated October 20, 1992.
10.4* Lease Agreement between Corinth Telecommunications Corp. (now known
as CMC Manufacturing, Inc.) and Douglas Jumper and Truitt Stockton
d/b/a/ Jumper-Stockton Warehouses for the Sawyers Road warehouse
dated October 20, 1992.
10.5 Loan and Security Agreement dated September 26, 1996 (and
Amendments) among CMC Industries, Inc., CMC California, Inc., and
CMC Mississippi, Inc. and Bank of America Illinois and related
documents.
10.6* License Agreement between ITT Corporation and ITT Telecom Products
Corporation (now known as CMC Manufacturing, Inc.) dated December
30, 1986.
10.7* Agreement between Cortelco International, Inc. and CMC
Manufacturing, Inc. dated as of September 1, 1993.
10.8* Cortelco USA, Inc. (now known as CMC Manufacturing, Inc.) Profit
Sharing Savings Plan and Trust for Salaried Employees.
10.9* Hourly Pension Plan for Employees of ITT Telecom Products
Corporation (now known as CMC Manufacturing, Inc.) at Corinth.
10.10**** CMC Industries, Inc. 1990 Equity Incentive Plan, amended and
restated as of November 15, 1996.
10.11* Form of Indemnification Agreement between CMC Industries, Inc. and
certain officers and directors.
10.12** Lease Agreement between Guzik Investments, L.P. and CMC Industries
dated June 14, 1995.
10.13**** CMC Industries, Inc. 1996 Employee Stock Purchase Plan.
10.14***** Executive Employment Agreement between CMC Industries, Inc. and Jack
O'Rear dated August 1, 1997.
13.1****** Excerpts from the 1998 Annual Report to Shareholders.
21.1****** Subsidiaries of the Registrant.
23.1****** Consent of Independent Accountants.
27.1****** Financial Data Schedule (For SEC electronic filing purposes only)
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* Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-70126.
** Incorporated by reference to exhibits filed with the Registrant's
Annual Report on Form 10-K for the year ended July 31, 1995.
*** Incorporated by reference to exhibits filed with the Registrant's
Current Report on Form 8-K filed the Securities and Exchange Commission
on May 24, 1996.
**** Incorporated by reference to exhibits filed with the Registrant's Proxy
Statement on Schedule 14A filed with the Securities and Exchange
Commission on October 22, 1996.
***** Incorporated by reference to exhibits filed with the Registrant's
Annual Report on Form 10-K for the year ended July 31, 1997.
****** Previously filed with the Registrant's Annual Report on Form 10K for
the Year ended July 31, 1998.
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(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.
CMC INDUSTRIES, INC.
/s/ Matthew G. Landa
--------------------
Date: October 28, 1998 Matthew G. Landa, President,
Chief Executive Officer and Director
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.
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Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David S. Lee Chairman of the Board October 28, 1998
- ------------------------------
David S. Lee
/s/ Matthew G. Landa President, Chief Executive October 28, 1998
- ------------------------------ Officer and Director
Matthew G. Landa
/s/ Andrew J. Moley Executive Vice President, October 28, 1998
- ------------------------------ Financial Officer and
Andrew J. Moley Chief Director
/s/ Ira Coron Director October 28, 1998
- ------------------------------
Ira Coron
/s/ Frederick W. Gibbs Director October 28, 1998
- ------------------------------
Frederick W. Gibbs
Director
- ------------------------------
Charles Holloway
/s/ Richard M. Moley Director October 28, 1998
- ------------------------------
Richard M. Moley
/s/ M. Kenneth Oshman Director October 28, 1998
- ------------------------------
M. Kenneth Oshman
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EXHIBIT 10.5
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 26, 1996
AMONG
CMC INDUSTRIES, INC.,
as guarantor,
CMC CALIFORNIA, INC.
and
CMC MISSISSIPPI, INC.,
as Borrowers and cross-guarantors,
AND
BANK OF AMERICA ILLINOIS,
as Lender
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TABLE OF CONTENTS
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1. DEFINITIONS AND OTHER TERMS...................................................... 1
1.1 Definitions............................................................... 1
1.2 Other Definitional Provisions............................................ 20
1.3 Interpretation of Agreement.............................................. 21
1.4 Compliance with Financial Restrictions................................... 21
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS......................................... 21
2.1 Revolving Loans.......................................................... 21
2.2 Term Loan................................................................ 22
2.3 Equipment Credit......................................................... 23
2.4 Use of Loan Proceeds..................................................... 25
2.5 No Limitations as to Collateral, Etc..................................... 26
2.6 Letters of Credit........................................................ 26
2.7 Loan Account; Demand Deposit Account..................................... 29
2.8 Interest and Fees........................................................ 29
2.8.1 Interest................................................ 29
2.8.2 Nonuse Fees............................................. 31
2.8.3 Closing Fee............................................. 32
2.8.4 Method of Calculating Interest and Fees................. 32
2.8.5 Payment of Interest and Fees............................ 32
2.9 Requests for Loans; Borrowing Base Certificates; Other Information....... 32
2.10 Notes.................................................................... 34
2.11 Overdrafts and Overdraft Loans........................................... 34
2.12 Over Advances............................................................ 35
2.13 All Loans One Obligation and Equally Secured............................. 35
2.14 Making of Payments; Application of Collections; Charging of Accounts..... 36
2.15 Lender's Election Not to Enforce......................................... 39
2.16 Reaffirmation............................................................ 39
2.17 Setoff................................................................... 39
2.18 Increased Costs.......................................................... 39
2.19 Borrowing Elections...................................................... 40
2.20 Continuation and Conversion Elections.................................... 40
2.21 Funding.................................................................. 41
2.22 Eurodollar Rate Lending Unlawful......................................... 42
2.23 Eurodollar Deposits Unavailable.......................................... 42
2.24 Increased Eurodollar Rate Loan Costs, etc................................ 42
2.25 Funding Losses........................................................... 43
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2.26 Holdings as Agent for Borrowers.......................................... 44
3. COLLATERAL...................................................................... 44
3.1 Grant of Security Interest............................................... 44
3.2 Accounts Receivable...................................................... 46
3.3 Inventory................................................................ 49
3.4 Equipment................................................................ 50
3.5 Supplemental Documentation............................................... 51
4. REPRESENTATIONS AND WARRANTIES.................................................. 51
4.1 Organization............................................................. 51
4.2 Authorization............................................................ 52
4.3 No Conflicts............................................................. 52
4.4 Validity and Binding Effect.............................................. 52
4.5 No Default............................................................... 52
4.6 Financial Statements..................................................... 53
4.7 Insurance................................................................ 53
4.8 Litigation; Contingent Liabilities....................................... 53
4.9 Liens.................................................................... 54
4.10 Subsidiaries............................................................. 54
4.11 Partnerships; Joint Ventures............................................. 54
4.12 Business and Collateral Locations........................................ 54
4.13 Real Property............................................................ 55
4.14 Eligibility of Collateral................................................ 55
4.15 Control of Collateral; Lease of Property................................. 55
4.16 Patents, Trademarks and Copyrights....................................... 55
4.17 Solvency................................................................. 56
4.18 Contracts; Labor Matters................................................. 56
4.19 Pension and Welfare Plans................................................ 56
4.20 Regulation U............................................................. 57
4.21 Compliance............................................................... 57
4.22 Taxes.................................................................... 57
4.23 Investment Company Act Representation.................................... 57
4.24 Public Utility Holding Company Act Representation........................ 57
4.25 Environmental Safety and Health Matters.................................. 57
4.26 Related Agreements....................................................... 58
5. COVENANTS OF LOAN PARTIES....................................................... 58
5.1 Financial Statements and Other Reports................................... 59
5.1.1 Financial Reports....................................... 59
(a) Annual Audit Report..................................... 59
(b) Quarterly Financial Statement........................... 59
(c) Monthly Financial Statement............................. 59
(d) Officer's Certificate................................... 60
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5.1.2 Agings.................................................. 60
5.1.3 Inventory Certification................................. 60
5.1.4 Other Reports........................................... 60
(a) SEC and Other Reports................................... 60
(b) Report of Change Relating to Holdings, its
Subsidiaries or Partnerships............................ 60
(c) Patents, etc............................................ 60
(d) Report on Investments................................... 61
(e) Other Reports........................................... 61
5.1.5 Certificate Regarding Environmental Matters............. 61
5.2 Notices.................................................................. 61
(a) Default................................................. 61
(b) Litigation.............................................. 61
(c) Judgment................................................ 62
(d) Pension Plans and Welfare Plans......................... 62
(e) Business and Collateral Information..................... 62
(f) Change of Name or Status................................ 63
(g) Insurance Information................................... 63
(h) Environmental and Safety and Health Matters............. 63
(i) Material Adverse Change................................. 63
(j) Default by Others....................................... 63
(k) Moveable Collateral..................................... 63
(l) Change in Management or Line(s) of Business............. 64
(m) Other Notices........................................... 64
5.3 Existence............................................................... 64
5.4 Nature of Business...................................................... 64
5.5 Books, Records and Access............................................... 64
5.6 Insurance............................................................... 65
5.7 Insurance Survey........................................................ 66
5.8 Repair.................................................................. 67
5.9 Taxes................................................................... 67
5.10 Compliance.............................................................. 67
5.11 Pension Plans........................................................... 67
5.12 Merger, Purchase and Sale............................................... 67
5.13 Restricted Payments..................................................... 68
5.14 Loan Parties' and Loan Parties' Subsidiaries' Stock..................... 68
5.15 Indebtedness............................................................ 68
5.16 Liens................................................................... 68
5.17 Guaranties.............................................................. 69
5.18 Investments............................................................. 69
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5.19 Subsidiaries............................................................ 70
5.20 Leases.................................................................. 70
5.21 Change in Accounts Receivable........................................... 71
5.22 Future Environmental Assessments........................................ 71
5.23 Related Agreements...................................................... 71
5.24 Unconditional Purchase Options.......................................... 72
5.25 Use of Proceeds......................................................... 72
5.26 Transactions with Related Parties....................................... 72
5.27 Financial Covenants..................................................... 72
5.28 Fiscal Year............................................................. 72
5.29 Landlords' Agreement.................................................... 72
6. DEFAULT......................................................................... 72
6.1 Event of Default......................................................... 73
(a) Non-Payment............................................. 73
(b) Non-Payment of Other Indebtedness....................... 73
(c) Acceleration of Other Indebtedness...................... 73
(d) Other Obligations....................................... 73
(e) [Intentionally Omitted]................................. 74
(f) Insolvency.............................................. 74
(g) Pension Plans........................................... 74
(h) Non-Compliance With This Agreement...................... 74
(i) [Intentionally Omitted]................................. 75
(j) Non-Compliance With Related Agreements.................. 75
(k) Warranty................................................ 75
(l) Litigation.............................................. 75
(m) Validity................................................ 76
(n) Conduct of Business..................................... 76
(o) Ownership............................................... 76
(p) [Intentionally Omitted]................................. 76
(q) [Intentionally Omitted]................................. 76
(r) Material Adverse Change................................. 76
6.2 Effect of Event of Default; Remedies..................................... 76
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.................. 78
7.1 Notice of Disposition of Collateral...................................... 78
7.2 Application of Proceeds of Collateral.................................... 78
7.3 Care of Collateral....................................................... 78
7.4 Performance of Borrowers' Obligations.................................... 78
7.5 Lender's Right........................................................... 78
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8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS................... 79
8.1 Conditions Precedent to Initial Revolving Loans, Term Loan, Initial
Equipment Loan and Initial Letters of Credit.............................. 79
8.1.1 Due Diligence........................................... 79
8.1.2 Security Interest....................................... 80
8.1.3 Solvency................................................ 80
8.1.4 Blocked Accounts; Lock Boxes............................ 80
8.1.5 Effect of Law........................................... 80
8.1.6 Exhibits; Schedules..................................... 80
8.1.7 Fees.................................................... 81
8.1.8 Documents............................................... 81
(a) Loan Parties' Resolutions............................... 81
(b) Loan Parties' Incumbency Certificates................... 81
(c) Holdings' Certificate................................... 81
(d) Loan Parties' Bylaws.................................... 81
(e) Loan Parties' Certificate of Incorporation.............. 82
(f) Loan Parties' Registration; Good Standing............... 82
(g) Legal Opinions.......................................... 82
(h) Insurance............................................... 82
(i) Other Documents......................................... 82
8.2 Continuing Conditions Precedent to all Loans; Certification.............. 82
(a) No Change in Condition.................................. 82
(b) Default................................................. 82
(c) Warranties.............................................. 83
(d) No Material Transaction................................. 83
(e) Accounting Methods...................................... 83
9. INDEMNITY....................................................................... 83
9.1 Environmental and Safety and Health Indemnity............................ 83
9.2 General Indemnity........................................................ 84
10. GENERAL......................................................................... 84
10.1 Loan Parties' Waiver..................................................... 84
10.2 Power of Attorney........................................................ 85
10.3 Expenses; Attorney's Fee................................................. 86
10.4 Lender Fees and Charges.................................................. 86
10.5 Lawful Interest.......................................................... 86
10.6 No Waiver by Lender; Amendments.......................................... 87
10.7 Termination of Credit.................................................... 87
10.8 Notices.................................................................. 87
10.9 Assignments and Participations; Information.............................. 88
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10.10 Severability............................................................. 88
10.11 Successors............................................................... 89
10.12 Construction............................................................. 89
10.13 Consent to Jurisdiction.................................................. 89
10.14 Subsidiary Reference..................................................... 89
10.15 WAIVER OF JURY TRIAL..................................................... 89
10.16 Acceptance............................................................... 90
10.17 Effect of Agreement...................................................... 90
11.LOAN PARTY GUARANTIES........................................................... 90
11.1 Guaranty................................................................. 90
11.2 Demand by Lender......................................................... 91
11.3 Benefit of Guaranty...................................................... 91
11.4 Subordination of Subrogation, Etc........................................ 91
11.5 Election of Remedies..................................................... 92
11.6 Limitation............................................................... 92
11.7 Contribution with Respect to Guaranty Obligations........................ 93
11.8 Liability Cumulative..................................................... 94
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LIST OF SCHEDULES
Schedules:
Schedule 2.6 Letters of Credit
Schedule 4.1 Trade Names, State of Incorporation & Qualification
Schedule 4.7 Insurance Summary
Schedule 4.8 Schedule of Litigation and Contingent Liabilities
Schedule 4.9 Schedule of Liens
Schedule 4.10 Schedule of Subsidiaries
Schedule 4.11 Schedule of Partnerships and Joint Ventures
Schedule 4.12 Schedule of Business and Collateral Locations
Schedule 4.13 Schedule of Realty
Schedule 4.15 Schedule of Leases
Schedule 4.16 Schedule of Patents, Trademarks, and Copyrights
Schedule 4.18 Schedule of Government Contracts
Schedule 4.19 Schedule of Contingent Employee Benefit Plan Liabilities
Schedule 4.25 Schedule of Environmental Matters
Schedule 5.12 Schedule of Liquidations
Schedule 5.15 Schedule of Indebtedness
Schedule 5.17 Schedule of Guaranties
Schedule 5.18A Schedule of Investments (General)
LIST OF EXHIBITS
Exhibits:
Exhibit A Borrowing Request
Exhibit B Continuation/Conversion Notice
LIST OF ANNEXES
Annex A Financial Covenants
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LOAN AND SECURITY AGREEMENT
PREAMBLE. THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of the
26th day of September, 1996 by and among BANK OF AMERICA ILLINOIS, an Illinois
banking corporation ("Lender"), CMC INDUSTRIES, INC., a Delaware corporation
("Holdings"), and each of CMC CALIFORNIA, INC., a Delaware corporation ("CMC
California"), and CMC MISSISSIPPI, INC., a Delaware corporation, ("CMC
Mississippi"; CMC California and CMC Mississippi are sometimes referred to
herein individually as a "Borrower" and together as "Borrowers"; and Holdings
and Borrowers are sometimes referred to herein individually as a "Loan Party"
and together as the "Loan Parties").
PRELIMINARY STATEMENT. CMC Mississippi and Lender are parties to a certain
Loan and Security Agreement, dated as of August 23, 1993, as amended (the
"Existing Loan Agreement"), pursuant to which Lender has made available to CMC
Mississippi a revolving credit facility in the maximum aggregate principal
amount of Seventeen Million Dollars ($17,000,000) (the "Existing Revolving
Credit") and has made a term loan to CMC Mississippi in the current outstanding
principal amount of Five Million Nine Hundred Forty-One Thousand Six Hundred
Sixty-Six Dollars and 73 cents ($5,941,666.73) (the "Existing Term Loan"). The
Loan Parties have requested that Lender make a new revolving credit facility
available to Borrowers (including provision for letters of credit), on the basis
set forth below, a portion of which will constitute an extension and renewal of
the revolving loans outstanding to CMC Mississippi under the Existing Revolving
Credit, that Lender extend and renew the Existing Term Loan to CMC Mississippi
and that Lender make a new equipment facility available to Borrowers, on the
basis set forth below. On the Closing Date hereunder, all advances and letters
of credit outstanding under the Existing Loan Agreement will be deemed to be
advances and letters of credit outstanding hereunder, the Existing Term Loan
shall be deemed to have been extended and renewed by the term loan made
hereunder, and this Agreement shall be deemed to, among other things, extend and
renew the Existing Loan Agreement. The Loan Parties and Lender have agreed to
enter into this Agreement for the purpose of setting forth the terms and
conditions on which the new revolving credit facility, term loan and equipment
facility referenced above will be made available to Borrowers.
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NOW, THEREFORE, in consideration of any loan or advance or grant of credit
(including any loan or advance or grant of credit by renewal or extension)
hereafter made to Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
DEFINITIONS AND OTHER TERMS.
Definitions . In addition to terms defined elsewhere in this
Agreement or any Supplement, Schedule, Exhibit or Annex hereto, when used
herein or in any Supplement, Schedule, Exhibit or Annex hereto, the following
terms shall have the following meanings (such meanings shall be equally
applicable to the singular and plural forms of the terms used, as the context
requires):
"Account Debtor" means any Person who is or who may become obligated to
Borrower under, with respect to, or on account of an Account Receivable,
Contract Right, General Intangible or other Collateral.
"Account Receivable" means any account of either Borrower and any other
right of either Borrower to payment for goods sold or leased or for services
rendered, whether or not evidenced by an instrument or chattel paper and whether
or not yet earned by performance.
"Activation Notice" means a written notice delivered by Lender to
Holdings after the occurrence of an Event of Default stating that Lender has
elected to apply amounts received by Lender (whether received in the Assignee
Deposit Accounts of Borrowers or otherwise received by Lender) from the
collection of items of payment and proceeds of Collateral and Third Party
Collateral in accordance with Section 2.14(b).
"Agreement" means this Loan and Security Agreement, as it may be
amended, modified or supplemented from time to time.
"Applicable Margins" shall mean the Revolving Eurodollar Rate Margin,
Revolving Reference Rate Margin, Term Eurodollar Rate Margin and Term Reference
Rate Margin, as applicable, as in effect for any date.
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"Application" means an application by Holdings, on behalf of the
applicable Borrower, in a form and containing terms and provisions acceptable to
Lender, for the issuance by Lender of a Letter of Credit.
"Assignee Deposit Account" has the meaning ascribed to such term in
Section 3.2(d).
"Attorneys' Fees" means the reasonable value of the services (and
costs, charges and expenses related thereto) of the attorneys (and all
paralegals, secretaries, accountants and other staff employed by such attorneys)
employed by Lender (including but not limited to attorneys and paralegals who
are employees of Lender) from time to time (i) in connection with the
negotiation, preparation, execution, delivery, administration and enforcement of
this Agreement, any Related Agreement, any Supplemental Documentation and all
other documents or instruments provided for herein or in any thereof or
delivered or to be delivered hereunder or under any thereof or in connection
herewith or with any thereof, (ii) to prepare documentation related to the Loans
made and other Liabilities incurred hereunder, (iii) to prepare any amendment to
or waiver under this Agreement or any Related Agreement and any documents or
instruments related thereto, (iv) to represent Lender in any litigation,
contest, dispute, suit or proceeding or to commence, defend or intervene in any
litigation, contest, dispute, suit or proceeding or to file a petition,
complaint, answer, motion or other pleading, or to take any other action in or
with respect to, any litigation, contest, dispute, suit or proceeding (whether
instituted by Lender, any Loan Party or any other Person and whether in
bankruptcy or otherwise) in any way or respect relating to the Collateral, any
Third Party Collateral, this Agreement or any Related Agreement, or any Loan
Party's or any other Obligor's or Subsidiary's affairs, (v) to protect, collect,
lease, sell, take possession of, or liquidate any of the Collateral or any Third
Party Collateral, (vi) to attempt to enforce any security interest in any of the
Collateral or any Third Party Collateral or to give any advice with respect to
such enforcement and (vii) to enforce any of Lender's rights to collect any of
the Liabilities.
"Borrower" -- see Preamble.
"Borrowing Base" means, at any time,
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(1) with respect to CMC California, the sum of (a) an amount of up to
eighty percent (80%) of the net amount (after deduction of such
reserves and allowances as Lender deems proper and necessary) of CMC
California's Eligible Accounts Receivable plus (b) an amount of up to
the least of (i) thirty-five percent (35%) of the net amount (after
deduction of such reserves and allowances as Lender deems proper and
necessary) of CMC California's Eligible Inventory, (ii) Four Million
Dollars ($4,000,000) and (iii) the amount determined under the
preceding clause (a); and
(2) with respect to CMC Mississippi, the sum of (a) an amount of up to
eighty-five percent (85%) of the net amount (after deduction of such
reserves and allowances as Lender deems proper and necessary) of CMC
Mississippi's Eligible Account Receivable plus (b) an amount of up to
the least of (i) fifty percent (50%) of the net amount (after deduction
of such reserves and allowances as Lender deems necessary and proper)
of CMC Mississippi's Eligible Inventory, (ii) Nine Million Five Hundred
Thousand Dollars ($9,500,000) during the period of August 1st through
October 31st of each year and Nine Million Dollars ($9,000,000) at all
other times and (iii) the amount determined under the preceding clause
(a).
"Borrowing Base Certificate" has the meaning ascribed to such term in
Section 2.9(c).
"Borrowing Request" means a Borrowing Request in the form of Exhibit A
hereto.
"Business Day" means:
(a) any day which is neither a Saturday or Sunday nor a legal holiday
on which banks are authorized or required to be closed in Chicago, Illinois; and
(b) relative to:
(i) the date of making or continuing any Loans as, or
converting any Loans from or into, Eurodollar Rate Loans,
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(ii) making any payment or prepayment of principal of or
payment of interest on any portion of the principal amount of any Loans
being maintained as Eurodollar Rate Loans, or
(iii) Holdings' giving any notice (or the number of
Business Days to elapse prior to the effectiveness thereof) in
connection with any matter referred to in clause (b)(i) or (b)(ii),
any day on which dealings in Dollars are carried on in the interbank
eurodollar market of Lender's Eurodollar Office.
"Capital Expenditures" means expenditures for fixed assets, including
equipment, fixtures, real estate or improvements or repairs which have a useful
life of more than one year and which are required to be capitalized in
accordance with GAAP.
"Capitalized Lease" means any lease which is or should be capitalized
on the balance sheet of the lessee in accordance with GAAP.
"Closing Date" means September __, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
"Collateral" has the meaning ascribed to such term in Section 3.1.
"Commercial Letter of Credit" means any Letter of Credit which is
drawable upon presentation of a sight draft and other documents evidencing the
sale or shipment of goods purchased by either Borrower in the ordinary course of
such Borrower's business.
"Compensatory Amount" shall have the meaning ascribed thereto in
Section 2.18 hereof.
"Continuation/Conversion Notice" means a notice of
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continuation or conversion and a certificate duly executed by the chief
executive, accounting, or other authorized officer of Holdings on behalf of the
applicable Borrower, each such notice and certificate to be substantially in the
form of Exhibit B hereto.
"Contract Right" means any right of either Borrower to payment under a
contract, which right is not yet earned by performance and not evidenced by an
instrument or chattel paper.
"Cortelco" means Cortelco International, Inc., a Delaware corporation.
"Credit" means the credit facility established under this Agreement
consisting of the Revolving Credit, the Term Loan and the Equipment Credit. The
amount of the Credit shall be reduced on the Equipment Credit Termination Date
by an amount equal to the difference between the initial Equipment Credit
($3,800,000) and the aggregate amount of Equipment Loans actually made by Lender
on or prior to such date. The amount of the Credit shall also be reduced by the
amount of each principal payment made by CMC Mississippi on the Term Loan or by
either Borrower on the Equipment Loans, concurrently with the making of each
payment. In the event that Lender in its sole discretion agrees to increase the
amount of the Revolving Credit, the Term Loan or the Equipment Credit, the
amount of the Credit shall increase by a like amount concurrently therewith.
"Credit Termination Date" means August 23, 1998; provided that Lender,
in its sole and absolute discretion, may elect to extend the Credit Termination
Date to August 23, 1999 by delivering written notice of such election to
Holdings at any time on or prior to July 1, 1998; provided further that, without
limiting in any way Lender's discretion in regard to its election to grant such
extension, Lender will not grant such extension unless the financial covenants
set forth in Annex A to this Agreement shall have been amended for Holdings'
1999 Fiscal Year in a manner satisfactory to Lender.
"CSHC" means Cortec Systems Holding Corp., a Delaware corporation, the
owner of all of the issued and outstanding common stock of Cortelco.
"Debt Service Coverage Ratio" shall have the meaning
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<PAGE> 15
ascribed thereto in clause (d) of Annex A.
"Default Rate" means, with respect to a Loan, the rate of interest
which shall be applicable to such Loan after any amount thereof is not paid when
due, whether by acceleration or otherwise, which rate of interest shall be equal
to the greater of (a) the Reference Rate from time to time in effect plus the
Applicable Margin from time to time in effect for such Loan as a Reference Rate
Loan plus two percent (2%) per annum or (b) the Reference Rate in effect at the
time such amount became due plus the Applicable Margin for such Loan as a
Reference Rate Loan at the time such amount became due plus two percent (2%) per
annum.
"Demand Deposit Account" has the meaning ascribed to such term in
Section 2.7.
"Dollar" and the sign "$" mean lawful money of the United States.
"Eligible Account Receivable" means, with respect to either Borrower,
an Account Receivable owing to such Borrower which meets all the following
requirements:
(1) it is genuine and in all respects what it purports to be;
(1) it arises from either (a) the performance of services by such
Borrower, which services have been fully performed and, if applicable,
acknowledged and/or accepted by the Account Debtor with respect thereto
or (b) the sale or lease of goods by such Borrower; and if it arises
from the sale or lease of goods, (i) such goods comply with such
Account Debtor's specifications (if any) and have been shipped to, or
delivered to and accepted by, such Account Debtor and (ii) such
Borrower has possession of, or if requested by Lender has delivered to
Lender, shipping and delivery receipts evidencing such shipment,
delivery and acceptance;
(1) it (a) is evidenced by an invoice rendered to the Account Debtor
with respect thereto which (i) is dated not earlier than the date of
shipment or performance and (ii) has payment terms not unacceptable to
Lender and (b) is due and payable in full within one hundred twenty
(120) days after the date of the invoice evidencing such Account
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Receivable, and is not unpaid on the date that is sixty (60) days after
the due date specified in such invoice; provided, however, that if
invoices representing twenty-five percent (25%) or more of the unpaid
net amount of all Accounts Receivable from any one Account Debtor are
or become ineligible as a result of the foregoing limitations, then all
Accounts Receivable relating to such Account Debtor shall cease to be
Eligible Accounts Receivable.
(1) it is not an Account Receivable with respect to which Lender does
not have a first priority perfected security interest and it is not
subject to any assignment, claim or Lien, other than (a) a Lien in
favor of Lender and (b) Liens consented to by Lender in writing;
(1) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor with respect thereto, and is not subject to setoff,
counterclaim, credit or allowance or adjustment by the Account Debtor
with respect thereto, except as provided in subclause (10), or to any
claim by such Account Debtor denying liability thereunder in whole or
in part, and such Account Debtor has not refused to accept any of the
goods or services which are the subject of such Account Receivable or
offered or attempted to return any of such goods (provided that such
Account Receivable shall be ineligible pursuant to this clause (5) only
to the extent of such setoff, counter-claim, allowance, adjustment,
claim or refusal);
(1) there are no proceedings or actions which are then threatened or
pending against the Account Debtor with respect thereto or to which
such Account Debtor is a party which might result in any material
adverse change in such Account Debtor's financial condition or in its
ability to pay any Account Receivable in full when due;
(1) it does not arise out of a contract or order which, by its terms,
forbids, restricts or makes void or unenforceable the grant by such
Borrower to Lender of a security interest in the Account Receivable
arising with respect thereto or the enforcement by Lender of such
security interest;
(1) the Account Debtor with respect thereto is not a Related Party or
an Obligor, or a shareholder, director,
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<PAGE> 17
officer or employee of any Loan Party, a Related Party or an Obligor;
(1) the Account Debtor with respect thereto is a resident or citizen
of, and is located within, the United States of America, unless the
sale of goods giving rise to the Account Receivable is on letter of
credit, banker's acceptance or other credit support terms satisfactory
to Lender;
(1) it is not an Account Receivable arising from a "sale on approval,"
"sale or return" or "consignment," or subject to any other repurchase
or return agreement (other than any related to the return of damaged or
defective merchandise or otherwise occurring in the ordinary course of
such Borrower's business as conducted on the Closing Date);
(1) it is not an Account Receivable with respect to which possession
and/or control of the goods sold giving rise thereto is held,
maintained or retained by any Loan Party, any Related Party or any
other Obligor (or by any agent or custodian of any Loan Party, any
Related Party or any other Obligor) for the account of or subject to
further and/or future direction from the Account Debtor thereof;
(1) it is not an Account Receivable which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement or any Related Agreement relating directly or indirectly to
such Borrower's Accounts Receivable;
(1) the Account Debtor thereunder is not located in the State of
Indiana, New Jersey or Minnesota; provided, however, that such
restriction shall not apply to an Account Receivable if at the time the
Account Receivable was created and at all times thereafter (a) such
Borrower had filed and has maintained effective a current Notice of
Business Activities Report with the appropriate office or agency of the
State of Indiana, New Jersey or Minnesota, as applicable or (b) such
Borrower was and has continued to be exempt from the filing of such
Report and has provided Lender with satisfactory evidence thereof;
(1) it arises in the ordinary course of such Borrower's business;
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<PAGE> 18
(1) if the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, such Borrower has
complied with the provisions of Section 3.2(f), as applicable;
(1) if Lender has established a credit limit for an Account Debtor, the
aggregate dollar amount of Accounts Receivable due from such Account
Debtor, including such Account Receivable, does not exceed such credit
limit;
(1) the Accounts Receivable of the Account Debtor obligated on such
Account Receivable do not exceed forty percent (40%) of the total
Accounts Receivable of such Borrower; provided that Accounts Receivable
shall be ineligible pursuant to this clause (17) only to the extent
that they exceed the applicable percentage limit set forth herein; and
(1) if the Account Receivable is evidenced by chattel paper or an
instrument, (a) Lender shall have specifically agreed in writing to
include such Account Receivable as an Eligible Account Receivable, (b)
only payments then due and payable under such chattel paper or
instrument shall be included as an Eligible Account Receivable and (c)
the original of such chattel paper or instrument has been endorsed
and/or assigned and delivered to Lender in a manner satisfactory to
Lender.
An Account Receivable which is at any time an Eligible Account Receivable, but
which subsequently fails to meet any of the foregoing requirements, shall
forthwith cease to be an Eligible Account Receivable. Further, with respect to
any Account Receivable, if Lender at any time or times hereafter determines in
its sole and absolute discretion that the prospect of payment or performance by
the Account Debtor with respect thereto is or will be impaired for any reason
whatsoever, notwithstanding anything to the contrary contained above, such
Account Receivable shall forthwith cease to be an Eligible Account Receivable.
"Eligible Inventory" means, with respect to either Borrower, Inventory
of such Borrower which meets the following requirements:
(1) it is owned by such Borrower, and is not Inventory with respect to
which Lender does not have a first priority
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<PAGE> 19
perfected security interest and is not subject to any prior assignment, claim or
Lien, other than (a) a Lien in favor of Lender and (b) Liens consented to by
Lender in writing;
(2) if it is held for sale or lease or furnishing under contracts of
service, it is (except as Lender may otherwise consent in writing) new and
unused;
(3) except as Lender may otherwise consent, it is in the possession and
control of such Borrower and is not placed on consignment; provided, however,
that if it is stored on premises leased by such Borrower, Lender is in
possession of a landlord's waiver, in form and substance satisfactory to Lender,
duly executed by the owner of such premises;
(4) if it is in the possession or control of a bailee, warehouseman,
processor or other Person other than such Borrower, Lender is in possession of
such agreements, instruments and documents as Lender may require (each in form
and content acceptable to Lender and duly executed, as appropriate, by the
bailee, warehouseman, processor or other Person in possession or control of such
Inventory, as applicable) including but not limited to warehouse receipts in
Lender's name covering such Inventory and a bailee's waiver, processor's waiver
or landlord's waiver, as applicable, in each case in form and substance
satisfactory to Lender;
(5) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in Title 29
U.S.C. ss. 215 or any successor statute or section;
(6) it is not (i) packaging or shipping materials, (ii) goods used in
connection with maintenance or repair of such Borrower's business, properties or
assets or (iii) general supplies;
(7) it is not Inventory which in any way fails to meet or violates any
warranty, representation or covenant contained in this Agreement or any Related
Agreement relating directly or indirectly to such Borrower's Inventory; and
(8) Lender has not determined in its sole and absolute discretion that
it is unacceptable due to age, type, category,
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quality and/or quantity.
Inventory of either Borrower which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements shall forthwith
cease to be Eligible Inventory.
"Environmental Laws" means the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act, any
so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree or other requirement regulating, relating to, or
imposing liability or standards of conduct (including, but not limited to,
permit requirements, and emission or effluent restrictions) concerning any
Hazardous Materials or any hazardous, toxic or dangerous waste, substance or
constituent, or any pollutant or contaminant or other substance, whether solid,
liquid or gas, as now or at any time hereafter in effect.
"Environmental Lien" means a Lien in favor of any governmental entity
for (1) any liability under any Environmental Law or (2) damages arising from or
costs incurred by such governmental entity relating to a spillage, disposal,
release or threatened release into the environment of any Hazardous Material or
other hazardous, toxic or dangerous waste, substance or constituent, or any
pollutant or contaminant or other substance, whether solid, liquid or gas.
"Equipment" means all equipment of either Borrower of every
description, including, without limitation, fixtures, furniture, vehicles and
trade fixtures, together with any and all accessions, parts and equipment
attached thereto or used in connection therewith, and any substitutions therefor
and replacements thereof.
"Equipment Credit Termination Date" means that date which is one (1)
year and two hundred seventy (270) days from the Closing Date.
"Equipment Credit" means the credit facility in the maximum principal
amount of Three Million Eight Hundred Thousand Dollars ($3,800,000) established
by Lender for Borrowers pursuant
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to Section 2.3 under which, subject to the terms and conditions set forth in
Sections 2.3, 8.1 and 8.2, Lender may make one or more Equipment Loans to
Borrowers.
"Equipment Loan" has the meaning ascribed to such term in Section 2.3.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" means any corporation, partnership, or other trade or
business (whether or not incorporated) that is, along with any Loan Party, a
member of a controlled group of corporations or a controlled group of trades or
businesses, as described in Sections 414(b) and 414(c), respectively, of the
Code or Section 4001 of ERISA, or a member of the same affiliated service group
within the meaning of Section 414(m) of the Code.
"Eurodollar Office" means, relative to Lender, the office of Lender
designated as such below its signature hereto (or, in the case of an assignee,
in the assignment executed by it) or such other office of Lender as designated
from time to time by notice from Lender to Holdings, whether or not outside the
United States, which shall be making or maintaining Eurodollar Rate Loans of
Lender hereunder.
"Eurodollar Rate" means, relative to the Interest Period for each
Eurodollar Rate Loan comprising all or any part of the same advance, the rate of
interest equal to the average (rounded upwards, if necessary, to the nearest
0.0625%) of the rates per annum at which Dollar deposits in immediately
available funds are offered to Lender's Eurodollar Office in the interbank
eurodollar market as at or about 10:00 a.m., Chicago time, two Business Days
prior to the beginning of such Interest Period, for delivery on the first day of
such Interest Period, in an amount approximately equal or comparable to the
amount of Lender's Eurodollar Rate Loan comprising part of such advance and for
a period equal to such Interest Period.
"Eurodollar Rate (Adjusted)" means, relative to any portion of a Loan
to be made, continued, or maintained as, or
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<PAGE> 22
converted into, a Eurodollar Rate Loan for any Interest Period, a rate per annum
(rounded upwards, if necessary, to the nearest 0.0625%) determined pursuant to
the following formula:
Eurodollar Rate (Adjusted) = Eurodollar Rate
--------------------
1 - the Eurodollar
"Eurodollar Rate Loan" means a Loan bearing interest, at all times
during the Interest Period applicable to such Loan, at a rate of interest
determined by reference to the Eurodollar Rate (Adjusted).
"Eurodollar Reserve Percentage" means, relative to each Interest
Period, a percentage (expressed as a decimal) equal to the daily average during
such Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the F.R.S. Board, for determining the maximum reserve
requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D
or any other applicable regulation of the F.R.S. Board which prescribes reserve
requirements applicable to "Eurocurrency Liabilities" as currently defined in
Regulation D.
"Event of Default" has the meaning ascribed to such term in Section
6.1.
"Existing Loan Agreement" - see Preliminary Statement.
"Existing Revolving Credit" - see Preliminary Statement.
"Existing Term Loan" - see Preliminary Statement.
"Excluded Taxes" means taxes imposed on the net income of Lender or
imposed on Lender by reason of Lender being engaged in a trade or business in
the United States or having a fixed place of business therein.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fiscal Quarter" means any fiscal quarter of a Fiscal Year.
"Fiscal Year" means, in respect of any Loan Party, any period of twelve
(12) consecutive calendar months ending on the
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<PAGE> 23
31st day of July. References to a Fiscal Year with a number corresponding to any
calendar year; e.g., "Fiscal Year 1996" refers to the Fiscal Year ending on the
31st day of July occurring during such calendar year.
"Fixtures" means all fixtures of either Borrower of every description
and all substitutions and replacements of any thereof.
"GAAP" means generally accepted accounting principles as applied in the
preparation of the audited consolidated financial statement of Holdings referred
to in Section 4.6.
"General Intangibles" means all of either Borrower's general
intangibles and intangible personal property, including things in action, causes
of action and all other personal property of such Borrower of every kind and
nature (other than accounts, inventory, equipment, chattel paper, documents,
instruments and money), including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade styles, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, security
interests, security deposits or other security held by or granted to such
Borrower to secure any payment from an Account Debtor, and any rights to
indemnification.
"Hazardous Materials" means any toxic substance, hazardous substance,
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any pollutant or
contaminant, and shall include, but not be limited to, petroleum, including
crude oil or any fraction thereof which is liquid at standard conditions of
temperature or pressure (60 degrees Fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including, but not limited to, any source,
special nuclear or by-product material as defined at 42 U.S.C. ss. 2011 et seq.,
as amended heretofore or hereafter, polychlorinated biphenyls, and asbestos in
any form or condition.
"Indebtedness" of any Person means, without duplication, (i) any
obligation of such Person for borrowed money, including, without limitation, (a)
any obligation of such
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<PAGE> 24
Person evidenced by bonds, debentures, notes or other similar debt instruments
and (b) any obligation for borrowed money which is non-recourse to the credit of
such Person but which is secured by a Lien on any asset of such Person, (ii) any
obligation of such Person for the deferred purchase price of any property or
services, except Trade Accounts Payable, (iii) any obligation of such Person as
lessee under a Capitalized Lease and (iv) any Indebtedness of another Person
secured by a Lien on any asset of such first Person, whether or not such
Indebtedness is assumed by such first Person. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or joint
venturer.
"Interest Period" means, relative to any Eurodollar Rate Loan, the
period from the date on which such Eurodollar Rate Loan is made or continued as,
or converted into, a Eurodollar Rate Loan pursuant to Section 2.19 or 2.20, and,
unless the maturity of such Eurodollar Rate Loan is accelerated, the day which
numerically corresponds to such date one, two or three months thereafter, as
Holdings, on behalf of the applicable Borrower, may select in its relevant
notice pursuant to Section 2.19 or 2.20; provided that:
(a) with respect to either Borrower's Eurodollar Rate Loans,
Holdings shall not be permitted to select Interest Periods to be in
effect at any one time which have expiration dates occurring on more
than four different dates;
(b) if there exists no numerically corresponding day in such
month, such Interest Period shall end on the last Business Day of such
month;
(c) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next following Business Day (unless such next following Business Day
is a Business Day falling in a new calendar month, in which case such
Interest Period shall end on the Business Day next preceding such
numerically corresponding day); and
(d) Holdings shall not be permitted to select, and there
shall not be applicable, any Interest Period that
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<PAGE> 25
would end later than the Credit Termination Date.
"Inventory" means any and all of either Borrower's inventory and goods
(including, without limitation, inventory and goods in transit), wheresoever
located which are or may at any time be leased by such Borrower to a lessee,
held for sale or lease, furnished under any contract of service, or held as raw
materials, work in process, or supplies or materials used or consumed in such
Borrower's business, or which are held for use in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
inventory and goods, and all inventory and goods the sale or other disposition
of which has given rise to an Account Receivable, Contract Right, General
Intangible, instrument or chattel paper which are returned to and/or repossessed
and/or stopped in transit by such Borrower or Lender or any agent or bailee of
either of them, and all documents of title or other documents representing the
same.
"Investment" of any Person means any investment, made in cash or by
delivery of any kind of property or asset, in any other Person, whether by
acquisition of shares of stock or similar interest, Indebtedness or other
obligation or security, or by loan, advance or capital contribution, or
otherwise.
"L/C Draft" means a draft drawn on Lender pursuant to a Letter of
Credit.
"Lender" -- See Preamble.
"Letter of Credit" means a letter of credit issued by Lender on the
Application of Holdings, on behalf of the applicable Borrower.
"Letter of Credit Obligations" means at any time an amount equal to the
sum of (i) the aggregate amount available to be drawn under outstanding Letters
of Credit, plus (ii) all amounts drawn, but not yet reimbursed, under Letters of
Credit, plus (iii) the aggregate outstanding face amount of all accepted but
unpaid L/C Drafts.
"Liabilities" means all of the liabilities, obligations and
indebtedness of the Loan Parties to Lender of any kind or nature, however
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing or
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<PAGE> 26
due or to become due, and including but not limited to (i) each Borrower's
obligations under any Note, (ii) each Loan Party's obligations under this
Agreement, (iii) each Borrower's obligations with respect to any Loan, Letter of
Credit or any Application therefor, (vi) interest, charges, expenses, Attorneys'
Fees and other sums chargeable to the Loan Parties by Lender under this
Agreement or any Related Agreement and (v) the obligations of the Loan Parties
under any Related Agreement, including obligations of performance. "Liabilities"
shall also include any and all amendments, extensions or renewals of any of the
foregoing.
"Lien" means any mortgage, pledge, hypothecation, judgment lien or
similar legal process, title retention lien, or other lien, encumbrance or
security interest, including, without limitation, the interest of a vendor under
any conditional sale or other title retention agreement and the interest of a
lessor under any Capitalized Lease.
"Loan" means (i) any Revolving Loan which may be made pursuant to
Section 2.1, (ii) the Term Loan made pursuant to Section 2.2, (iii) any
Equipment Loan which may be made pursuant to Section 2.3 and (iv) any other loan
or advance made to either Borrower by Lender under or pursuant to this
Agreement.
"Loan Account" has the meaning ascribed to such term in Section 2.7.
"Loan Party" -- see "Preamble."
"Margin Stock" has the meaning ascribed to such term in Regulation U of
the Federal Reserve Board or any regulation substituted therefor, as in effect
from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of any Loan Party, any
other Obligor or any ERISA Affiliate.
"Note" means any promissory note of either Borrower evidencing any Loan
made by Lender to such Borrower pursuant to this Agreement, together with any
renewals or extensions thereof, in whole or in part, and amendments and
modifications thereto.
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<PAGE> 27
"Obligor" means each Loan Party and each other Person who shall become
primarily or secondarily liable on any of the Liabilities, or who grants to
Lender a Lien on any property of such Person as security for any of the
Liabilities, unless and until any liability of such Person or the Lien granted
by such Person, as the case may be, has been fully and completely discharged
pursuant to this Agreement and the Related Agreements or has been released by
Lender in writing.
"Occupational Safety and Health Law" means the Occupational Safety and
Health Act of 1970, as amended, and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning employee health and/ or
safety.
"Over Advance" has the meaning ascribed to such term in Section 2.12.
"Overdraft Loan" has the meaning ascribed to such term in Section 2.11.
"Participant" means any Person, now or at any time or times hereafter,
participating with Lender in the Loans made to Borrower pursuant to this
Agreement or any Related Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan," as such term is defined in
Section 3(2) of ERISA, which is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which any Loan Party, any other Obligor
or any ERISA Affiliate may have any liability, including any liability by reason
of being deemed to be a contributing sponsor under Section 4069 of ERISA.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, or government (whether national, federal, state, county,
city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
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<PAGE> 28
"Reference Rate" means, at any time and from time to time, the rate per
annum then most recently announced by Lender at its head office as its reference
rate. The Reference Rate is not necessarily intended to be the lowest rate of
interest determined by Lender in connection with extensions of credit. Changes
in the rate of interest on that portion of any Loans maintained as Reference
Rate Loans shall take effect simultaneously with each change in the Reference
Rate. Lender shall give notice promptly to Holdings of changes in the Reference
Rate.
"Reference Rate Loan" means a Loan bearing interest at a fluctuating
rate determined by reference to the Reference Rate.
"Regulatory Change" means, relative to Lender:
(a) any change after the Closing Date in (or the adoption,
implementation, phase-in or commencement of effectiveness of) any applicable
law, guideline or request (whether or not having the force of law); or
(b) any change after the Closing Date in the application to Lender of
any applicable law, guideline or request (whether or not having the force of
law), including a determination by Lender to apply the requirements of changes
to Regulations H and Y of the F.R.S. Board issued on January 19, 1989 and the
regulations of the Comptroller of the Currency, 12 CFR Part 3, Appendix A,
issued on January 27, 1989 to its Loans hereunder.
"Related Agreement" means any agreement, instrument or document
(including, without limitation, notes, guarantees, mortgages, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter)
heretofore, now, or hereafter delivered to Lender with respect to or in
connection with or pursuant to this Agreement or any of the Liabilities, and
executed by or on behalf of any Loan Party or any other Obligor.
"Related Party" means and includes the following Persons: (i) each
Borrower, (ii) Holdings, (iii) CSHC, (iv)
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<PAGE> 29
Cortelco, (v) any Subsidiary of any Loan Party, Cortelco or CSHC and (vi) any
Person (A) which directly or indirectly through one or more intermediaries
controls, or is controlled by, any Loan Party, Cortelco or CSHC or a Subsidiary
of any Loan Party, Cortelco or CSHC (B) which beneficially owns or holds twenty
percent (20%) or more of the equity interest of any Loan Party, Cortelco or CSHC
or a Subsidiary of any Loan Party, Cortelco or CSHC or (C) twenty percent (20%)
or more of the equity interest of which is beneficially owned or held by any
Loan Party, Cortelco or CSHC or a Subsidiary of any Loan Party, Cortelco or
CSHC. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract
or otherwise.
"Reportable Event" has the meaning given to such term in ERISA.
"Revolving Credit" means the credit facility in the maximum principal
amount of Twenty-Five Million Dollars ($25,000,000) established by Lender for
Borrowers pursuant to Section 2.1 under which, subject to the terms and
conditions set forth in Sections 2.1, 8.1 and 8.2, Lender may make one or more
Revolving Loans to Borrowers.
"Revolving Credit Amount" means
(1) with respect to CMC California, the sum of Seven Million Dollars
($7,000,000), representing the maximum amount of Revolving Loans which
Lender may make available to CMC California under this Agreement
(unless such amount is increased by Lender in its sole discretion at
Holdings' request); and
(2) with respect to CMC Mississippi, the sum of Eighteen Million
Dollars ($18,000,000), representing the maximum amount of Revolving
Loans which Lender may make available to CMC Mississippi under this
Agreement (unless such amount is increased by Lender in its sole
discretion at Holdings' request).
"Revolving Eurodollar Rate Margin" shall mean the per annum marginal
interest rate set forth below as determined by the
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<PAGE> 30
corresponding Debt Service Coverage Ratio determined as of January 31st and July
31st in each year for the four (4) Fiscal Quarters then ended.
<TABLE>
<CAPTION>
Revolving Eurodollar Rate Margin Debt Coverage Ratio
<S> <C>
2.50% 1.00 or less
2.25% 1.15 to 1.01
2.00% 1.25 to 1.16
1.75% 1.26 or greater
</TABLE>
"Revolving Loan" has the meaning ascribed to such term in Section 2.1.
"Revolving Loan Availability" means
(1) with respect to CMC California, the lesser of (a) the Revolving
Credit Amount applicable to CMC California minus the Letter of Credit
Obligations of CMC California and (b) the Borrowing Base of CMC
California minus the Letter of Credit Obligations of CMC California;
and
(2) with respect to CMC Mississippi, the lesser of (a) the Revolving
Credit Amount applicable to CMC Mississippi minus the Letter of Credit
Obligations of CMC Mississippi and (b) the Borrowing Base of CMC
Mississippi minus the Letter of Credit Obligations of CMC Mississippi.
"Revolving Reference Rate Margin" shall mean the per annum marginal
interest rate set forth below as determined by the corresponding Debt Service
Coverage Ratio determined as of January 31st and July 31st of each year for the
four (4) Fiscal Quarters then ended.
<TABLE>
<CAPTION>
Revolving Reference Rate Margin Debt Coverage Ratio
<S> <C>
50% 1.00 or less
0.00% 1.15 to 1.01
0.00% 1.25 to 1.16
0.00% 1.26 or greater
</TABLE>
"Standby Letter of Credit" means any Letter of Credit
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<PAGE> 31
which is not a Commercial Letter of Credit.
"Subordinated Debt" means that portion of any liabilities, obligations
or Indebtedness of any Loan Party which contains terms satisfactory to Lender
and is subordinated, in a manner satisfactory to Lender, as to right and time of
payment of principal and interest thereon, to all of the Liabilities.
"Subsidiary" means, as to any Person, any other Person of which or in
which such Person owns, directly or indirectly, fifty percent (50%) or more of
(i) the combined voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of the board of directors
of such Person, if it is a corporation, (ii) the capital interest or profits
interest of such Person, if it is a partnership, joint venture or similar entity
or (iii) the beneficial interest of such Person, if it is a trust, association
or other unincorporated organization.
"Supplemental Documentation" has the meaning ascribed to such term in
Section 3.5.
"Tangible Net Worth" means at any time with respect to any Loan Party ,
the total of shareholders' equity (including capital stock, paid-in capital and
retained earnings after deducting treasury stock) of such Loan Party and its
consolidated Subsidiaries (if any) calculated in accordance with GAAP, plus the
principal amount of any Subordinated Debt less the sum of the total amount of
all intangible assets and less Investments in or loans to Persons other than
such Loan Party's consolidated Subsidiaries, other than marketable securities
and, in the case of Holdings, its existing Investment in Cortelco. "Intangible
assets," as used herein, shall include, without limitation, unamortized debt
discount and expense, unamortized deferred charges and goodwill.
"Taxes" means all excise and other taxes, levies, imposts, duties,
charges or fees imposed on Lender with respect to payments by any Loan Party to
Lender by the United States or any political subdivision thereof.
"Term Eurodollar Rate Margin" shall mean the per annum marginal rate of
interest set forth below as determined by the corresponding Debt Coverage Ratio
determined as of January 31st
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<PAGE> 32
and July 31st of each year for the four (4) Fiscal Quarters then ended.
<TABLE>
<CAPTION>
Term Eurodollar Rate Margin Debt Coverage Ratio
<S> <C>
2.625% 1.00 or less
2.375% 1.15 to 1.01
2.25% 1.25 to 1.16
2.00% 1.26 or greater
</TABLE>
"Term Reference Rate Margin" shall mean the per annum marginal rate of
interest set forth below as determined by the corresponding Debt Coverage Ratio
determined as of January 31 and July 31st of each year for the four (4) Fiscal
Quarters then ended.
<TABLE>
<CAPTION>
Term Reference Rate Margin Debt Coverage Ratio
<S> <C>
.625% 1.00 or less
.125% 1.15 to 1.01
0.00% 1.25 to 1.16
0.00% 1.26 or greater
</TABLE>
"Term Loan" has the meaning ascribed to such term in Section 2.2.
"Third Party Collateral" means any property of any Person other than
Borrowers which secures payment or performance of any Liabilities.
"Trade Accounts Payable" of any Person means trade accounts payable of
such Person in accordance with GAAP incurred in the ordinary course of such
Person's business.
"UCC" means the Uniform Commercial Code as in effect in the State of
Illinois, and any successor statute, together with any regulations thereunder,
in each case as in effect from time to time. References to sections of the UCC
shall be construed to also refer to any successor sections.
"Unmatured Event of Default" means any event or condition which, with
the lapse of time or giving of notice to Holdings or both, would constitute an
Event of Default.
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<PAGE> 33
OTHER DEFINITIONAL PROVISIONS. Unless otherwise defined or the context
otherwise requires, all financial and accounting terms used herein or in any
certificate or other document made or delivered pursuant hereto shall be defined
in accordance with GAAP. Unless otherwise defined therein, all terms defined in
this Agreement shall have the defined meanings when used in any Note or in any
certificate or other document made or delivered pursuant hereto. Terms used in
this Agreement which are defined in any Supplement or Exhibit hereto shall,
unless the context otherwise indicates, have the meanings given them in such
Supplement or Exhibit. Other terms used in this Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the UCC to the
extent the same are used or defined therein.
INTERPRETATION OF AGREEMENT. A Section, an Exhibit, a Schedule or an
Annex is, unless otherwise stated, a reference to a section hereof, an exhibit
hereto, a schedule hereto or an Annex hereto, as the case may be. Section
captions used in this Agreement are for convenience only and shall not affect
the construction of this Agreement. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar import when used in this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
COMPLIANCE WITH FINANCIAL RESTRICTIONS. Compliance with each of the
financial ratios and restrictions contained in Section 5.27 shall, except as
otherwise provided therein, be determined in accordance with GAAP consistently
followed for the period or periods involved.
LOANS; LETTERS OF CREDIT; OTHER MATTERS.
REVOLVING LOANS. Lender hereby establishes the Revolving Credit
pursuant to which, subject to fulfillment to Lender's satisfaction on or before
the Closing Date of all conditions precedent set forth in Section 8.1 and
Section 8.2 and to all other terms and conditions of this Agreement and the
Related Agreements, and in reliance upon the representations and warranties of
the Loan Parties and each other Obligor set forth herein and in the Related
Agreements, Lender agrees to make such loans or advances (individually each a
"Revolving Loan" and collectively the "Revolving Loans") to either Borrower from
time to time as Holdings, on behalf of such Borrower, may from time to
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<PAGE> 34
time request, up to, but not in excess of, such Borrower's Revolving Loan
Availability. Revolving Loans made by Lender may be repaid and, subject to the
terms and conditions hereof, reborrowed unless the Revolving Credit extended
under this Agreement is otherwise terminated as provided in this Agreement. The
Revolving Credit shall terminate on the Credit Termination Date, and all then
outstanding Revolving Loans shall be repaid in full on such date; provided,
however, that in the event that at any time the aggregate outstanding principal
balance of all Revolving Loans to either Borrower exceeds such Borrower's
Revolving Loan Availability, such Borrower shall, unless Lender shall otherwise
consent, without notice or demand of any kind, immediately make such repayments
of the Revolving Loans to such Borrower or take such other actions as shall be
necessary to eliminate such excess; provided, further, that any Revolving Loans
may, at the election of Holdings, on behalf of the applicable Borrower, be
repaid, in whole or in part, at any time prior to such date without premium or
penalty. Notwithstanding any other provision of this Agreement, however, the sum
of the aggregate outstanding principal balance of the Revolving Loans plus all
Letter of Credit Obligations shall not exceed Twenty-Five Million Dollars
($25,000,000) and the sum of the aggregate principal balance of the Revolving
Loans to either Borrower plus all Letter of Credit Obligations of such Borrower
shall not exceed Seven Million Dollars ($7,000,000) in the case of CMC
California and Eighteen Million Dollars ($18,000,000) in the case of CMC
Mississippi; provided, however, that the foregoing shall not limit the right of
Lender, in its sole and absolute discretion, to advance Revolving Loans to
Borrowers pursuant to the provisions of Section 2.6(b), 2.6(c), 2.6(e), 2.8,
3.2(c), 5.5, 5.6, 5.22, 7.4, 10.3, 10.4 or any other provision of this Agreement
or any Related Agreement that permits Lender to advance Revolving Loans to
Borrowers even if one or more of the conditions precedent set forth in Section
8.1 or 8.2 has not then been fulfilled.
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<PAGE> 35
TERM LOAN.
(a) Subject to fulfillment to Lender's satisfaction on or before the
Closing Date of all conditions precedent relative thereto set forth in
Sections 8.1 and 8.2 and to all other terms and conditions of this
Agreement and the Related Agreements, and in reliance upon the
warranties of the Loan Parties and each other Obligor set forth herein
and in the Related Agreements, Lender agrees to make a loan (the "Term
Loan") to CMC Mississippi on the Closing Date in the amount of Five
Million Nine Hundred Forty-One Thousand Six Hundred Sixty-Six Dollars
and 73 cents ($5,941,666.73), which shall constitute an extension and
renewal of the Existing Term Loan.
(a) Unless otherwise required to be sooner repaid pursuant to clause
(c) of this Section 2.2 or any other provision of this Agreement, the
principal of the Term Loan shall be repaid in Fifty-Five (55) monthly
installments of One Hundred Eight Thousand Three Hundred Thirty-Three
Dollars and 33 cents ($108,333.33) each (except that the 55th and final
monthly installment shall be in the amount of Ninety-One Thousand Six
Hundred Sixty-Six Dollars and 91 cents ($91,666.91) or such lesser or
greater amount as is then required to pay the principal of, and all
accrued and unpaid interest on, the Term Loan in full), commencing on
October 1, 1996 and continuing on the first day of each month
thereafter until the Term Loan is paid in full. Notwithstanding the
foregoing, if the Revolving Credit is not renewed or extended, the
entire outstanding principal balance of the Term Loan shall be due and
payable on the Credit Termination Date.
(a) Notwithstanding the foregoing, if not theretofore repaid in full,
the outstanding principal balance of the Term Loan, and all accrued and
unpaid interest thereon, shall be due and payable in full on the Credit
Termination Date.
(a) CMC Mississippi may, upon at least ten (10) Business Days' prior
notice to Lender, prepay the outstanding principal balance of the Term
Loan in whole or in part without any premium or penalty. Any partial
prepayment of
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<PAGE> 36
principal shall be in a minimum amount of the lesser of (i) the
outstanding principal balance of the Term Loan and (ii) Fifty Thousand
Dollars ($50,000) or an integral multiple thereof, and shall be applied
to the unpaid installments of the Term Loan in the inverse order of
their maturities. Any principal of the Term Loan which is repaid may
not be reborrowed. A prepayment of the Term Loan may be made with the
proceeds of a Revolving Loan only, if immediately before and after
giving effect to such prepayment, no Event of Default or Unmatured
Event of Default then exists or would result therefrom.
EQUIPMENT CREDIT.
(a) Lender hereby establishes the Equipment Credit pursuant to which,
subject to fulfillment to Lender's satisfaction on or before the
Closing Date of all conditions precedent set forth in Sections 8.1 and
8.2 and subject as to each Equipment Loan to the fulfillment to
Lender's satisfaction of the additional conditions precedent set forth
in clause (b) below, and subject to all other terms and conditions of
this Agreement and the Related Agreements, and in reliance upon the
representations and warranties of the Loan Parties and each other
Obligor set forth herein and in the Related Agreements, during the
period commencing on the Closing Date and ending on the Equipment
Credit Termination Date, Lender agrees to make such loans (individually
an "Equipment Loan" and collectively the "Equipment Loans") to either
Borrower from time to time as Holdings, on behalf of such Borrower, may
from time to time request to finance the purchase of Equipment by such
Borrower, provided that (i) the amount of each Equipment Loan shall not
exceed seventy-five percent (75%) of the invoiced purchase price (net
of taxes, freight, installation charges and other "soft" costs) of the
Equipment being purchased with the proceeds thereof and (ii) the
aggregate amount of Equipment Loans obtained by Borrowers hereunder
shall not exceed Three Million Eight Hundred Thousand Dollars
($3,800,000).
(a) In addition to the conditions precedent set forth in Sections 8.1
and 8.2, each Equipment Loan will be made by Lender to either Borrower
only if Lender has approved in all respects the proposed Equipment
purchase. Without limiting in any way Lender's discretion in regard to
the granting of
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<PAGE> 37
such approval or in regard to the conditions that Lender may require to
be satisfied in connection with the granting of such approval, Lender
will not in any event make any Equipment Loan to either Borrower unless
and until:
(i) Holdings, on behalf of such Borrower, has notified Lender
in writing at least twenty (20) days prior to the date on which
such Borrower desires to obtain such Equipment Loan of its request
for such Equipment Loan, which notice shall specify the desired
amount of the requested Equipment Loan (to be in a minimum amount
of One Million Dollars ($1,000,000) or integral multiples thereof)
and the desired disbursement date and shall describe the Equipment
to be acquired and attach a copy of the invoice to be issued in
connection with the purchase of such Equipment together with
proforma projected financial statements demonstrating that the Loan
Parties will be in compliance with the financial covenants set
forth in Annex A hereto after giving effect to such Equipment Loan
and proposed Equipment purchase.
(i) Holdings, on behalf of such Borrower, shall have provided
to Lender such documentation and information concerning the
Equipment to be acquired as Lender shall request, including,
without limitation, if Lender so requests, an appraisal performed
by an appraiser and using a methodology satisfactory to Lender.
(i) Lender, if it so requests, shall have had an opportunity
to inspect the Equipment to be acquired.
(i) such Borrower shall have taken all action as Lender may
request to establish for Lender a valid and perfected Lien in such
Equipment to be acquired, free and clear of any Liens other than in
favor of Lender and as approved by Lender in writing.
(i) Holdings, on behalf of such Borrower, shall have delivered
or telecopied to Lender a Borrowing Request (1) with respect to a
Eurodollar Rate Loan at or before 10:00 a.m. Chicago time not less
than 3 or greater than 5 Business Days' prior to the Business Day
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<PAGE> 38
such Eurodollar Rate Loan is to be made and (2) with respect to a
Reference Rate Loan, at or before 10:00 a.m. Chicago time on the
Business Day such Reference Rate Loan is to be made.
(a) On the Equipment Credit Termination Date, Borrowers' right to
obtain Equipment Loans shall terminate. Unless otherwise required to be
sooner repaid pursuant to clause (d) of this Section 2.3 or any other
provision of this Agreement, the principal of each Equipment Loan shall
be repaid in seventy-two (72) equal monthly installments (except that
the 72nd and final monthly installment shall be in such lesser or
greater amount as is then required to pay the principal of, and all
accrued and unpaid interest on, such Equipment Loan in full),
commencing on the first day of the month immediately following the
funding of such Equipment Loan and continuing on the first day of each
month thereafter until such Equipment Loan is paid in full.
Notwithstanding the foregoing, if the Revolving Credit is not renewed
or extended, the entire outstanding principal balance of all Equipment
Loans shall be due and payable on the Credit Termination Date.
(a) Notwithstanding the foregoing, if not theretofore repaid in full,
the outstanding principal balance of the Equipment Loans, and all
accrued and unpaid interest thereon, shall be due and payable in full
on the Credit Termination Date.
(a) Either Borrower may, upon at least ten (10) Business Days' prior
notice to Lender, prepay the outstanding principal balance of the
Equipment Loans to such Borrower in whole or in part without any
premium or penalty. Any partial prepayment of principal shall be in a
minimum amount of the lesser of (i) the aggregate outstanding principal
balance of the Equipment Loans to such Borrower and (ii) Fifty Thousand
Dollars ($50,000) or an integral multiple thereof, and shall be applied
to the unpaid installments of the Equipment Loans to such Borrower in
the inverse order of their maturities (and on a pro rata basis as among
the outstanding Equipment Loans to such Borrower). Any principal of the
Equipment Loans which is repaid may not be reborrowed. A prepayment of
the Equipment Loans may be made with the proceeds of a Revolving Loan
only if immediately
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<PAGE> 39
before and after giving effect to such prepayment, no Event of Default
or Unmatured Event of Default then exists or would result therefrom.
USE OF LOAN PROCEEDS . On the Closing Date, all advances to CMC
Mississippi outstanding under the Existing Revolving Credit (the aggregate
principal amount of which is _____________ Dollars ($____________)) shall be
deemed to be Revolving Loans to CMC Mississippi outstanding under the Revolving
Credit established hereunder, and the Term Loan shall extend and renew the
Existing Term Loan (the aggregate principal amount of which is Five Million
Nine Hundred Forty-One Thousand Six Hundred Sixty-Six Dollars and 73 cents
($5,941,666.73). Unless otherwise approved by Lender, the proceeds of all other
Revolving Loans to either Borrower shall be used by such Borrower for its
working capital purposes, to make capital improvements and to fund loans and
advances to the other Borrower to the extent permitted by Section 5.18; and the
proceeds of Equipment Loans to either Borrower shall be used by such Borrower
to purchase Equipment as provided in Section 2.3; provided, however, that in
any event, the proceeds of each Loan to either Borrower shall be used by such
Borrower in a manner consistent with Section 5.25 and all other terms and
conditions of this Agreement and the Related Agreements, such Borrower's
Certificate of Incorporation and By-Laws as then in effect and all applicable
laws.
NO LIMITATIONS AS TO COLLATERAL, ETC . The Loan Parties agree
that nothing contained in this Agreement (i) shall be construed as Lender's
agreement to resort or look to a particular type or item of collateral as
security for any specific Loan or advance or in any way limit Lender's right to
resort to any or all of the Collateral as security for any of the Liabilities,
(ii) shall be deemed to limit or reduce any lien on or any security interest in
or upon any portion of the Collateral or other security for the Liabilities or
(iii) shall supersede Section 2.13 of this Agreement.
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<PAGE> 40
LETTERS OF CREDIT.
(a) In addition to Loans made pursuant to Sections 2.1, 2.2 and 2.3 but
subject to satisfaction of the conditions precedent set forth in
Section 8.1 and Section 8.2, prior to the termination of the Credit on
the Credit Termination Date, Lender will, upon receipt of duly executed
Applications from Holdings, on behalf of either Borrower, and such
other documents, instruments and/or agreements as Lender may require,
issue Letters of Credit for the account of such Borrower on such terms
as are satisfactory to Lender, provided, however, that Lender shall not
be required to issue any Letter of Credit for the account of such
Borrower at any time:
(i) if, before or after giving effect to such Letter of
Credit, (A) the Letter of Credit Obligations of such Borrower would
exceed the lesser of (1) the Revolving Credit Amount applicable to
such Borrower minus the outstanding principal balance of the
Revolving Loans to such Borrower, (2) the Borrowing Base of such
Borrower minus the outstanding principal balance of the Revolving
Loans to such Borrower or (B) the aggregate Letter of Credit
Obligations of Borrowers would exceed Three Million Dollars
($3,000,000); and
(i) which has an expiration date which is (A) more than
one (1) year after the date of issuance (provided that a Standby
Letter of Credit may provide for an annual renewal if such renewal
is consented to by Lender and all conditions precedent to the
issuance of Letters of Credit are met at the time of such renewal)
or (B) after thirty (30) days immediately preceding the Credit
Termination Date.
(a) Each Borrower agrees to pay Lender, on demand, Lender's standard
administrative operating fees and charges in effect from time to time
for issuing and administering any Letters of Credit for the account of
such Borrower. Each Borrower further agrees to pay Lender a commission
(i) on each Standby Letter of Credit issued for the account of such
Borrower and each related L/C Draft accepted by Lender but not yet paid
equal to one and three-fourths percent (1-3/4%) per annum (calculated
on the basis of a year consisting of 360 days and paid for actual days
elapsed) on the aggregate daily average amount available to be drawn
under such
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<PAGE> 41
Standby Letter of Credit and unpaid under such L/C Drafts, payable
quarterly in arrears; and (ii) in the case of each Commercial Letter of
Credit issued for the account of such Borrower, one and three-fourths
percent (1-3/4%) of the original face amount of such Commercial Letter
of Credit, payable upon the initial draw under, or acceptance of any
L/C Draft with respect to, such Letter of Credit. Lender may provide
for the payment of any fees, charges or commission due by advancing the
amount thereof to the applicable Borrower as a Revolving Loan.
(a) Each Borrower agrees to reimburse Lender, on demand, for each
payment made by Lender under or pursuant to any Letter of Credit issued
for the account of such Borrower or any related L/C Draft. Each
Borrower further agrees to pay to Lender, on demand, interest at the
Default Rate applicable to Revolving Loans on any amount paid by Lender
under or pursuant to any Letter of Credit issued for the account of
such Borrower or any related L/C Draft from the date of payment until
the date of reimbursement to Lender. Lender may provide for the payment
of any reimbursement obligations and any interest accrued thereon by
advancing the amount thereof to the applicable Borrower as a Revolving
Loan, provided, however, that, subject to the conditions precedent set
forth in Section 8.2, if at the time Lender makes a payment under or
pursuant to a Letter of Credit issued for the account of such Borrower
or any related L/C Draft such Borrower's Revolving Loan Availability
exceeds the outstanding principal balance of the Revolving Loans to
such Borrower by an amount at least equal to such Borrower's
reimbursement obligation with respect to such payment, such Borrower
hereby authorizes Lender, and Lender will, immediately and without any
request by or notice to Holdings or such Borrower, provide for the
payment of any reimbursement obligations due to Lender and any interest
accrued thereon by making a Revolving Loan to such Borrower in the
amount thereof, which reimbursement obligation shall be thereupon
satisfied to the extent of the Revolving Loan so made.
(a) Each Borrower's obligation to reimburse Lender for payments and
disbursements made by Lender under any Letter of Credit issued for the
account of such Borrower shall be absolute and unconditional under any
and all circumstances
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<PAGE> 42
and irrespective of any setoff, counterclaim or defense to payment
which Borrowers may have or have had against Lender or any other
Person, including, without limitation, any defense based on the failure
of the demand for payment under such Letter of Credit to conform to the
terms of such Letter of Credit, the legality, validity, regularity or
enforceability of such Letter of Credit, or the identity of the
transferee of such Letter of Credit or the sufficiency of any transfer
if such Letter of Credit is transferable; provided, however, that
Borrowers shall not be obligated to reimburse Lender for any wrongful
payment or disbursement made under any Letter of Credit as a result of
acts or omissions constituting gross negligence or willful misconduct
on the part of Lender or any of its officers, employees or agents.
(a) Notwithstanding anything to the contrary herein or in any
Application, upon the occurrence of an Event of Default, an amount
equal to the aggregate amount of the outstanding Letter of Credit
Obligations shall, at Lender's option and upon not less than five (5)
Business Days' prior written notice by Lender to Holdings (unless the
Liabilities shall have been accelerated, in which event no such notice
to the Loan Parties shall be required), be deemed (as between Lender
and the Loan Parties) to have been paid or disbursed by Lender under
the Letters of Credit and L/C Drafts accepted by Lender
(notwithstanding that such amounts may not in fact have been so paid or
disbursed), and a Revolving Loan to each Borrower in the amount of such
Letter of Credit Obligations of such Borrower to have been made and
accepted, which Loan shall be immediately due and payable. In lieu of
the foregoing, at the election of Lender upon not less than five (5)
Business Days' prior written notice by Lender to Holdings at any time
after an Event of Default (unless the Liabilities shall have been
accelerated, in which event no such notice to the Loan Parties shall be
required), each Borrower shall, upon Lender's demand, deliver to Lender
cash Collateral equal to the aggregate Letter of Credit Obligations of
such Borrower. Any such cash Collateral and/or any amounts received
from either Borrower by Lender in payment of the Loan made pursuant to
this paragraph (e) shall be held by Lender in such Borrower's Assignee
Deposit Account or a separate account appropriately designated as a
cash collateral account in relation to this Agreement and
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<PAGE> 43
the Letters of Credit and shall be retained by Lender as collateral
security in respect of, first, such Borrower's Liabilities under or in
connection with the Letters of Credit issued for the account of such
Borrower and related L/C Drafts and then, all other Liabilities. Such
amounts shall not be used by Lender to pay any amounts drawn or paid
under or pursuant to any Letter of Credit issued for the account of
such Borrower or any related L/C Draft; but may be applied to reimburse
Lender for drawings or payments under or pursuant to Letters of Credit
issued for the account of such Borrower and related L/C Drafts which
Lender has paid, or if no such reimbursement is required, to payment of
such other Liabilities as Lender shall determine. Any amounts remaining
in any cash collateral account established pursuant to this paragraph
(e) following payment in full of all Liabilities shall be returned to
Borrowers.
(a) On the Closing Date, all of those letters of credit issued under
the Existing Loan Agreement described on Schedule 2.6 (if any) shall be
deemed to be Letters of Credit outstanding for the account of CMC
Mississippi under this Agreement for all purposes of this Agreement,
subject to all of the terms and conditions hereof.
LOAN ACCOUNT; DEMAND DEPOSIT ACCOUNT. Lender shall establish or
cause to be established on its books in each Borrower's name one or more
accounts (each a "Loan Account") to evidence Loans made to such Borrower.
Lender will credit or cause to be credited to a commercial account ("Demand
Deposit Account") maintained by each Borrower at Lender's 231 South LaSalle
Street, Chicago, Illinois office the amount of any sums advanced as Loans to
such Borrower hereunder. Any amounts advanced as Loans hereunder which are
credited to either Borrower's Demand Deposit Account, together with any other
amounts advanced to such Borrower as a Loan pursuant to this Agreement, will be
debited to the applicable Loan Account of such Borrower and result in an
increase in the principal balance outstanding in such Loan Account in the
amount thereof.
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<PAGE> 44
INTEREST AND FEES.
INTEREST. (a) From the date any Revolving Loan, Term Loan or
Equipment Loan is made, converted or continued to the date the
principal amount of such Loan is repaid in full, interest shall accrue
on the outstanding principal amount of such Loan at a rate per annum
determined as follows:
(i) in the case of a portion of any Revolving Loan
that is a Reference Rate Loan, at a per annum rate equal to
the Reference Rate from time to time in effect, plus the
Revolving Reference Rate Margin from time to time in effect;
(ii) in the case of a portion of any Revolving Loan
that is a Eurodollar Rate Loan, during each Interest Period
applicable thereto, at a per annum rate equal to the
Eurodollar Rate (Adjusted) for such Interest Period, plus the
Revolving Eurodollar Rate Margin from time to time in effect;
(iii) in the case of a portion of the Term Loan or
any Equipment Loan that is a Reference Rate Loan, at a per
annum rate equal to the Reference Rate from time to time in
effect, plus the Term Reference Rate Margin from time to time
in effect; and
(iv) in the case of a portion of the Term Loan or
any Equipment Loan that is a Eurodollar Rate Loan, during
each Interest Period applicable thereto, at a per annum rate
equal to the Eurodollar Rate (Adjusted) for such Interest
Period, plus the Term Eurodollar Rate Margin from time to
time in effect.
(b) The Applicable Margins in effect for any date shall be
determined based upon the Debt Service Coverage Ratio measured as of
the last day of the most recently completed Fiscal Quarter of Holdings
ending on January 31st and July 31st of each Fiscal Year for the four
(4) Fiscal Quarters then ended, with the first measurement date being
January 31, 1997; provided that if any change in the Debt Service
Coverage Ratio results in an adjustment in the
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Applicable Margins, such adjustment shall become effective on the fifth
(5th) Business Day following the delivery to Lender of quarterly
financial statements demonstrating the need for such adjustment and, as
to each Eurodollar Rate Loan outstanding at the time of such delivery,
only upon expiration of the then current Interest Period applicable
thereto (each such date being referred to as an "adjustment date");
provided further, that notwithstanding the foregoing, the Applicable
Margins during the period from the Closing Date to the first adjustment
date shall be as follows:
Revolving Eurodollar Rate Margin - 2.50%;
Revolving Reference Rate Margin - .50%;
Term Eurodollar Margin - 2.625%; and
Term Reference Rate Margin - .625%
(c) The unpaid amount of any Overdraft or Over Advance shall
bear interest at the rates prescribed in Section 2.11 and Section
2.12, respectively.
(d) If any Loan or portion thereof is not paid when due,
whether by acceleration or otherwise the entire unpaid principal
amount of such Loan, at Lender's option, shall bear interest
thereafter at the Default Rate until such amount is paid in full.
(e) Interest accrued on each Loan shall be payable, without
duplication:
(i) on the Credit Termination Date;
(ii) with respect to any portion of the Term Loan or
any Equipment Loan prepaid pursuant to Section 2.2(c) hereof,
on the date of such prepayment.
(iii) in the case of any Revolving Loan, Term
Loan or Equipment Loan;
1. On that portion of the outstanding
principal amount hereof maintained as a Reference Rate Loan,
on or prior to the first day of each month; and
2. On that portion of the outstanding
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principal amount hereof maintained as a Eurodollar Rate Loan,
on the last day of each applicable Interest Period; and
(iv) upon acceleration of the Loans pursuant to
Section 6.2, immediately upon such acceleration.
(f) Whenever any payment shall otherwise be due on a day that
is not a Business Day, such payment shall (except as otherwise
required by clause (c) of the definition of the term "Interest Period"
with respect to payments on Loans maintained as Eurodollar Rate Loans)
be made on the next succeeding Business Day, and such extension of
time shall be included in computing interest and fees, if any, in
connection with such payment.
(g) All determinations by Lender of any rate of interest
applicable to any Loan or other Liability shall be conclusive absent
manifest error.
NONUSE FEES.
(a) Each Borrower agrees to pay to Lender a fee equal to
three-eighths of one percent (.375%) per annum on the daily average
amount by which such Borrower's Revolving Credit Amount (Seven Million
Dollars ($7,000,000) in the case of CMC California and Eighteen
Million Dollars ($18,000,000) in the case of CMC Mississippi) exceeds
the outstanding principal balance of all Revolving Loans to such
Borrower plus all Letter of Credit Obligations of such Borrower. The
fee provided for in this Section 2.8.2(a) shall be payable monthly in
arrears on the first day of each month (for the preceding calendar
month, or portion thereof), commencing on the first day of the
calendar month immediately following the calendar month in which the
Closing Date occurs, and on the Credit Termination Date for the period
then ended. Lender may provide for the payment of any fee due under
this Section 2.8.2(a) by advancing the amount thereof to the
applicable Borrowers as a Revolving Loan.
(b) Borrowers agree to pay to Lender a fee equal to
three-eighths of one percent (.375%) per annum on the daily average
amount by which the amount of the Equipment Credit
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(Three Million Eight Hundred Thousand Dollars ($3,800,000)) exceeds the
aggregate principal amount of Equipment Loans made by Lender hereunder.
The fee provided for in this Section 2.8.2(b) shall be payable monthly
in arrears on the first day of such month (for the preceding calendar
month, or portion thereof) commencing on the first day of the calendar
month immediately following the calendar month in which the Closing
Date occurs, and on the Equipment Credit Termination Date for the
period then ended. Lender may provide for the payment of any fee due
under this Section 2.8.2(b) by advancing the amount thereof to
Borrowers as a Revolving Loan.
CLOSING FEE. Borrowers agree to pay Lender a closing fee of Forty
Thousand Dollars ($40,000) on the Closing Date. Such closing fee shall
be fully earned when due and not subject to any rebate, refund or
proration subsequent to its remittance. With Lender's consent, the
amount of the closing fee may be advanced to Borrowers as a Revolving
Loan.
METHOD OF CALCULATING INTEREST AND FEES. Interest on the unpaid
principal amount of each Loan shall accrue from and including the date
such Loan is made to, but not including, the date such Loan is paid.
Interest and any fee shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed. Changes in
any interest rate provided for herein which are due to changes in the
Reference Rate shall take effect on the date of the change in the
Reference Rate.
PAYMENT OF INTEREST AND FEES. Lender may provide for the payment
of any unpaid accrued interest and any fees by charging the Demand
Deposit Accounts or any other bank accounts maintained by Borrowers
with Lender.
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REQUESTS FOR LOANS; BORROWING BASE CERTIFICATES; OTHER INFORMATION.
(a) Holdings, on behalf of the applicable Borrower, may make a request
for a Revolving Loan to such Borrower hereunder by either (i)
delivering or telecopying to Lender a Borrowing Request or (ii) giving
telephonic notice thereof to Lender, promptly confirmed in writing by
transmittal of a Borrowing Request to Lender (1) with respect to a
Eurodollar Rate Loan at or before 10:00 a.m. Chicago time on not less
than 3 nor more than 5 Business Days' prior notice and (2) with respect
to Reference Rate Loans, at or before 12:00 noon, Chicago time on the
Business Day that such Reference Rate Loan is to be made. In the case
of Reference Rate Loans, each Revolving Loan advance shall be in a
minimum principal amount of $200,000 and an integral multiple of
$100,000 in excess of that amount, except for Reference Rate Loans made
pursuant to Sections 2.6(b), 2.6(c), 2.6(e), 2.8, 3.2(c), 5.5, 5.6,
5.22, 7.4, 10.3, 10.4 or any other provision of this Agreement or any
Related Agreement that permits Lender to advance Revolving Loans to
Borrowers. In the case of Eurodollar Rate Loans, each Revolving Loan
advance shall be in a minimum principal amount of $1,000,000 and an
integral multiple of $500,000 in excess of such amount. Each request
for a Revolving Loan advance shall constitute the Loan Parties'
representation and warranty to Lender that all of the applicable
conditions contained in Section 8.2 hereof have been met and will
continue to be met after giving affect to that Revolving Loan advance.
(a) In the event that Holdings, on behalf of either Borrower, shall at
any time, or from time to time, (i) make a request for a Revolving Loan
hereunder or (ii) be deemed to have requested an Overdraft Loan,
Holdings agrees to forthwith provide Lender with such information, at
such frequency and in such format, as is reasonably required by Lender,
such information to be current as of the time of such request.
(a) From and after the date on which Lender makes the initial Revolving
Loan or issues the initial Letter of Credit, whichever is the earlier,
Holdings, on behalf of Borrowers, further agrees to provide to Lender a
current
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borrowing base certificate at the end of each week and at such other
times as Lender may request (a "Borrowing Base Certificate"). Such
Borrowing Base Certificate shall be in form and contain such data as
Lender may require from time to time, and shall be executed and
certified as accurate by such officers or employees of Holdings as
Holdings designates in writing to Lender pursuant to duly adopted
resolutions of Holdings' Board of Directors authorizing such action.
(a) Holdings shall provide Lender with documentation satisfactory to
Lender indicating the names of those employees of Holdings authorized
by Holdings to sign Borrowing Base Certificates and/or to make
telephonic requests for Revolving Loans, and/or to authorize
disbursement of the proceeds of Revolving Loans by wire transfer or
otherwise, and Lender shall be entitled to rely upon such documentation
until notified in writing by Holdings of any change(s) in the names of
the employees so authorized. Lender shall be entitled to act on the
instructions of anyone identifying himself as one of the persons
authorized to request Revolving Loans or disbursements of Revolving
Loan proceeds by telephone and the Loan Parties shall be bound thereby
in the same manner as if the person were actually so authorized. Each
Loan Party agrees to indemnify and hold Lender harmless from any and
all claims, damages, liabilities, losses, costs and expenses (including
Attorneys' Fees) which may arise or be created by the acceptance of
instructions by telephone or in writing for making or paying Revolving
Loans by wire transfer or otherwise.
NOTES. Except to the extent a Loan may, in Lender's sole and
absolute discretion, be evidenced by a Note, all Loans and payments hereunder
shall be recorded on Lender's books, which shall be rebuttably presumptive
evidence of the amount of such Loans outstanding at any time hereunder. Lender
will account monthly as to all Loans and payments hereunder and, absent
demonstrable error, each monthly accounting will be fully binding on Borrowers
unless, within fifteen (15) days of Holdings receipt thereof, Holdings shall
provide Lender with a specific listing of exceptions. Notwithstanding any term
or condition of this Agreement to the contrary, however, the failure of Lender
to record the date and amount of any Loan hereunder shall not limit
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or otherwise affect the obligation of the applicable Borrower to repay any such
Loan.
OVERDRAFTS AND OVERDRAFT LOANS.
(a) Lender, in its sole and absolute discretion, may (but shall not be
obligated to) (i) pay any check or other item drawn on either
Borrower's Demand Deposit Account or any other bank account which such
Borrower may now or hereafter have with Lender notwithstanding that
such payment results in an overdraft, or (ii) make a Revolving Loan to
such Borrower in the amount necessary to provide such Borrower with
funds sufficient to cover any such checks or other items or, if
applicable, to eliminate any such overdraft.
(a) Each Borrower agrees that the existence of any overdraft with
respect to its Demand Deposit Account or any other bank account now or
hereafter maintained by such Borrower with Lender, or the presentment
of any check or other item drawn on any such account which, if paid,
would result in an overdraft, shall be an automatic request by such
Borrower for a Revolving Loan in an amount sufficient to eliminate any
such overdraft or provide funds for the payment of such check or other
item, as appropriate. Each Borrower acknowledges that, absent such
Borrower's actual request for a Revolving Loan, and subject to the
provisions of Section 8.2, Lender is under no duty or obligation to
make a Loan to such Borrower to eliminate any overdraft or to pay any
check or other item the payment of which would result in an overdraft.
(a) Each Borrower further agrees that, whether or not a Revolving Loan
is made to eliminate or avoid an overdraft, the payment by Lender of
any check or other item drawn on such Borrower's Demand Deposit Account
which results in an overdraft shall constitute a separate Liability
under this Agreement. Each overdraft which at any time exists with
respect to either Borrower's Demand Deposit Account or any other bank
account now or hereafter maintained by such Borrower with Lender, and
each Revolving Loan made pursuant to this Section 2.11 to avoid or
eliminate any such overdraft, is herein called an "Overdraft Loan."
Each Overdraft Loan shall bear interest, from the date made or pursuant
to this Section 2.11 deemed made, until paid, in an
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amount equal to the greater of (i) one hundred thirty percent (130%) of
the highest rate of interest then charged for Loans (other than
Overdraft Loans) made hereunder and (ii) Fifty Dollars ($50.00) per
day.
(a) If Lender, in its sole and absolute discretion, decides not to pay
a check or other item which, if paid, would result in an overdraft on
either Borrower's Demand Deposit Account or any other bank account now
or hereafter maintained by such Borrower with Lender, or elects not to
make a Revolving Loan to prevent or eliminate part or all of any such
overdraft, Lender may return any check(s) the payment of which would
result in such overdraft.
OVER ADVANCES. Lender, in its sole and absolute discretion, may make
Revolving Loans to either Borrower in amounts which cause the outstanding
principal balance of the Revolving Loans to such Borrower to exceed such
Borrower's Revolving Loan Availability or otherwise permit the outstanding
principal balance of the Revolving Loans to either Borrower to at any time
exceed such Borrower's Revolving Loan Availability, and no such event or
occurrence shall cause or constitute a waiver by Lender of its right to refuse
to make any further Revolving Loans or issue any Letters of Credit at any time
that an Over Advance exists or would result therefrom. During any period in
which the aggregate outstanding Revolving Loans to either Borrower exceeds such
Borrower's Revolving Loan Availability (such excess Liabilities are herein
referred to as "Over Advances"), the amount of Over Advances shall bear interest
at a rate equal to one hundred thirty percent (130%) of the highest rate of
interest then charged for Loans made hereunder.
ALL LOANS ONE OBLIGATION AND EQUALLY SECURED. The Revolving Loans, the
Term Loan, the Equipment Loans and all other Loans under this Agreement shall
constitute one Loan, and all Indebtedness and other Liabilities of the Loan
Parties to Lender under this Agreement and any of the Related Agreements shall
constitute one general obligation secured by Lender's Lien on all of the
Collateral and Third Party Collateral and by all other Liens heretofore, now, or
at any time or times hereafter granted by the Loan Parties or any other Obligor
to Lender. The Loan Parties agree that all of the rights of Lender set forth in
this Agreement shall apply to any modification of or supplement to this
Agreement, any Supplements or Exhibits hereto, and the
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Related Agreements, unless otherwise agreed in writing.
MAKING OF PAYMENTS; APPLICATION OF COLLECTIONS; CHARGING OF ACCOUNTS.
(a) All payments hereunder (including payment of reimbursement
obligations and payments with respect to any Note) shall be made
without set-off or counterclaim and shall be made to Lender in
immediately available funds (except as Lender may otherwise consent)
prior to 12:30 p.m., Chicago time, on the date due at its office at 231
South LaSalle Street, Chicago, Illinois 60697, or at such other place
as may be designated by Lender to Holdings in writing. Any payments
received after such time shall be deemed received on the next Business
Day (except to the extent provided, and for the purpose, set forth, in
the last sentence of paragraph (b) below).
(a) Prior to the delivery of an Activation Notice by Lender, Borrowers
will apply amounts received by Borrowers from the collection of items
of payment and proceeds of any Collateral or Third Party Collateral as
follows, and, following the delivery of an Activation Notice by Lender
and until such Activation Notice is rescinded, Borrowers authorize
Lender, and Lender will, subject to the provisions of this paragraph
(b), apply amounts received by Lender (whether deposited in the
Assignee Deposit Accounts of Borrowers or otherwise received by Lender)
from the collection of items of payment and proceeds of any Collateral
or Third Party Collateral, (whether received upon any sale or other
disposition of Collateral or Third Party Collateral by Lender or
otherwise) as follows:
(i) so long as no Event of Default exists, (A) in the case of
proceeds of Collateral or Third Party Collateral consisting of
Equipment (other than Equipment financed with the proceeds of
Equipment Loans and other than proceeds from any sale of
obsolete or unuseful Equipment having a market value of Fifty
Thousand Dollars ($50,000) or less), to the prepayment of the
outstanding principal installments of the Term Loan, in the
inverse order of their maturities, (B) in the case of proceeds
of Collateral consisting of Equipment financed with the
proceeds of Equipment Loans
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(other than proceeds from any sale of obsolete or unuseful
Equipment having a market value of Fifty Thousand Dollars
($50,000) or less), to the prepayment of the outstanding
principal installments of the Equipment Loans to the
applicable Borrower, in the inverse order of their maturities,
and (C) following the delivery of an Activation Notice by
Lender and until such Activation Notice is rescinded, in the
case of collections of items of payment and other proceeds of
Collateral and Third Party Collateral other than Equipment, to
the repayment of outstanding Revolving Loans of the Borrower
which owns such Collateral (or, in the case of Third Party
Collateral, to the repayment of outstanding Revolving Loans of
either Borrower as Lender may determine) or if no Revolving
Loans are outstanding, to the prepayment of the outstanding
principal installments of the Term Loan, in the inverse order
of their maturities, or, with the consent of Lender, as
instructed by Holdings (but subject to the provisions of this
Agreement); provided, however, that in the case of any
prepayment or repayment under this clause (i), if the amount
of Reference Rate Loans then outstanding is not sufficient to
satisfy the entire prepayment or repayment requirement, then
Borrowers may hold any amounts which would otherwise be
applied to prepay or repay Eurodollar Rate Loans on a day
other than the last day of the Interest Period therefor until
the end of such Interest Period at which time such amounts
will be applied to prepay or repay such Eurodollar Rate Loans;
and
(i) during the continuance of an Event of Default, against the
Liabilities, whether or not then due, in such order of
application as Lender may determine, unless such payments or
proceeds are, in Lender's discretion, released to Borrowers;
provided, however, that, prior to the delivery of an Activation Notice by
Lender, all payments by Borrowers to Lender under this paragraph (b) shall be
made in immediately available funds in accordance with Section 2.14(a) and,
following the delivery of an Activation Notice and until such Activation Notice
is rescinded, no checks, drafts or other instruments received by Lender under
this paragraph (b) shall constitute final payment to Lender
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unless and until such item of payment has actually been collected. Prior to the
delivery of an Activation Notice by Lender, and so long as no Event of Default
shall have occurred and be continuing, all amounts received by Lender (whether
deposited in the Assignee Deposit Accounts of Borrowers or otherwise received by
Lender) from the collection of items of payment and proceeds of any Collateral
or Third Party Collateral shall be deposited by Lender in the applicable
Borrower's Demand Deposit Account as and when such amounts become available
funds; provided that such Borrower shall apply such amounts towards payment of
the Liabilities in the manner provided in the preceding clause (i), to the
extent applicable. Following the delivery of an Activation Notice by Lender and
until such Activation Notice is rescinded, all items or amounts which are
delivered to Lender by or on behalf of either Borrower or any other Obligor or
any Account Debtor on account of partial or full payment or otherwise as
proceeds of any of the Collateral or Third Party Collateral (including any items
or amounts which may have been deposited to any Assignee Deposit Account) may
from time to time in Lender's sole and absolute discretion be released to
Borrowers or may be applied by Lender towards payment of the Liabilities,
whether or not then due, in the manner provided in the preceding clauses (i) and
(ii), as applicable. Notwithstanding anything to the contrary herein, following
the delivery of an Activation Notice by Lender and until such Activation Notice
is rescinded, (i) all cash, checks, instruments and other items of payment,
solely for purposes of determining the occurrence of an Event of Default, shall
be deemed received upon actual receipt by Lender, unless the same is
subsequently dishonored for any reason whatsoever, (ii) for purposes of
determining whether, under Section 2.1 and Section 2.6, respectively, there is
availability for Revolving Loans or Letters of Credit, all cash, checks,
instruments and other items of payment shall be applied against the Liabilities
on the first Business Day after receipt thereof by Lender and (iii) solely for
purposes of interest calculation hereunder, all cash, checks, instruments and
other items of payment shall be deemed to have been applied against the
Liabilities on the next Business Day after Lender receives immediately available
funds with respect thereto or two (2) Business Days after Lender receives funds
other than immediately available funds with respect thereto, whichever the case
may be. Lender reserves the right to deliver an Activation Notice at any time
following the occurrence of an Event of Default; provided, that an Activation
Notice shall
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automatically be rescinded upon the cure of all Events of Default giving rise
thereto and, at Lender's sole election, may be rescinded upon Lender's waiver of
such Events of Default.
(a) Each Borrower hereby authorizes Lender, and Lender may, in its sole
and absolute discretion, charge to such Borrower at any time when due
all or any portion of any of the Liabilities (and interest, if any,
thereon) including but not limited to any Attorneys' Fees and other
costs and expenses of Lender for which such Borrower is liable pursuant
to the terms of this Agreement or any Related Agreement, by charging
such Borrower's Demand Deposit Account or any other bank account of
such Borrower with Lender; provided, however, that with respect to
Attorneys' Fees, prior to the occurrence of an Event of Default, Lender
shall provide Holdings with a reasonably detailed invoice for such
Attorneys' Fees at least five (5) Business Days prior to charging such
Attorneys' Fees to any such Demand Deposit Account or other bank
account; provided, further, that the provisions of this Section 2.14(c)
shall not affect either Borrower's obligation to pay when due all
amounts payable by such Borrower under this Agreement, any Note or any
Related Agreement, whether or not there are sufficient funds therefor
in such Borrower's Demand Deposit Account or any such other bank
account of such Borrower.
LENDER'S ELECTION NOT TO ENFORCE. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this Section 2, but no such
suspension or failure to enforce shall impair any right or power of Lender
under this Agreement, including, without limitation, any right of Lender to
refrain from making a Loan or issuing a Letter of Credit if all conditions
precedent to Lender's obligation to making such Loan or issuing such Letter of
Credit have not been satisfied.
REAFFIRMATION. Each request by Holdings, on behalf of either
Borrower, for a Loan or Letter of Credit pursuant to this Agreement shall
constitute an automatic certification by the Loan Parties to Lender that (i)
all of the representations and warranties of the Loan Parties in this Agreement
and each of the Related Agreements are true and correct in all material
respects
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on the date of such request to the same extent as if made on such date, except
for such changes as are specifically permitted hereunder (or under such Related
Agreement) and (ii) immediately before and after making the requested Loan or
issuing the requested Letter of Credit, no Event of Default, or Unmatured Event
of Default, then exists or would result therefrom.
SETOFF. In addition to and not in limitation of all other
rights and remedies (including other rights of offset or banker's lien) that
Lender or any other holder of any Note may have under applicable law, Lender or
such other holder shall, upon the occurrence of any Event of Default described
in Section 6.1, or any Unmatured Event of Default described in Section 6.1(f),
have the right to appropriate and apply to the payment of the Liabilities
(whether or not then due), in such order of application as Lender or such other
holder may elect, any and all balances, credits, deposits (general or special,
time or demand, provisional or final), accounts or moneys of any Loan Party
then or thereafter with Lender or such other holder. Lender shall promptly
advise Holdings of any such setoff and application but failure to do so shall
not affect the validity of such setoff and application.
INCREASED COSTS. If any Regulatory Change imposes, modifies or
deems applicable any capital adequacy, capital maintenance or similar
requirement (including a request or requirement which affects the manner in
which Lender allocates capital resources to its commitments, including its
commitments thereunder) and as a result thereof, in the reasonable opinion of
Lender, the rate of return on Lender's capital as a consequence of its
commitments or Loans, or the issuance of any Letter of Credit hereunder, is
reduced to or a level below that which Lender could have achieved but for such
circumstances, then and in each such case upon notice from time to time by
Lender to Holdings, Borrowers shall pay to Lender such additional amount or
amounts as shall compensate Lender for such reduction in its rate of return
(herein such additional amounts being collectively called "Compensatory
Amount"); provided that (a) each Compensatory Amount shall be reduced to the
extent, if any, that Lender increases the Reference Rate in order to recover
all or part of the increased costs which are imposed by such Regulatory Change
and (b) in determining any increased expense, reduction in rate of return on
capital or reduction in an amount received, Lender shall act reasonably and in
good faith and will, to the
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extent the increased costs or reductions in amounts received or receivable
relate to Lender's loans and commitments in general and are not specifically
attributable to the Loans and commitments hereunder, use averaging and
attribution methods which are reasonable and which cover all loans similar to
the Loans made by Lender whether or not the loan documentation for such other
loans permits the Lender to receive increased costs of the type described in
this Section 2.18. Such notice shall contain a statement of Lender as to any
such additional amount or amounts (including calculations thereof in reasonable
detail) which shall, in the absence of manifest error, be conclusive evidence of
the matters stated therein and be binding upon Borrowers.
BORROWING ELECTIONS. At the election of Holdings, on behalf of the
applicable Borrower, pursuant to a Borrowing Request delivered pursuant to
Section 2.9, Loans comprising any borrowing may be made as Reference Rate Loans
or Eurodollar Rate Loans. Each Borrowing Request shall be irrevocable and
binding upon Borrowers.
CONTINUATION AND CONVERSION ELECTIONS. At the election of
Holdings, on behalf of the applicable Borrower, pursuant to a
Continuation/Conversion Notice delivered by either (1) delivering or
telecopying to Lender a Continuation/Conversion Notice or (2) giving telephonic
notice thereof to Lender, in each case at or before 10:00 a.m., Chicago time
(and, in the case of any such telephonic notice, promptly confirming such
notice by delivering or telecopying a Continuation/Conversion Notice therefor,
signed by an authorized officer of Holdings, to Lender), on any Business Day,
Holdings, on behalf of the applicable Borrower, may elect, from time to time on
not less than 3 nor more than 5 prior Business Days' notice:
(a) that all, or any portion in an aggregate minimum
amount of $1,000,000 and an integral multiple of $500,000 in excess of
such amount, of the Revolving Loans or the Equipment Loans to such
Borrower or, in the case of CMC Mississippi, the Term Loan, be
converted from Reference Rate Loans into Eurodollar Rate Loans or,
subject to the parenthetical at the end of clause (b) below and Section
2.25, from Eurodollar Rate Loans into Reference Rate Loans; and
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(b) on the expiration of the Interest Period applicable to
the Eurodollar Rate Loans comprising all or part of the Revolving
Loans or the Equipment Loans to such Borrower or, in the case of CMC
Mississippi, the Term Loan, that all, or any portion in an aggregate
minimum amount of $1,000,000 and an integral multiple of $500,000 in
excess of such amount, of such Loans be continued as Eurodollar Rate
Loans (in the absence of delivery of such notice under either this
clause (b) or clause (a) above, such Borrower will be deemed to have
elected that such Eurodollar Rate Loans be converted into Reference
Rate Loans);
provided that:
(i) no portion of the outstanding principal amount
of any Loans may be continued as, or be converted into,
Eurodollar Rate Loans when any Event of Default has occurred
and is continuing;
(ii) no portion of the outstanding principal amount
of any Loans may be continued as, or be converted into,
Eurodollar Rate Loans if, after giving effect to such action,
the Interest Period applicable thereto shall extend beyond
the date of any scheduled repayment of Loans unless a
sufficient principal amount of such Loans is being maintained
as Reference Rate Loans or Eurodollar Rate Loans having an
Interest Period ending on or prior to the date of any such
scheduled repayment to permit such repayment to be applied in
full to Reference Rate Loans; and
(iii) no portion of the outstanding principal amount
of any Loans may be continued as, or converted into,
Eurodollar Rate Loans or Reference Rate Loans if, after
giving effect to such action, the aggregate principal amount
of any Eurodollar Rate Loans having a particular Interest
Period is less than $1,000,000 or not an integral multiple of
$500,000.
FUNDING. In the event Holdings, on behalf of the applicable Borrower,
elects to obtain any Loans as Eurodollar Rate Loans pursuant to Section 2.19,
or elects to continue or convert any portion of the principal amount of any
Reference Rate Loans to Eurodollar Rate Loans pursuant to Section 2.20, Lender
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may, if it so elects, fulfill its obligation to make or continue any portion of
the principal amount of any Loan as, or to convert any portion of the principal
amount of any Loan into, a Eurodollar Rate Loan in accordance with any election
made by Holdings on behalf of such Borrower by causing a foreign branch or
Affiliate of Lender or an international banking facility created by Lender to
make such Eurodollar Rate Loan; provided that in such event such Eurodollar Rate
Loan shall be deemed to have been made by Lender, and the obligation of such
Borrower to repay such Eurodollar Rate Loan shall nevertheless be to Lender and
shall be deemed to be held by it, to the extent of such Eurodollar Rate Loan,
for the account of such foreign branch, Affiliate or international banking
facility. In addition, the Loan Parties hereby consent and agree that, for
purposes of any determination to be made for purposes of this Agreement
(including Sections 2.22, 2.23, 2.24 and 2.25.)), it shall be conclusively
assumed that Lender elected to fund all Eurodollar Rate Loans by purchasing
Dollar deposits in its Eurodollar Office's interbank eurodollar market.
EURODOLLAR RATE LENDING UNLAWFUL. If, as the result of any
Regulatory Change, Lender shall determine (which determination shall be
conclusive and binding on the Loan Parties) that it is unlawful for Lender to
make, continue, or maintain any Loan as, or to convert any Loan into, a
Eurodollar Rate Loan, the obligations of Lender to make, continue, or maintain,
as the case may be, any portion of the principal amount of any Loans as, or to
convert any Loans into, Eurodollar Rate Loans shall, upon such determination
(and telephonic notice thereof confirmed in writing to Holdings), forthwith be
suspended (but only to the extent unlawful) until Lender shall notify Holdings
that the circumstances causing such suspension no longer exist, and all
Eurodollar Rate Loans shall automatically convert into Reference Rate Loans.
EURODOLLAR DEPOSITS UNAVAILABLE. If prior to the date on which
all or any portion of the principal amount of any Loan is to be made or
continued as, or be converted into, Eurodollar Rate Loans, Lender shall have
determined (and telephonic notice thereof, confirmed in writing, shall have
been given to Holdings) that:
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to Lender in the
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interbank eurodollar market; or
(b) by reason of circumstances affecting the interbank
eurodollar market, adequate means do not exist for ascertaining the
interest rate applicable hereunder to such Eurodollar Rate Loan,
then, the obligations of Lender under Sections 2.19 and 2.20 to make or
continue any portion of the principal amount of any Loans as, or to convert any
Loans into, Eurodollar Rate Loans shall forthwith be suspended until Lender
shall notify Holdings that the circumstances causing such suspension no longer
exist.
INCREASED EURODOLLAR RATE LOAN COSTS, ETC. Borrowers agree to
reimburse Lender for any increase in the cost to Lender of making, continuing
or maintaining (or of its obligation to make, continue or maintain) any portion
of the principal amount of any of its Loans as, or of converting (or of its
obligation to convert) any portion of the principal amount of any of its Loans
into, Eurodollar Rate Loans and for any reduction in the amount of any sum
receivable by Lender hereunder in respect of making, continuing or maintaining
any portion of the principal amount of any of its Loans as, or converting any
portion of the principal amount of any Loans into, Eurodollar Rate Loans, which
increased cost or reduced amount (a) results from a Regulatory Change and (b)
is not attributable to Excluded Taxes applicable to Lender, in each case
imposed by the jurisdiction under the laws of which it is constituted or in
which it is doing business or, a Tax of any jurisdiction imposed by withholding
with respect to a payment hereunder. In any such event, Lender shall promptly
notify Holdings thereof, stating the reasons therefor and the additional amount
required fully to compensate Lender for such increased costs or reduced amount.
Such additional amounts shall be payable in full on the earlier of each
interest payment date occurring after they have accrued and on demand. A
statement as to any such increased cost or reduced amount or any change therein
(including calculations thereof in reasonable detail) shall be submitted by
Lender to Holdings and shall, in the absence of manifest error, be conclusive
and binding on Borrowers; provided that Borrowers shall not be liable in
respect of any such increased cost or reduced amount as to which Lender became
aware and failed to notify Holdings promptly if and to the extent that prompt
notice could have avoided or materially lessened payment by Borrowers
hereunder.
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FUNDING LOSSES. In the event Lender shall incur any loss or expense
(including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Lender to make, continue,
or maintain any portion of the principal amount of any Loan as, or to convert
any portion of the principal amount of any Loan into, a Eurodollar Rate Loan)
as a result of:
(a) repayment or prepayment of the principal amount of any Eurodollar
Rate Loans on a date other than the scheduled last day of the Interest
Period applicable thereto;
(a) any conversion of all or any portion of the outstanding principal
amount of any Eurodollar Rate Loans to Reference Rate Loans pursuant to
2.20 or 2.22 prior to the expiration of the Interest Period then
applicable thereto;
(a) any Loans not being made as Eurodollar Rate Loans in accordance
with the Borrowing Request therefor, unless pursuant to Section 2.22 or
2.23; or
(a) any Loans not being continued as, or converted into, Eurodollar
Rate Loans in accordance with the Continuation/Conversion Notes given
therefor, unless pursuant to Section 2.22 or 2.23, then, upon the
request of Lender to Holdings, Borrowers shall pay to Lender such
amount as will (in the reasonable determination of Lender) reimburse
Lender for such loss or expense. A statement as to any such loss or
expense (including calculations thereof in reasonable detail) shall be
submitted by Lender to Holdings and shall, in the absence of manifest
error, be conclusive and binding on Borrowers. Any payment required
under this section 2.25 shall not constitute a premium or penalty under
any circumstances.
HOLDINGS AS AGENT FOR BORROWERS . Each Borrower hereby
designates Holdings as its representative and agent on its behalf for the
purposes of issuing Borrowing Requests and Continuation/Conversion Notices,
giving instructions with respect to the disbursement of the proceeds of the
Loans, selecting interest rate options, requesting Letters of Credit, giving
and receiving notice and consents hereunder or under any of the other Related
Agreements and taking any other action (including in
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respect of compliance with covenants) which Holdings is required or permitted to
undertake on behalf of any Borrower or Borrowers pursuant to this Agreement and
the other Related Agreements. Holdings hereby accepts such appointment. Lender
may regard any notice or other communication pursuant to this Agreement and the
other Related Agreements from Holdings as a notice or communication from
Borrowers. Each Borrower agrees that each notice, election, representation and
warranty, covenant, agreement and undertaking made on its behalf by Holdings
shall be deemed for all purposes to have been made by such Borrower and shall be
binding upon and enforceable against such Borrower to the same extent as if the
same had been made directly by such Borrower.
COLLATERAL.
GRANT OF SECURITY INTEREST. As security for the payment of all Loans
now or hereafter made by Lender to Borrowers hereunder or under any Note, and
as security for the payment or other satisfaction of all other Liabilities
(including, without limitation, all reimbursement obligations under any Letters
of Credit), each Borrower hereby grants to Lender, and CMC Mississippi
reaffirms its grant to Lender under the original Loan Agreement of, a security
interest in and to the following property of such Borrower, whether now owned
or existing, or hereafter acquired or coming into existence, wherever now or
hereafter located (all such property is hereinafter referred to collectively as
the "Collateral"):
(a) All Accounts Receivable (whether or not Eligible Accounts
Receivable);
(a) All Equipment and Fixtures;
(a) All Inventory (whether or not Eligible Inventory);
(a) All General Intangibles;
(a) All Contract Rights and documents of title;
(a) All chattel paper and instruments evidencing, arising out of or
relating to any obligation to such Borrower for goods or inventory sold
or leased or services rendered, or otherwise arising out of or relating
to any property
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described in clause (a) through clause (e) above;
(a) Any and all balances, credits, deposits (general or special, time
or demand, provisional or final), accounts or monies of or in the name
of such Borrower now or hereafter with Lender and any and all property
of every kind or description of or in the name of such Borrower now or
hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, or standing to such Borrower's credit on
the books of, Lender, any agent or bailee for Lender, or any
Participant;
(a) All interest of such Borrower in any goods or inventory the sale or
lease of which shall have given or shall give rise to, and in all
guaranties and other property securing the payment of or performance,
under any Accounts Receivable, Contract Rights, General Intangibles or
any chattel paper or instruments referred to in clause (f) above;
(a) Any and all other property of such Borrower, of any kind or description
(including but not limited to real estate of such Borrower), subject to a
separate mortgage, pledge or security interest in favor of Lender or in which
Lender now or hereafter has or acquires a security interest securing any
Liabilities, whether pursuant to a written agreement or instrument other than
this Agreement or otherwise;
(b)
(c) All replacements, substitutions, additions or accessions to or for
any of the foregoing;
(a) To the extent related to the property described in clauses (a)
through (j) above, all books, correspondence credit files, records,
invoices and other papers and documents, including, without limitation,
to the extent so related, all tapes, cards, computer runs, computer
programs and other papers and documents in the possession or control of
such Borrower or any computer bureau from time to time acting for such
Borrower, and, to the extent so related, all rights in, to and under
all policies of insurance, including claims of rights to payments
thereunder and proceeds therefrom, including any credit insurance; and
(a) All products and proceeds (including but not limited to
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any Accounts Receivable or other proceeds arising from the sale or
other disposition of any Collateral, any returns of any Equipment or
Inventory sold by such Borrower, and the proceeds of any insurance
covering any of the Collateral) of any of the foregoing and all blocked
accounts and similar accounts into which such proceeds may be
deposited.
ACCOUNTS RECEIVABLE.
(a) Each Borrower shall advise Lender promptly of any dispute or claim
by any Account Debtor of such Borrower not arising in the ordinary
course of such Borrower's business as conducted by it on the Closing
Date in which the amount thereof exceeds One Hundred Thousand Dollars
($100,000). Each Borrower further shall advise Lender promptly when any
Inventory of such Borrower with a value in excess of $100,000 is
returned by or repossessed from any Account Debtor or otherwise
recovered by such Borrower other than in the ordinary course of such
Borrower's business as conducted by it on the Closing Date. Each
Borrower further agrees that no discount or credit allowance shall be
granted by such Borrower to any Account Debtor hereafter other than in
the ordinary course of such Borrower's business as conducted by it on
the Closing Date. All Account Debtor payments and all net amounts
received by Lender in settlement, adjustment or liquidation of any
Account Receivable of either Borrower may be applied by Lender to such
Borrower's Liabilities or credited to such Borrower's Demand Deposit
Account (subject to collection) with Lender, as Lender may deem
appropriate, as more fully described in Section 2.14. Each Borrower
will make proper entries in its books and records, disclosing the
assignment of Accounts Receivable to Lender.
(a) Each Borrower warrants that: (i) to the best of such Borrower's
knowledge, all of the Accounts Receivable of such Borrower are and will
continue to be bona fide existing obligations created by the sale of
goods, the rendering of services, or the furnishing of other good and
sufficient consideration to Account Debtors in the regular course of
business; (ii) all shipping or delivery receipts and other documents
furnished or to be furnished to Lender in connection therewith are and
will be genuine and (iii) to the best of such Borrower's knowledge,
none of the Accounts Receivable of such Borrower identified or included
on any
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schedule, Borrowing Base Certificate or report as Eligible Accounts
Receivable or Eligible Inventory fail at the time so identified or
included to satisfy any of the requirements for eligibility set forth
in the definition of Eligible Accounts Receivable or Eligible
Inventory, as applicable.
(a) Lender is authorized and empowered (which authorization and power,
being coupled with an interest, is irrevocable until the last to occur
of termination of this Agreement and payment and performance in full of
all of the Liabilities under this Agreement) at any time in its sole
and absolute discretion:
(1) To request, in Lender's name, the applicable Borrower's
name or the name of a third party, confirmation from any
Account Debtor or party obligated under or with respect to any
Collateral of the amount shown by the Accounts Receivable or
other Collateral to be payable, or any other matter stated
therein;
(1) After the occurrence and during the continuance of an
Event of Default, to notify, either in Lender's name or the
applicable Borrower's name, and/or to require such Borrower to
notify, any Account Debtor or other Person obligated under or
in respect of any Collateral owned by such Borrower, of the
fact of Lender's Lien thereon and of the collateral assignment
thereof to Lender;
(1) To require the applicable Borrower to direct or, after the
occurrence and during the continuance of an Event of Default,
to direct, either in Lender's name or the applicable
Borrower's name, any Account Debtor or other Person obligated
under or in respect of any Collateral owned by such Borrower
to make payment directly to Lender of any amounts due or to
become due thereunder or with respect thereto; and
(1) From and after the occurrence of, and during the
continuation of, an Event of Default, to demand, collect,
surrender, release or exchange all or any part of any
Collateral or any amounts due thereunder or with respect
thereto, or compromise or extend or renew for any period
(whether or not longer than the initial
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period) any and all sums which are now or may hereafter become
due or owing upon or with respect to any of the Collateral, or
enforce, by suit or otherwise, payment or performance of any
of the Collateral either in Lender's own name or in the name
of the applicable Borrower.
Under no circumstances shall Lender be under any duty to act in regard
to any of the foregoing matters. The costs relating to any of the
foregoing matters, including Attorneys' Fees and out-of-pocket
expenses, and the cost of any Assignee Deposit Account or other bank
account or accounts which may be required hereunder, shall be borne
solely by Borrowers whether the same are incurred by Lender or
Borrowers, and Lender may advance same to Borrowers as a Revolving
Loan.
(d) Unless otherwise consented to by Lender, each Borrower
will, forthwith upon receipt by such Borrower of all checks, drafts,
cash and other remittances in payment or as proceeds of, or on account
of, any of the Accounts Receivable or other Collateral owned by such
Borrower, deposit the same in a special bank account (such Borrower's
"Assignee Deposit Account") with Lender or such other bank or
financial institution as Lender shall consent, over which Lender alone
has power of withdrawal, and will, to the extent required by Lender,
designate with each such deposit the particular Account Receivable or
other item of Collateral upon which the remittance was made. Each
Borrower acknowledges that the maintenance of such Borrower's Assignee
Deposit Account is solely for the convenience of Lender in
facilitating its own operations and such Borrower does not and shall
not have any right, title or interest in such Borrower's Assignee
Deposit Account or in the amounts at any time appearing to the credit
thereof. Said proceeds shall be deposited in precisely the form
received except for such Borrower's endorsement where necessary to
permit collection of items, which endorsement such Borrower agrees to
make. Pending such deposit, each Borrower agrees not to commingle any
such checks, drafts, cash and other remittances with any of its funds
or property, but will hold them separate and apart there from and upon
an express trust for Lender until deposit thereof is made in such
Borrower's Assignee Deposit Account. Upon
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the full and final liquidation of all Liabilities, Lender will pay over
to the applicable Borrower any excess amounts received by Lender as
payment or proceeds of Collateral owned by such Borrower, whether
received by Lender as a deposit in such Borrower's Assignee Deposit
Account or received by Lender as a direct payment on any of the sums
due hereunder.
(e) Each Borrower appoints Lender, or any Person whom Lender
may from time to time designate, as such Borrower's attorney and
agent-in-fact with power: (i) from and after the occurrence of, and
during the continuation of, any Event of Default, to notify the post
office authorities to change the address for delivery of such
Borrower's mail to an address designated by Lender and to receive,
open and dispose of all mail addressed to such Borrower; (ii) to send
requests for verification of Accounts Receivable or other Collateral
to Account Debtors; (iii) to open an escrow account or Assignee
Deposit Account under Lender's sole control for the collection of
Accounts Receivable or other Collateral, if not required
contemporaneously with the execution hereof and (iv) to do all other
things which Lender is permitted to do under this Agreement or any
Related Agreement or which are necessary to carry out this Agreement
and the Related Agreements. Neither Lender nor any of its directors,
officers, employees or agents will be liable for any acts of
commission or omission nor for any error in judgment or mistake of
fact or law, unless the same shall have resulted from gross negligence
or willful misconduct. The foregoing appointment and power, being
coupled with an interest, is irrevocable until all Liabilities under
this Agreement are paid and performed in full and this Agreement is
terminated. Each Borrower expressly waives presentment, demand, notice
of dishonor and protest of all instruments and any other notice to
which it might otherwise be entitled.
(f) If either Borrower hereafter enters into any contract
with the United States or any department, agency, or instrumentality
thereof, pursuant to which an Account Receivable, Contract Right or
General Intangible has arisen or may arise, such Borrower will
promptly notify Lender in writing thereof, and if thereafter requested
by Lender, such Borrower will execute any instruments and take any
steps
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required by Lender in order that all monies due and to become due under
such contract shall be assigned to Lender and notice thereof given to
the government under the Federal Assignment of Claims Act of 1940, as
amended or other applicable laws or regulations.
(g) If any Account Receivable or Contract Right of either
Borrower is evidenced by chattel paper or promissory notes, trade
acceptances, or other instruments for the payment of money, such
Borrower will, unless Lender shall otherwise agree, deliver the
originals of same to Lender, appropriately endorsed to Lender's order
and, regardless of the form of such endorsement, such Borrower hereby
expressly waives presentment, demand, notice of dishonor, protest and
notice of protest and all other notices with respect thereto.
INVENTORY.
(a) Unless Lender shall otherwise agree, if either Borrower sells
Inventory for cash, all full and partial payments therefor shall be
immediately delivered by such Borrower to Lender in their original form
for deposit in such Borrower's Assignee Deposit Account or for other
application to reduction of the Liabilities. All such cash shall be
held by each Borrower in trust for Lender and shall be remitted to
Lender not later than the end of the day received, or at such other
time as Lender may designate.
(a) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed
by or for it, to any warehouseman, or under any other circumstances.
Lender shall not be responsible for collection of any proceeds or for
losses in collected proceeds held by either Borrower in trust for
Lender. Any and all risk of loss for any or all of the foregoing shall
be upon Borrowers, except for such loss as shall result from Lender's
gross negligence or willful misconduct.
(a) If requested by Lender, each Borrower shall, upon acquiring an
interest in any Inventory, deliver to Lender schedules of such
Inventory, together with supplier's invoices, warranties, production,
cost and other records as Lender may request. If requested by Lender,
each Borrower
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shall deliver to Lender schedules of the sale of any Inventory
immediately upon its sale. Any material change in the value or
condition of any Inventory, and any errors discovered in schedules
delivered to Lender, shall be reported to Lender immediately. Each
Borrower confirms that the warranties and representations in this
Agreement shall apply to each schedule. Each Borrower represents and
warrants that, as to each schedule of such Borrower's Inventory
delivered to Lender:
(1) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any
attachment thereto, are true and correct in all material
respects;
(1) None of the goods are defective, of second quality, used,
or goods returned after shipment, except where described as
such; and
(1) All Inventory not included on such schedule has been
previously scheduled.
EQUIPMENT.
(a) Borrowers shall at all times keep the Equipment in good operating
condition and repair, ordinary wear and tear excepted, and Borrowers
shall not, without the prior written consent of Lender, sell, lease, or
otherwise dispose of any Equipment, or any part thereof or interest
therein; provided, however, that without Lender's consent Borrowers may
dispose of obsolete or unuseful Equipment in the ordinary course of
their respective businesses as conducted by Borrowers on the Closing
Date provided that (i) the Equipment disposed of by Borrowers in any
Fiscal Year has an aggregate market value of Five Hundred Thousand
Dollars ($500,000) or less, (ii) Borrowers provide Lender, at least
annually, with a schedule of all such dispositions in each Fiscal Year
and (iii) no Event of Default then has occurred which is continuing.
(a) In the event any Equipment is sold, transferred or otherwise
disposed of, unless Lender shall agree otherwise, the applicable
Borrower shall deliver all of the proceeds of any such sale, transfer
or disposition to Lender, which
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proceeds shall be deposited in such Borrower's Assignee Deposit Account
or otherwise applied to the repayment of the Liabilities in the manner
provided in Section 2.14(b).
(a) Each Borrower will, upon request of Lender, submit to Lender a
current listing of all of such Borrower's Equipment, which listing
shall indicate, to the extent practicable, the type, model, serial
number and location of such Equipment.
SUPPLEMENTAL DOCUMENTATION. At Lender's request, the Loan Parties shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral (all the above hereinafter referred to as "Supplemental
Documentation"), in form and substance acceptable to Lender, and pay all taxes,
fees and other costs and expenses associated with any recording or filing of the
Supplemental Documentation. Each Borrower hereby irrevocably makes, constitutes
and appoints Lender (and all Persons designated by Lender for that purpose) as
such Borrower's true and lawful attorney (and agent-in-fact) (which appointment
and power, being coupled with an interest, is irrevocable until the last to
occur of termination of this Agreement and payment and performance in full of
all of the Liabilities under this Agreement) to sign the name of such Borrower
on any of the Supplemental Documentation and to deliver any of the Supplemental
Documentation to such Persons as Lender in its sole and absolute discretion, may
elect. Each Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
REPRESENTATIONS AND WARRANTIES. To induce Lender to make Loans to
Borrowers under this Agreement, the Loan Parties jointly and severally make the
following representations and warranties, all of which shall be true and
correct in all material respects as of the Closing Date (after giving effect to
the transactions contemplated hereby) and shall survive the execution of this
Agreement and the Closing Date:
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ORGANIZATION. Holdings and all of its corporate Subsidiaries
are corporations duly organized, validly existing and in good standing under
the laws of the jurisdiction of their respective incorporation. All of Holdings
other Subsidiaries, if any, are entities duly organized, validly existing and
in good standing under the laws of the jurisdictions of their respective
organization. Holdings and all of its Subsidiaries are in good standing and are
duly qualified to do business in each jurisdiction where, because of the nature
of their respective activities or properties, such qualification is required,
except where such failure to be so qualified would not have a material adverse
effect on the business, operations or financial condition of any Loan Party. On
the date hereof, Holdings and each Subsidiary conducts business in its own name
exclusively. Each Borrower is a direct wholly-owned Subsidiary of Holdings.
Schedule 4.1 sets forth a complete and accurate list, as of the date of this
Agreement, of (a) the state or other jurisdiction of formation of each Loan
Party, (b) each state in which each Loan Party is qualified to do business and
(c) all of each Loan Party's trade names, trade styles or doing business forms.
AUTHORIZATION. Each Loan Party is duly authorized to execute
and deliver this Agreement, any Note(s), and any Related Agreements or
Supplemental Documentation contemplated by this Agreement to which such Loan
Party is a party, and is and will continue to be duly authorized to borrow
monies hereunder and to perform its obligations under this Agreement, any Notes
and any such Related Agreements and Supplemental Documentation to which such
Loan Party is a party. The execution, delivery and performance by each Loan
Party of this Agreement, any Note(s), and any Related Agreements or
Supplemental Documentation contemplated by this Agreement to which such Loan
Party is a party, and the borrowings hereunder, do not and will not require any
consent or approval of any governmental agency or authority.
NO CONFLICTS. The execution, delivery and performance by each
Loan Party of this Agreement, any Note(s), and any Related Agreements or
Supplemental Documentation contemplated by this Agreement to which such Loan
Party is a party do not and will not conflict with (i) any provision of law,
(ii) the Certificate of Incorporation or by-laws of such Loan Party, (iii) any
material agreement binding upon such Loan Party or (iv) any court or
administrative order or decree applicable to such Loan Party, and do not and
will not require, or result in, the creation or
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imposition of any Lien on any asset of such Loan Party or any of its
Subsidiaries except as provided herein.
VALIDITY AND BINDING EFFECT. This Agreement, any Note(s), and
any Related Agreements or Supplemental Documentation contemplated by this
Agreement, when duly executed and delivered will be legal, valid and binding
obligations of each Loan Party which is a party thereto, enforceable against
such Loan Party in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws
of general application affecting the enforcement of creditors' rights or by
general principles of equity limiting the availability of equitable remedies.
NO DEFAULT. Neither Holdings nor any of its Subsidiaries is in
default under any material agreement or instrument to which Holdings or any
such Subsidiary is a party or by which any of their respective properties or
assets is bound or affected, which default might materially and adversely
affect (i) Lender's Lien on or rights with respect to any Collateral or Third
Party Collateral or (ii) the financial condition or operations of Holdings, any
of its Subsidiaries or Holdings and its Subsidiaries taken as a whole. No Event
of Default or Unmatured Event of Default has occurred and is continuing.
FINANCIAL STATEMENTS. Holdings' audited consolidated financial
statements for its Fiscal Year ending July 31, 1995, together with unaudited
consolidating statements for such Fiscal Year, and Holdings' unaudited
consolidated and consolidating financial statements for the portion ending June
30, 1996 of its 1996 Fiscal Year, copies of which have been furnished to
Lender, have been prepared in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding Fiscal Year
and present fairly the financial condition of Holdings and its Subsidiaries as
at such dates and the results of their operations for the periods then ended,
on a consolidated and consolidating basis, subject to year-end audit
adjustments (in the case of unaudited interim financial statements). Holdings'
consolidated and consolidating preliminary pro forma balance sheet and income
statement as of July 31, 1996, copies of which have been furnished to Lender
prior to the date of this Agreement, have been prepared in accordance with
generally accepted accounting principles, as if the transactions contemplated
hereby had occurred as of the date
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of such financial statements, and present fairly on a pro forma basis the Loan
Parties' reasonable estimate of the consolidated and consolidating financial
position and results of operations of Holdings and its Subsidiaries at such date
assuming that the events specified in this paragraph had actually occurred on
such date.
INSURANCE. Schedule 4.7 hereto is a complete and accurate
summary of the property and casualty insurance program carried by Holdings and
its Subsidiaries on the date hereof. Schedule 4.7 includes the insurer'(s')
name(s), the insured(s') name(s), policy number(s), expiration date(s),
amount(s) of coverage, type(s) of coverage, the annual premium(s), Best's
policyholder's and financial size ratings of the insurer(s), exclusions,
deductibles and self-insured retention and describes in detail any
retrospective rating plan, fronting arrangement or any other self-insurance or
risk assumption agreed to by Holdings or any Subsidiary of Holdings or imposed
upon Holdings or any Subsidiary of Holdings by any such insurer. This summary
also includes any self-insurance program that is in effect.
LITIGATION; CONTINGENT LIABILITIES. Except for those referred to
in a Schedule 4.8, no claims, litigation, arbitration proceedings or
governmental proceedings are pending or threatened against or are affecting
Holdings or any Subsidiary of Holdings, the results of which might materially
and adversely affect (i) the financial condition or operations of any Loan
Party or Holdings and its Subsidiaries, taken as a whole or (ii) Lender's
interest in or Lien on any material Collateral or Third Party Collateral. Other
than any liability incident to the claims, litigation or proceedings disclosed
in Schedule 4.8, Schedule 4.19, or Schedule 4.25, or provided for or disclosed
in the financial statements referred to in Section 4.6, neither Holdings nor
any of its Subsidiaries has any contingent liabilities which are material to
any Loan Party or Holdings and its Subsidiaries, taken as a whole.
LIENS. None of the Collateral or other property, revenues or
assets of Holdings or any Subsidiary of Holdings is subject to any Lien
(including but not limited to Liens pursuant to Capitalized Leases under which
Holdings or any Subsidiary of Holdings is a lessee) except: (a) Liens in favor
of Lender; (b) Liens for current Taxes not delinquent or Taxes being contested
in good faith and by appropriate proceedings and as to which such
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reserves or other appropriate provisions as may be required by GAAP are being
maintained; (c) carriers', warehousemen's, mechanics', materialmen's and other
like statutory Liens arising in the ordinary course of business securing
obligations which are not overdue or which are being contested in good faith and
by appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained; (d) Liens disclosed
in the financial statements referred to in Section 4.6; and (e) Liens listed on
Schedule 4.9.
SUBSIDIARIES. As of the date of this Agreement, Holdings has no
Subsidiaries except as listed on Schedule 4.10. Schedule 4.10 sets forth, for
each Subsidiary of Holdings, a complete and accurate statement of (a) Holdings'
and each such Subsidiary's percentage ownership of each of their respective
Subsidiaries, (b) the state or other jurisdiction of formation or incorporation
of each such Subsidiary, (c) each state in which each such Subsidiary is
qualified to do business on the date of this Agreement and (d) all of each such
Subsidiary's trade names, trade styles or doing business forms on the date of
this Agreement.
PARTNERSHIPS; JOINT VENTURES. Except as disclosed on Schedule
4.11, neither Holdings nor any of its Subsidiaries is a partner or joint
venturer in any partnership or joint venture.
BUSINESS AND COLLATERAL LOCATIONS.
(a) On the date hereof the office where each Borrower keeps its
books and records concerning such Borrower's Accounts Receivable
and other Collateral, the location(s) of each Borrower's
manufacturing facility(ies) and each Borrower's chief place of
business and chief executive office, are set forth on Schedule
4.12. Schedule 4.12 also contains a complete and accurate list, as
of the date of this Agreement, of (i) all of each Borrower's
places of business other than that referred to in the first
sentence of this paragraph (a) and (ii) all locations and places
of business of each Subsidiary of each Borrower, if any.
(a) Schedule 4.12 contains a complete and accurate list, as of the
date of this Agreement, of (i) the locations of all of each
Borrower's Inventory, Equipment and Fixtures, (ii) if applicable,
the locations of all Third Party Collateral
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(except any part thereof which prior to the execution of this Agreement
Holdings shall have advised Lender in writing consists of Collateral or
Third Party Collateral, as applicable, normally used in more than one
state) and (iii) if any Inventory, Equipment or other Collateral owned
by either Borrower, or any Third Party Collateral is not in the
possession or control of such Borrower or the owner of such Third Party
Collateral, the name and mailing address of each bailee, processor,
warehouseman or other Person in possession or control thereof.
REAL PROPERTY. Schedule 4.13 contains a complete and accurate list, as
of the date of this Agreement, of (a) the address and legal descriptions of any
real property owned by each Borrower or on which any Fixtures of such Borrower
are located and (b) in the case of Fixtures located on property not owned by
such Borrower, the name(s) and mailing addresses of the record owners of such
property.
ELIGIBILITY OF COLLATERAL. Each Account Receivable or item of Inventory
which the Loan Parties shall, expressly or by implication (by inclusion on a
Borrowing Base Certificate or otherwise), request Lender to classify as an
Eligible Account Receivable or as Eligible Inventory, as applicable, will, as of
the time when such request is made, conform in all respects to the requirements
of such classification set forth in the definition of "Eligible Account
Receivable" or "Eligible Inventory" (as applicable).
CONTROL OF COLLATERAL; LEASE OF PROPERTY. Neither Borrower is now
conducting, or permitting or suffering to be conducted, any activities pursuant
to or in conjunction with which any of the Collateral is now, or will be (while
any Liabilities exist or this Agreement is in effect), in the possession or
control of, any Subsidiary of such Borrower, any Obliger (other than such
Borrower) or any Related Party. Except for Capitalized Leases included on
Schedule 5.15, Schedule 4.15 contains a complete and accurate list of (a) all
leases under which each Borrower or any Subsidiary of such Borrower is the
lessee covering any machinery, equipment or real property used by such Borrower
or any Subsidiary of such Borrower and (b) the name and mailing address of each
lessor or owner of such machinery, equipment or real property.
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PATENTS, TRADEMARKS AND COPYRIGHTS. Each Borrower and each of
its Subsidiaries possesses adequate assets, licenses, patents, patent
applications, copyrights, trademarks, trademark applications, trade styles, and
trade names to continue to conduct its respective business as heretofore
conducted by it, and all such licenses, patents, patent applications,
copyrights, trademarks, trademark applications, trade styles, and trade names
existing on the date hereof and, in the case of patents, trademarks and
copyrights, the date of issuance thereof, are listed on Schedule 4.16.
SOLVENCY. Holdings and each of its Subsidiaries now has capital
sufficient to carry on its respective business and transactions and all
business and transactions in which it is about to engage, and is now solvent
and able to pay its respective debts as they mature, and Holdings and each of
its Subsidiaries now owns property having a value, both at fair valuation and
at present fair salable value, greater than the amount required to pay
Holdings' or such Subsidiary's debts.
CONTRACTS; LABOR MATTERS. As of the date of this Agreement,
except as may be disclosed on Schedule 4.18: (a) neither Holdings nor any
Subsidiary of Holdings is a party to any material contract or agreement, or is
subject to any charge, corporate restriction, judgment, decree or order, which
materially affects its business, property, assets, operations or condition,
financial or otherwise; (b) no labor contract to which Holdings or any
Subsidiary of Holdings is a party or is otherwise subject is scheduled to expire
prior to the Credit Termination Date; (c) neither Holdings nor any Subsidiary of
Borrower has, within the two-year period preceding the date of this Agreement,
taken any action which would have constituted or resulted in a "plant closing"
or "mass layoff" within the meaning of the Federal Worker Adjustment and
Retraining Notification Act of 1988 or any similar applicable federal, state or
local law, and no Loan Party has any reasonable expectation that any such action
is or will be required at any time prior to the Credit Termination Date; (d) (i)
neither Holdings nor any Subsidiary of Holdings is a party to any labor dispute
and (ii) there are no strikes or walkouts relating to any labor contracts to
which Holdings or any Subsidiary of Holdings is a party or is otherwise subject;
and (e) neither Holdings or any Subsidiary of Holdings has entered into any
contract with the United States or any department, agency or instrumentality
thereof pursuant to which an Account
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Receivable, Contract Right or General Intangible has arisen or may arise.
PENSION AND WELFARE PLANS. Except as may be described in
Schedule 4.19, each Pension Plan complies in all material respects with all
applicable statutes and governmental rules and regulations; no Reportable Event
has occurred and is continuing with respect to any Pension Plan; no Loan Party
nor any ERISA Affiliate has withdrawn from any Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 or
4205 of ERISA, respectively; no steps have been instituted to terminate any
Pension Plan; no contribution failure has occurred with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; no
condition exists or event or transaction has occurred in connection with any
Pension Plan or Multiemployer Plan which could result in the incurrence by any
Loan Party, any other Obligor or any ERISA Affiliate of any material liability,
fine or penalty; and neither any Loan Party, nor any other Obligor nor any
ERISA Affiliate is a "contributing sponsor" as defined in Section 4001(a)(13)
of ERISA of a "Single-employer plan" as defined in Section 4001(a)(15) of ERISA
which has two or more contributing sponsors at least two of whom are not under
common control. Except as may be listed in Schedule 4.19, neither Holdings nor
any Subsidiary of Holdings has any contingent liability with respect to any
"employee welfare benefit plans," as such term is defined in Section 3(1) of
ERISA, which covers retired or terminated employees and their beneficiaries.
REGULATION U. No Loan Party is engaged in the business of
purchasing or selling Margin Stock or extending credit to others for the
purpose of purchasing or carrying Margin Stock, and no part of the proceeds of
any borrowing hereunder will be used to purchase or carry any Margin Stock or
for any other purpose which would violate any of the margin regulations of the
Federal Reserve Board.
COMPLIANCE. Holdings and its Subsidiaries are in material
compliance with all statutes, judicial or administrative orders, licenses,
permits, and governmental rules and regulations applicable to them.
TAXES. Each of Holdings and its Subsidiaries has filed any tax
returns which, heretofore, were required to have been filed
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by it and has paid, or made adequate provisions for the payment of, all of its
Taxes which are due and payable, except to the extent that Holdings or such
Subsidiary is contesting such Taxes in good faith and by appropriate proceedings
and Holdings or such Subsidiary has set aside on its books such reserves or
other appropriate provisions therefor as may be required by GAAP. No Loan Party
is aware of any proposed assessment against Holdings or any of its Subsidiaries
for additional Taxes (or any basis for any such assessment) which might be
material to any Loan Party and its Subsidiaries taken as a whole.
INVESTMENT COMPANY ACT REPRESENTATION. No Loan Party is an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
PUBLIC UTILITY HOLDING COMPANY ACT REPRESENTATION. No Loan Party
is 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.
ENVIRONMENTAL SAFETY AND HEALTH MATTERS. Except as may be
disclosed on Schedule 4.25, to the Loan Parties' knowledge, after diligent
inquiry, Holdings and each of its Subsidiaries and each property, operation and
facility that Holdings or any Subsidiary of Holdings may own, operate or
control (i) complies in all material respects with (A) all applicable
Environmental Laws and (B) all applicable Occupational Safety and Health Laws;
(ii) is not subject to any judicial or administrative proceeding alleging the
violation of any Environmental Law or Occupational Safety and Health Law; (iii)
has not received any notice (A) that it may be in violation of any
Environmental Law or occupational Safety and Health Law, (B) threatening the
commencement of any proceeding relating to allegedly unlawful, unsafe or
unhealthy conditions or (C) alleging that it is or may be responsible for any
response, cleanup, or corrective action, including but not limited to any
remedial investigation/feasibility studies, under any Environmental Law or
Occupational Safety and Health Law; (iv) has not received notice that it is the
subject of federal or state investigation evaluating whether any investigation,
remedial action or other response is needed to respond to (A) a spillage,
disposal or release or threatened release into the environment of any Hazardous
Material or (B) any allegedly unsafe or unhealthful
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condition; (v) has not filed any notice under or relating to any Environmental
Law or occupational Safety and Health Law indicating or reporting (A) any past
or present spillage, disposal or release into the environment of, or treatment,
storage or disposal of, any Hazardous Material or (B) any potentially unsafe or
unhealthful condition, and there exists no basis for such notice irrespective of
whether such notice was actually filed; and (vi) has no contingent liability in
connection with (A) any actual, threatened, or potential spillage, disposal or
release into the environment of, or otherwise with respect to, any Hazardous
Material whether on any premises owned or occupied by Holdings or any Subsidiary
or on any other premises or (B) any unsafe or unhealthful condition. Except as
may be disclosed on Schedule 4.25, to the Loan Parties' knowledge, there are no
Hazardous Materials on, in or under any property or facilities owned, operated
or controlled by Holdings or any Subsidiary of Holdings (including but not
limited to such Hazardous Materials that may be contained in underground storage
tanks), but excepting such Hazardous Materials as are used in accordance with
all applicable laws and in the same manner as an ordinary consumer of such
materials.
RELATED AGREEMENTS. All representations and warranties of the Loan
Parties contained in any Related Agreements are true and correct as if made on
the date hereof and each Loan Party hereby adopts and affirms all such
representations and warranties which each Loan Party agrees shall be
incorporated by reference herein and made a part hereof.
COVENANTS OF LOAN PARTIES. From the date of this Agreement and
thereafter until the Credit is terminated and all Liabilities of the Loan
Parties hereunder are paid in full, each Loan Party agrees that unless Lender
shall otherwise consent in writing, it will:
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FINANCIAL STATEMENTS AND OTHER REPORTS. Furnish to Lender in form
satisfactory to Lender:
FINANCIAL REPORTS :
(a) Annual Audit Report. Within ninety (90) days after
each Fiscal Year of Holdings, commencing with Holdings'
Fiscal Year ended July 31, 1996, a copy of the annual audit
report of Holdings and its Subsidiaries, prepared on a
consolidated basis and in conformity with GAAP and certified
by an independent certified public accountant who shall be
satisfactory to Lender, together with unaudited consolidating
financial statements for such Fiscal Year and a certificate
from such accountant (i) containing a computation of, and
showing compliance with, each of the financial ratios and
covenants contained in Section 5.27, and (ii) to the effect
that, in making the examination necessary for the signing of
such annual audit report, such accountant has not become
aware of any Event of Default respecting the financial ratios
and covenants contained in Section 5.27 that has occurred and
is continuing, or, if such accountant has become aware of any
such event, describing it and the steps, if any, being taken
to cure it;
(a) Quarterly Financial Statement. Within forty-five
(45) days after each Fiscal Quarter of each Fiscal Year of
Holdings, a copy of the unaudited financial statement of
Holdings and its Subsidiaries, prepared in the same manner as
the audit report referred to in preceding clause (a), except
that such financial statements shall be prepared on both a
consolidating and consolidated basis, signed by Holdings'
chief financial officer and consisting of at least a balance
sheet as at the close of such Fiscal Quarter and statements
of earnings and cash flows for such Fiscal Quarter and for
the period from the beginning of such Fiscal Year to the
close of such Fiscal Quarter;
(a) Monthly Financial Statement . Within thirty (30) days
after the end of each month of each Fiscal Year of Holdings,
a copy of the unaudited financial statement of Holdings and
its Subsidiaries, prepared in the same
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manner as the reports referred to in preceding clause (b)
(including on a consolidated and consolidating basis) signed
by Holdings' chief financial officer and consisting of at
least a balance sheet as at the close of such month and
statements of earnings and cash flows for such month and for
the period from the beginning of such Fiscal Year to the
close of such month; and
(a) Officer's Certificate. Together with the financial
statements furnished by Holdings under the preceding clauses
(a), (b) and (c), a certificate of Holdings' chief financial
officer, dated the date of such annual audit report or such
quarterly or monthly financial statement, as the case may be,
containing a statement that no Event of Default or Unmatured
Event of Default has occurred and is continuing, or, if there
is any such event, describing it and the steps, if any, being
taken to cure it, and containing a computation of, and
showing compliance with, each of the financial ratios and
restrictions contained in this Section 5, including, in
connection with the computation of the Debt Service Coverage
Ratio for any period, the aggregate amount of unfinanced
Capital Expenditures of Holdings on a consolidated basis
during such period.
AGINGS. Within twenty (20) days after the end of each fiscal
month of Holdings, an aging of all Accounts Receivable of each
Borrower and an open invoice listing of all Trade Accounts Payable of
each Borrower as of the end of such month, in form and content
acceptable to Lender.
INVENTORY CERTIFICATION. Within twenty (20) days after the end
of each fiscal month of Holdings, an Inventory certification report as
of the end of such month for all Inventory locations of each Borrower,
in form and content acceptable to Lender, which shall include, in any
event, a specification of any Inventory consigned by or to each
Borrower.
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OTHER REPORTS:
(a) SEC and Other Reports . Copies of each filing and
report made by Holdings or any Subsidiary of Holdings with or
to any securities exchange or the Securities and Exchange
Commission and of each communication from Holdings or any
Subsidiary of Holdings to shareholders generally (excluding
therefrom, however, routine communications between Borrowers
and Holdings made in the ordinary course of business),
promptly upon the filing or making thereof;
(a) Report of Change Relating to Holdings, its
Subsidiaries or Partnerships. Promptly from time to time, a
written report of any change in the information set forth in
Schedule 4.1 or Schedule 4.10 concerning Holdings, any
Subsidiary of Holdings, or any partnership or joint venture;
(a) Patents, etc . Promptly from time to time, a written
report of any change to the list of patents, trademarks,
copyrights and other information set forth in Schedule 4.16;
and
(a) Report on Investments . On a quarterly basis, within
fifteen (15) days after the end of each Fiscal Quarter of
Holdings, a written status report with respect to each
Investment permitted by Section 5.18 existing as of the last
day of such Fiscal Quarter.
(a) Other Reports . Any information required to be
provided pursuant to other provisions of this Agreement, and
such other reports or information from time to time
reasonably requested by Lender.
CERTIFICATE REGARDING ENVIRONMENTAL MATTERS.
Within thirty (30) days after the end of each Fiscal Year, or, upon
Lender's request from and after the occurrence of, and during the
continuation of, any Event of Default, a certificate executed on
behalf of Holdings, by Holdings' chief executive officer containing a
statement that based on such officer's due inquiry of persons charged
with the responsibility for having such information, the
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representations set forth in Section 4.25 relating to Environmental
and Safety and Health Matters, and Schedule 4.25 remain true and
correct, or, if not, each and every respect in which they have
changed; provided, however, that notwithstanding the preceding
language of this Section 5.1.5, such statement shall in no way affect
the survival of any of the representations and warranties contained in
Section 4.25.
NOTICES. Notify Lender in writing of any of the following immediately
upon learning of the occurrence thereof (or, in the case of clauses (e) and (f)
of this Section 5.2, at least thirty (30) days prior to the occurrence thereof
to the extent applicable to any Loan Party or any other Obligor), describing
the same and, if applicable, the steps being taken by the Person(s) affected
with respect thereto:
(a) Default. The occurrence of (i) an Event of Default or
Unmatured Event of Default and (ii) to the extent not included in
clause (i) of this Section 5.2(a), the default by any Loan Party, any
other Obliger or any Subsidiary of any Loan Party under any note,
indenture, loan agreement, mortgage, lease, deed or other material
similar agreement to which any Loan Party, any other Obligor or any
Subsidiary of any Loan Party, as appropriate, is a party or by which
it is bound in which the Indebtedness owing thereunder exceeds Two
Hundred Fifty Thousand Dollars ($250,000);
(a) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding affecting any Loan Party, any
other Obligor, any Subsidiary of any Loan Party or any Collateral or
any Third Party Collateral, whether or not considered to be covered by
insurance in which the amount claimed exceeds Two Hundred Fifty
Thousand Dollars ($250,000);
(a) Judgment. The entry of any judgment or decree against any Loan
Party, any other Obligor or any Subsidiary of any Loan Party if the
amount of such judgment exceeds Two Hundred Fifty Thousand Dollars
($250,000);
(a) Pension Plans and Welfare Plans. The occurrence of a
Reportable Event with respect to any Pension Plan; the filing of a
notice of intent to terminate a Pension Plan by
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any Loan Party, any ERISA Affiliate, or any other Obligor; the
institution of proceedings to terminate a Pension Plan by the PBGC or
any other Person; the withdrawal in a "complete withdrawal" or a
"partial withdrawal" as defined in Sections 4203 and 4205,
respectively, of ERISA by any Loan Party, any ERISA Affiliate or any
other Obligor from any Multiemployer Plan; the failure of any Loan
Party, any other Obligor or any ERISA Affiliate to make a required
contribution to any Pension Plan, including but not limited to any
failure to pay an amount sufficient to give rise to a Lien under
Section 302(f) of ERISA; the taking of any action with respect to a
Pension Plan which could result in the requirement that any Loan
Party, any other Obligor or any ERISA Affiliate furnish a bond or
other security to the PBGC or such Pension Plan; the occurrence of any
other event with respect to any Pension Plan which could result in the
incurrence by any Loan Party, any other Obligor or any ERISA Affiliate
of any material liability, fine or penalty; or the incurrence of any
material increase in the contingent liability of any Loan Party, any
other Obligor or any Subsidiary of any Loan Party with respect to any
"employee welfare benefit plan" as defined in Section 3(1) of ERISA
which covers retired or terminated employees and their beneficiaries;
(a) Business and Collateral Information. Any change or proposed
change in any of the information set fort on Schedule 4.12, Schedule
4.13 or Schedule 4.15, including, but not limited to, (i) any change
in the locati of any Inventory, or Equipment or any Third Party
Collateral, (ii) the identity of any bailee, processor, warehouseman
or other Person in possession or control of any Inventory or Equipment
or other Collateral or Third Party Collateral, if the aggregate amount
of all such property in the possession or control of such Persons at
any time exceeds Five Hundred Thousand Dollars ($500,000) as to
Inventory, at then book value, and Five Hundred Thousand Dollars
($500,000), as to Equipment, at then current fair market value, (iii)
any change in the name or address of the lessor or owner of any real
property or equipment having a value in excess of $100,000 leased to
any Loan Party, any Subsidiary of any Loan Party or any other Obligor,
(iv) any proposed change in the location of any Loan Party's or any of
any Loan Party's Subsidiaries' chief executive office or chief place
of
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business, or the location at which either Borrower keeps its books and
records concerning such Borrower's Accounts Receivable and other
Collateral, (v) any proposed opening, closing or other change in the
list of offices and other places of business of any Loan Party and
each Subsidiary of any Loan Party and (vi) any opening, closing or
other change in the offices and other places of business of each other
Obligor;
(a) Change of Name or Status. Any change in the name or address
of any other Obligor;
(a) Insurance Information. Any material change in the information
set forth in Schedule 4.7;
(a) Environmental and Safety and Health Matters. The occurrence
of any event, or the acquisition of any information which, if it had
occurred, had been acquired, or was true on or before the Closing
Date, would have been required to have been disclosed and included on
Schedule 4.25, including but not limited to existence of any
Environmental Lien and receipt of any notice from any entity, or
federal, state or local government or agency with respect to any
actual or alleged violation of, or potential liability under, any
Environmental Law or any Occupational Safety and Health Law;
(a) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of any Loan
Party, any other Obligor or any Subsidiary of any Loan Party;
(a) Default by Others. Any material default by any Account Debtor
or other Person obligated to any Loan Party, any other Obligor or any
Subsidiary of any Loan Party under any contract, chattel paper, note
or other evidence of amounts payable or due or to become due to such
Loan Party, such Obligor or such Subsidiary if the amount payable
under such contract, chattel paper, note or other evidence of amounts
payable or due or to become due exceeds Two Hundred Thousand Dollars
($200,000);
(a) Moveable Collateral. If any of the Collateral or Third Party
Collateral shall consist of goods of a type
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normally used in more than one state, whether or not actually so used,
any use of any such goods in any state other than a state in which the
Loan Parties shall have previously advised Lender such goods will be
used. The Loan Parties agree that such goods will not, unless Lender
shall otherwise consent in writing, be used outside the continental
United States;
(b) Change in Management or Line(s) of Business. Any substantial
change in the senior management of any Loan Party or any Subsidiary of
any Loan Party, or any change in the line(s) of business of any Loan
Party or any Subsidiary of any Loan Party; and
(m) Other Notices. Any notices required to be provided by
any Loan Party pursuant to any Related Agreement or the other
provisions of this Agreement, and notice of the occurrence of such
other events as Lender may reasonably from time to time specify.
EXISTENCE. Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, its respective existence as a
corporation or other form of business organization, as the case may be, and all
rights, privileges, licenses, patents, patent rights, copyrights, trademarks,
trade names, trade styles, franchises and other authority to the extent
material and necessary for the conduct of its respective business in the
ordinary course as conducted from time to time.
NATURE OF BUSINESS. Engage, and cause each of its Subsidiaries to
engage, in substantially the same fields of business as it is engaged in on the
date hereof; provided, that Holdings shall not engage in any type of business
activity other than ownership of Borrowers' capital stock and the performance
of its obligations under this Agreement and the Related Agreements.
BOOKS, RECORDS AND ACCESS. Maintain, and cause each of its
Subsidiaries to maintain, complete and accurate books and records (including
but not limited to records relating to Accounts Receivable, Inventory,
Equipment and other Collateral), in which full and correct entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to its respective business and activities. Cause its books and records as at
the end of any fiscal month of Holdings to be posted and closed not more than
fifteen (15) days after the last business day of such
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fiscal month. During normal business hours and upon reasonable notice permit,
and cause each of its Subsidiaries to permit, access by Lender and its agents
or employees to the books and records of Holdings and each such Subsidiary at
Holdings' or each such Subsidiary's place or places of business at intervals to
be determined by Lender and without hindrance or delay, and permit and cause
each of its Subsidiaries to permit Lender or its agents and employees to
inspect Borrowers' Inventory and Equipment and such Subsidiary's inventory and
equipment, to perform, appraisals of Borrowers' Equipment and each of Holdings'
other Subsidiaries' equipment, and to inspect, audit, check and make copies
and/or extracts from the books, records, computer data and records, computer
programs, journals, orders, receipts, correspondence and other data relating to
Inventory, Accounts Receivable, Contract Rights, General Intangibles, Equipment
and any other Collateral or Third Party Collateral, or relating to any other
transactions between the parties hereto. The reasonable costs and expenses of
Lender in connection with any and all such inspections and/or audits shall be
at Borrowers' expense, and Lender may advance same to Borrowers as a Revolving
Loan; provided, however, that, unless and until an Event of Default shall have
occurred and be continuing, Borrowers' expense in such regard shall not exceed
Twenty Thousand Dollars ($20,000) during any consecutive twelve (12) months'
period. Notwithstanding the foregoing, as long as no Event of Default or
Unmatured Event of Default has occurred or is continuing Borrowers shall not be
required to reimburse Lender for appraisals of Borrowers' Equipment or the
equipment of their Subsidiaries more frequently than once each Fiscal Year.
INSURANCE. Maintain, and cause each of its Subsidiaries to maintain,
insurance to such extent and against such hazards and liabilities as is
commonly maintained by companies similarly situated or as Lender may reasonably
request from time to time. Keep the Collateral properly housed and insured for
its full insurable value against loss or damage by fire, theft, explosion,
sprinklers, collision (in the case of motor vehicles) and such other risks as
are customarily insured against by persons engaged in businesses similar to
those of Borrowers, with such companies, in such amounts and under policies in
such form as shall be satisfactory to Lender. Certificates of such policies of
insurance have been delivered to Lender prior to the date hereof together with
evidence of payment of all premiums therefor. Holdings shall cause each issuer
of an insurance policy to provide Lender, prior to the Closing Date, with an
endorsement or
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an independent instrument, in such form and containing such terms as shall be
acceptable to Lender, in the case of hazard insurance, showing loss payable to
Lender with respect to loss of or damage to Collateral and, if required by
Lender, also naming Lender as an additional insured thereon and, in the case of
liability insurance, showing Lender as additional insured. The Loan Parties
hereby direct all insurers under such policies of insurance in which Lender is
named as loss payee, as required aforesaid, to pay all proceeds payable
thereunder directly to Lender. The Loan Parties appoint Lender and any Person
whom Lender may from time to time designate (and all officers, employees or
agents designated by Lender or such Person) as each Loan Party's true and
lawful attorney and agent-in-fact with power to make, settle and adjust claims
under such policies of insurance, endorse the name of each Loan Party on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and make all determinations and decisions with respect to
such policies of insurance. The foregoing appointment and power, being coupled
with an interest, is irrevocable until all Liabilities under this Agreement are
paid and performed in full and this Agreement is terminated. In the event the
Loan Parties at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required herein or to pay any premium in whole
or in part relating thereto, then Lender, without waiving or releasing any
obligation of or default by the Loan Parties hereunder, may at any time or
times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which Lender deems advisable. All sums so disbursed
by Lender, including without limitation Attorneys' Fees, court costs, expenses
and other charges relating thereto, shall be payable on demand by Borrowers to
Lender, and Lender may, in its sole and absolute discretion, advance such sums
to Borrowers as a Revolving Loan. Notwithstanding the foregoing, however,
Lender agrees that, so long as no Event of Default or Unmatured Event of
Default has occurred and is then continuing, Borrowers shall have the right, in
lieu of Lender, to receive proceeds payable under policies of insurance
insuring loss of or damage to Collateral, and make, settle and adjust claims
with regard thereto, provided that (i) the amount of any such claim does not
exceed One Hundred Thousand Dollars ($100,000) per occurrence and (ii) the
entire amount of such proceeds, net of sums expended by Borrowers in obtaining
receipt thereof, are promptly expended by Borrowers in
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the substitution or replacement of the Collateral lost or destroyed which was
the subject of such claim.
INSURANCE SURVEY. Provide to Lender at least annually within ninety
(90) days of the end of Holdings' Fiscal Year, a certificate signed by the
chief financial officer of Holdings that attests to and summarizes the property
and casualty insurance program carried by Holdings and its Subsidiaries. This
summary shall include the insurer's(s) name(s), the insured's (s') name(s),
policy number(s), expiration date(s), amount(s) of coverage, type(s) of
coverage, the annual premium(s), Best's ratings of the insurer(s), exclusions,
deductibles and self-insured retention and shall describe in detail any
retrospective rating plan, fronting arrangement or any other self-insurance or
risk assumption agreed to by Holdings or any Subsidiary of Holdings or imposed
upon Holdings or any Subsidiary of Holdings by any such insurer, as well as any
self-insurance program that is in effect. Holdings shall notify Lender in
writing (i) at least twenty (20) days prior to any cancellation of or change
materially adverse to any Loan Party in any such insurance to be instituted by
Holdings or any Subsidiary of Holdings and (ii) within five (5) business days
after receipt of any notice (whether formal or informal) of any cancellation of
or change materially adverse to any Loan Party in any of its insurance
instituted or to be instituted by any of its insurers or any negative change in
the ratings of any insurance carrier of Holdings or any of its Subsidiaries, as
established by Best's Insurance Reports. Annually, Lender shall have the right
to request Holdings to have a risk management survey completed by a recognized
independent risk management consultant mutually acceptable to Holdings and
Lender which will identify, quantify and assess any catastrophic uninsured,
under-insured or self-insured exposures faced by Holdings and its Subsidiaries.
The cost of such survey shall be borne solely by Borrowers. A copy of the
results of each such a survey shall be promptly delivered by Holdings to
Lender.
REPAIR. Maintain, preserve and keep, and cause each of its
Subsidiaries to maintain, preserve and keep, its properties (other than
property which is no longer useful) in operating condition and repair, ordinary
wear and tear excepted, and from time to time make, and cause each such
Subsidiary to make, all necessary and proper repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
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efficiency thereof shall be fully preserved and maintained.
TAXES. Pay, and cause each of its Subsidiaries to pay, when due, all
of its Taxes, unless and only to the extent that such Loan Party or such
Subsidiary is contesting such Taxes in good faith and by appropriate
proceedings and such Loan Party or such Subsidiary has set aside on its books
such reserves or other appropriate provisions therefor as may be required by
GAAP.
COMPLIANCE. Comply, and cause each of its Subsidiaries to comply, in
all material respects, with all statutes, judicial or administrative orders,
licenses, permits, and governmental rules and regulations applicable to it.
PENSION PLANS. Not permit, and not permit any of its Subsidiaries to
permit, any condition to exist in connection with any Pension Plan which might
constitute grounds for the PBGC to institute proceedings to have such Pension
Plan terminated or a trustee appointed to administer such Pension Plan; not
fail, and not permit any of its Subsidiaries to fail, to make a required
contribution to any Pension Plan if such failure is sufficient to give rise to
a Lien under Section 302(f) of ERISA; and not engage in, or permit to exist or
occur, or permit any of its Subsidiaries to engage in, or permit to exist or
occur, any other condition, event or transaction with respect to any Pension
Plan which could result in the incurrence by Holdings or any of its
Subsidiaries of any material liability, fine or penalty.
MERGER, PURCHASE AND SALE. Except as set forth on Schedule 5.12, not,
and not permit any of its Subsidiaries to: (a) be a party to any merger,
liquidation or consolidation provided that any Subsidiaries of either Borrower
may merge, liquidate or consolidate into or with another such Subsidiary or
such Borrower (so long as in the latter instance, such Borrower is the
surviving corporation); (b) except in the normal course of its business as
conducted by Borrowers on the Closing Date or as otherwise expressly permitted
hereby, sell, transfer, convey, lease or otherwise dispose of any of its
assets; (c) sell or assign, with or without recourse, any Accounts Receivable,
Contract Rights, notes receivable or chattel paper, except as provided in this
Agreement or (d) purchase or otherwise acquire all or substantially all the
assets of any Person.
RESTRICTED PAYMENTS. (a) Not purchase or redeem any shares of its
stock, declare or pay any dividends thereon (other than
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stock dividends), make any distribution to stockholders as such or pay any
management fees to its stockholders or pay any expenses on behalf of its
stockholders or set aside any funds for any such purpose, except that, provided
that no Unmatured Event of Default or Event of Default has occurred and is
continuing, Borrowers may pay actual expenses of Holdings on behalf of
Holdings, or may pay management fees to Holdings, for such purpose, in an
amount not in excess of One Million Six Hundred Thousand Dollars ($1,600,000)
in the aggregate in any Fiscal Year, and (b) not prepay, purchase or redeem,
and not permit any of its Subsidiaries to prepay, purchase or redeem any
Subordinated Debt.
LOAN PARTIES' AND LOAN PARTIES' SUBSIDIARIES' STOCK. Not permit any of
its Subsidiaries to purchase or otherwise acquire any shares of the stock of
any Loan Party, and, except as and to the extent permitted in Section 5.12, not
take any action, or permit any of its Subsidiaries to take any action, which
will result in a decrease in any Loan Party's or any of its Subsidiaries'
ownership interest in any Subsidiary of any Loan Party or any of its
Subsidiaries.
INDEBTEDNESS. Not, and not permit any of its Subsidiaries to, incur or
permit to exist any Indebtedness (including but not limited to Indebtedness as
lessee under Capitalized Leases), except: (a) Indebtedness under the terms of
this Agreement; (b) other Indebtedness of any Loan Party having maturities and
terms, and which is subordinated to payment of the Liabilities in a manner,
approved in writing by Lender; (c) other Indebtedness outstanding on the date
hereof and listed on Schedule 5.15 and in the financial statements described at
Section 4.6; (d) Indebtedness hereafter incurred in connection with Liens
permitted under Section 5.16(d) and (e) other Indebtedness approved in writing
by Lender.
LIENS. Not, and not permit any of its Subsidiaries to, create or
permit to exist any Lien with respect to any property, revenue or assets now
owned or hereafter acquired, except: (a) Liens for current Taxes not delinquent
or Taxes being contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by GAAP
are being maintained; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, and other like statutory Liens arising in the ordinary course of
business securing
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obligations which are not overdue or which are being contested in good faith
and by appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP are being maintained; (c)
pledges or deposits in connection with workers, compensation, unemployment
insurance and other social security legislation; (d) Liens in connection with
the acquisition of property after the date hereof by way of purchase money
mortgage, conditional sale or other title retention agreement, Capitalized
Lease, or other deferred payment contract, and attaching only to the property
being acquired, if the aggregate outstanding amount of such Indebtedness of
Holdings and its Subsidiaries (excluding Indebtedness under Capitalized Leases)
does not exceed Two Hundred Fifty Thousand Dollars ($250,000) and if the
Capital Expenditure made or the Capitalized Lease entered into in connection
with such acquisition is otherwise permitted under the terms of this Agreement;
(e) Liens in favor of Lender; (f) Liens referred to in Section 4.9 and (g)
Liens consented to in writing by Lender.
GUARANTIES. Not, and not permit any of its Subsidiaries to, become or
be a guarantor or surety of, or otherwise become or be responsible in any
manner (whether by agreement to purchase any obligations, stock, assets, goods
or services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to, any undertaking of any other Person, except for the
Loan Parties' guaranties of the Liabilities hereunder and except for the
endorsement, in the ordinary course of collection, of instruments payable to it
or its order and except as described on Schedule 5.17 and as otherwise
consented to by Lender in writing.
INVESTMENTS. Not, and not permit any of its Subsidiaries to, make or
permit to exist any Investment in any Person, except for: (a) Investments to
the extent consented to by Lender in writing; (b) advances to employees of such
Loan Party or any of its Subsidiaries for travel or other ordinary business
expenses provided that the aggregate amount outstanding at any one time shall
not exceed Twenty-Five Thousand Dollars ($25,000) for any single employee of
such Loan Party and Two Hundred Thousand Dollars ($200,000) in the aggregate
for all employees of all Loan Parties, collectively; (c) advances to
subcontractors and suppliers in maximum aggregate amounts reasonably acceptable
to Lender but in any event not exceeding an aggregate outstanding amount of
Three Hundred Thousand Dollars ($300,000), (d)
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extensions of credit in the nature of Accounts Receivable or notes receivable
arising from the sale of goods and services in the ordinary course of business;
(e) shares of stock, obligations or other securities received in settlement of
claims arising in the ordinary course of such Loan Party's business as
conducted by it on the Closing Date; (f) other Investments outstanding on the
date hereof and listed on Schedule 5.18A or in the financial statements
described in Section 4.6; and (g) so long as no Event of Default or Unmatured
Event of Default has occurred which is then continuing (or otherwise would be
caused thereby), Investments in the form of loans and advances may be made by
either Borrower to the other Borrower; provided, that the aggregate amount of
all such loans and advances outstanding at any time (inclusive of all such
loans and advances, if any, outstanding on the Closing Date as described on
Schedule 5.18A) may never exceed Four Million Dollars ($4,000,000), in the case
of loans and advances by CMC Mississippi to CMC California, and Two Million
Dollars ($2,000,000), in the case of loans and advances by CMC California to
CMC Mississippi; provided, further, that (i) the limitations set forth
hereinabove in this clause (g) shall apply whether such loans and advances are
made directly or indirectly; (ii) as to any such loans and advances, Holdings
shall give Lender written notice of the amount and intended use thereof by the
prospective borrower at least three (3) Business Days in advance of its
disbursement, together with an aging as of the date of such notice of all Trade
Accounts Payable of the Borrower proposing to make such loan or advance
demonstrating that such Trade Accounts Payable aging (average days outstanding)
does not exceed the average of such Borrower's Trade Accounts Payable aging as
of the last day of each of the twelve (12) preceding months; (iii) as of the
date of such notice and the date of the proposed loan or advance referred to
therein, after giving effect to any Revolving Loan made to such Borrower in
connection therewith, such Borrower's Revolving Loan Availability shall exceed
the outstanding principal of the Revolving Loans to such Borrower by an amount
at least equal to One Million Five Hundred Thousand Dollars ($1,500,000) in the
case of CMC California and Three Million Dollars ($3,000,000) in the case of
CMC Mississippi; and (iv) at Lender's request, the Loan Parties shall cause
such loans to be evidenced by promissory notes or other documentation in form
and substance satisfactory to Lender and shall deliver such notes or other
documents to Lender, duly assigned or endorsed to Lender, as additional
Collateral and the Loan Parties shall not permit any such loan or advance to be
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subject to any subordination or similar agreement. For purposes of this Section
5.18, "loans and advances" to any Person named in clause (g) of the preceding
sentence shall include, without limitation, any Letters of Credit hereafter
issued by Lender for the account of either Borrower on behalf of any such
Person.
SUBSIDIARIES. Not, and not permit any Subsidiary of its Subsidiaries
to, acquire any stock or similar interest in any Person, and not, and not
permit any of its Subsidiaries, create, establish or acquire any Subsidiary
other than those, if any, existing on the date of this Agreement.
LEASES. Not enter into or permit to exist, or permit any of its
Subsidiaries to enter into or permit to exist, any arrangements for the leasing
by such Loan Party or such Subsidiary, as lessee under any operating lease or
Capitalized Lease, of any real or personal property (or any interest therein)
if the aggregate of all payments under such leases would exceed $10,000,000 in
any year; provided that no operating lease or Capitalized Lease covering assets
with a value equal to or in excess of $750,000 shall be entered into without
Lender's prior written consent and, without limiting in any way Lender's
discretion in regard to the granting of such consent or in regard to the
conditions that Lender may require to be satisfied in connection with the
granting of such consent, at least twenty (20) days prior to any Loan Party or
Subsidiary entering into any such operating lease or Capital Lease, Holdings
shall deliver to Lender written notice thereof, together with proforma
projected financial statements demonstrating that the Loan Parties will be in
compliance with the financial covenants set forth in Annex A hereto after
giving effect to that operating Lease or Capital Lease.
CHANGE IN ACCOUNTS RECEIVABLE. After the occurrence of an Event of
Default or Unmatured Event of Default, permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account Receivable in excess of $100,000, including
any of the terms relating thereto.
FUTURE ENVIRONMENTAL ASSESSMENTS. The Loan Parties shall provide such
information and certifications which Lender may reasonably request from time to
time pertaining to the environmental aspects of Holdings and its Subsidiaries
and any
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property owned, operated or controlled by Holdings or any Subsidiary of
Holdings. To investigate environmental aspects of Holdings and its Subsidiaries
and their properties, facilities and operations, Lender or its agents shall
have the right, but no obligation at any time during normal business hours and
upon reasonable notice to enter upon the property of Holdings or any Subsidiary
of Holdings, take samples, review the books, records or other documents of
Holdings and its Subsidiaries, interview officers and employees and independent
contractors of Holdings or its Subsidiaries, and conduct such other activities
as Lender, in its sole discretion, deems appropriate. Each Loan Party shall,
and shall cause its Subsidiaries to, cooperate fully in the conduct of any such
assessment. If Lender decides to cause such an assessment to be conducted
because of (a) Lender's considering taking possession of or title to the
property after the occurrence of an Event of Default or (b) a material change
in the use of the property which, in Lender's reasonable opinion, increases the
risk of non-compliance with Environmental Laws or increases the risk of costs
or liabilities thereunder, then Borrowers shall pay upon demand all reasonable
costs and expenses (including Attorney's Fees) connected with such assessment.
Lender, may, in its discretion, provide for the payment of any amount due from
Borrowers under this Section 5.22 by making a Revolving Loan to Borrowers.
Nothing in this Section 5.22, and no actions taken by Lender pursuant thereto,
shall give, or be construed as affecting, directing, influencing, or
controlling, or giving, to Lender the right, capacity or obligation to direct
or control the conduct or action or inaction of any Loan Party or any
Subsidiary of any Loan Party with respect to any environmental matters,
including but not limited to those pertaining to compliance with any
Environmental Laws and Hazardous Material disposal.
RELATED AGREEMENTS. Not enter into, or permit any of its Subsidiaries
to enter into, any agreement containing any provision which would be violated
or breached by the performance by any Loan Party or such Subsidiary of its
obligations hereunder or under any Related Agreement or any instrument or
document delivered or to be delivered by any Loan Party or such Subsidiary in
connection herewith.
UNCONDITIONAL PURCHASE OPTIONS. Not enter into or be a party to, or
permit any of its Subsidiaries to enter into or be a party to any contract for
the purchase of materials, supplies or
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other property or services, if such contract requires that payment be made by
it regardless of whether or not delivery is ever made of such materials,
supplies or other property or services.
USE OF PROCEEDS. 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" any Margin Stock, and
furnish to Lender upon request, a statement in conformity with the requirements
of Federal Reserve Form U-1 referred to in Regulation U of the Board of
Governors of the Federal Reserve System. Not directly or indirectly use any
proceeds of Loans to fund all or part of any hostile take-over or tender offer.
TRANSACTIONS WITH RELATED PARTIES. Not, and not permit any of its
Subsidiaries to, enter into or be a party to any transaction or arrangement,
including, without limitation, the purchase, sale, lease or exchange of
property or the rendering of any service, with any Related Party, except in the
ordinary course of and pursuant to the reasonable requirements of such Loan
Party's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to such Loan Party or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not a Related Party. For
purposes of this Section 5.26 only, "Related Party" shall extend to and
include, without limitation, any Person which beneficially owns or holds twenty
percent (20%) or more of the equity interest of Holdings.
FINANCIAL COVENANTS. From the Closing Date and at all times thereafter
unless and until this Agreement is terminated and all of the Loan Parties'
Liabilities under this Agreement are paid in full, the Loan Parties agree that,
unless Lender otherwise consents in writing, they will comply with each of the
financial covenants set forth on Annex A.
FISCAL YEAR. Not change its Fiscal Year.
LANDLORDS' AGREEMENT. On or prior to that date thirty (30) days from
the Closing Date, deliver to Lender a landlord's agreement, in form and
substance satisfactory to Lender, executed by the landlord of CMC California's
facility at 4950 Patrick Henry Drive, Santa Clara, California.
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DEFAULT.
EVENT OF DEFAULT . Each of the following shall constitute an Event of
Default under this Agreement:
(a) NON-PAYMENT. Default in the payment, when due or declared due,
of any amount of principal of any Loan or of any reimbursement
obligation in respect of any payment made by Lender under or pursuant
to any Letter of Credit or L/C Draft; or default in the payment, when
due or declared due, of any other Liabilities and continuance of such
default for two (2) Business Days after such other Liabilities are due
or declared due.
(a) NON-PAYMENT OF OTHER INDEBTEDNESS. Default in the payment when
due, whether by acceleration or otherwise (subject to any applicable
grace period), of any Indebtedness of, or guaranteed by, any Loan
Party, any other Obligor or any Subsidiary of any Loan Party (other
than (i) any Indebtedness under this Agreement and any Notes, or (ii)
any Indebtedness of any Subsidiary of Holdings or either Borrower to
Holdings or such Borrower or to any other Subsidiary of such
Borrower).
(a) ACCELERATION OF OTHER INDEBTEDNESS. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, any Loan Party, any other Obligor
or any Subsidiary of any Loan Party in excess of Two Hundred Fifty
Thousand Dollars ($250,000) (other than (i) any Indebtedness of any
Subsidiary of either Borrower to such Borrower or to any other
Subsidiary of such Borrower, and (ii) the Indebtedness under this
Agreement and any Notes) or enables the holder or holders of such
other Indebtedness or any trustee or agent for such holders (any
required notice of default having been given and any applicable grace
period having expired) to accelerate the maturity of such other
Indebtedness.
(a) OTHER OBLIGATIONS. Default in the payment when due, whether
by acceleration or otherwise, or in the performance or observance
(subject to any applicable grace period or waiver of such default) of
(i) any obligation or agreement of any Loan Party, any other Obligor
or any Subsidiary of
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any Loan Party to or with Lender (other than any obligation or
agreement of any Loan Party hereunder) or (ii) any material obligation
or agreement of any Loan Party, any other Obligor or any Subsidiary of
any Loan Party involving a liability or obligation in excess of Two
Hundred Fifty Thousand Dollars ($250,000) to or with any other Person
to the extent such default would have a material and adverse effect on
the financial condition or operations of any Loan Party (other than
(x) any such material obligation or agreement constituting or related
to Indebtedness, (y) Trade Accounts Payable and (z) any material
obligation or agreement of any Subsidiary of Holdings or either
Borrower to Holdings or such Borrower or to any other Subsidiary of
such Borrower), except only to the extent that the existence of any
such default is being contested by such Loan Party, such other Obligor
or such Subsidiary of such Loan Party, as the case may be, in good
faith and by appropriate proceedings and such Loan Party, such other
Obligor or such Subsidiary of such Loan Party, as applicable, shall
have set aside on its books such reserves or other appropriate
provisions therefor as may be required by GAAP.
(a) [INTENTIONALLY OMITTED].
(a) INSOLVENCY. Any Loan Party any other Obligor or any
Subsidiary of any Loan Party becomes insolvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they
mature, or applies for, consents to, or acquiesces in the appointment
of a trustee, receiver or other custodian for such Loan Party, such
other Obligor or such Subsidiary of such Loan Party, or for a
substantial part of the property of such Loan Party, such other
Obligor or such Subsidiary of such Loan Party, or makes a general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for any Loan Party, any other Obligor or any
Subsidiary of any Loan Party or for a substantial part of the property
of any Loan Party, any other Obligor or any Subsidiary of any Loan
Party and is not discharged or dismissed within ninety (90) days; or
any bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against any Loan Party,
any other Obligor or any Subsidiary
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of any Loan Party; or any warrant of attachment or similar legal
process is issued against any substantial part of the property of any
Loan Party, any other Obligor or any Subsidiary of any Loan Party.
(a) PENSION PLANS. The institution by any Loan Party or any ERISA
Affiliate of steps to terminate any Pension Plan if, in order to
effectuate such termination, any Loan Party or any ERISA Affiliate
would be required to make a contribution to such Pension Plan, or
would incur a liability or obligation to such Pension Plan, in excess
of One Million Five Hundred Thousand Dollars ($1,500,000); the
institution by the PBGC of steps to terminate any Pension Plan and the
continuation of either such condition after notice thereof from
Lender; or a contribution failure occurs with respect: to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
(a) NON-COMPLIANCE WITH THIS AGREEMENT. Default in the
performance of any of Borrower's agreements set forth in Sections 2,
3.2, 3.3, 3.4, 5.5, 5.6 or 5.12 through 5.26 or 5.29 (and not
constituting an Event of Default under any of the other subsections of
this Section 6.1), and continuance of such default after notice
thereof to Holdings from Lender; or default in the performance of any
of any Loan Party's agreements set forth in Sections 5.1.2, 5.1.3,
5.2, 5.27 or 5.28 (and not constituting an Event of Default under any
of the other subsections of this Section 6.1), and continuance of such
default for ten (10) days after notice thereof to Holdings from
Lender; or default in the performance of any of any Loan Party's other
agreements herein set forth (and not constituting an Event of Default
under any of the other subsections of this Section 6.1), and
continuance of such default for thirty (30) days after notice thereof
to Holdings from Lender.
(a) [INTENTIONALLY OMITTED].
(a) NON-COMPLIANCE WITH RELATED AGREEMENTS. Default in the
performance by any Loan Party, any other Obligor or any Subsidiary of
any Loan Party of any of its agreements set forth in any Related
Agreement (and not constituting an Event of Default under any of the
other subsections of this Section 6.1), and continuance of such
default after notice
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from Lender and the expiration of the grace period (if any) set forth
therein or thirty (30) days, whichever is the longer.
(a) WARRANTY. Any warranty made by any Loan Party, any other
Obligor or any Subsidiary of any Loan Party in any Related Agreement
is untrue or misleading in any material respect when made or deemed
made; or any schedule, statement, report, notice, certificate or other
writing furnished by any Loan Party, any other Obligor or any
Subsidiary of any Loan Party to Lender is untrue or misleading in any
material respect on the date as of which the facts set forth therein
are stated or certified; or any certification made or deemed made by
any Loan Party, any other Obligor or any Subsidiary of any Loan Party
to Lender is untrue or misleading in any material respect on or as of
the date made or deemed made.
(a) LITIGATION. There shall be entered against any one of any
Loan Party, any other Obligor or any Subsidiary of any Loan Party one
or more judgments or decrees in excess of Three Hundred Thousand
Dollars ($300,000) in the aggregate at any one time outstanding,
excluding, however, those judgments or decrees (i) that shall have
been outstanding less than thirty (30) calendar days from the entry
thereof, or which have been discharged, stayed or dismissed within
such thirty (30) days' period, and (ii) for and to the extent which
such Loan Party, such Subsidiary or such Obligor, as applicable, is
insured and with respect to which the insurer has assumed
responsibility in writing or for and to the extent which such Loan
Party, such Subsidiary or such Obligor, as applicable, is otherwise
indemnified if the terms of such indemnification are satisfactory to
Lender.
(a) VALIDITY. If the validity or enforceability of this Agreement
or any other Related Agreement shall be challenged by any Loan Party
or any other Obligor, or shall fail to remain in full force and
effect, or if Lender does not have or ceases to have a valid and
perfected first priority security interest in the Collateral (subject
to other Liens permitted hereunder) for any reason other than the
failure of Lender to take any action within its control.
(a) CONDUCT OF BUSINESS. If any Loan Party, any other
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Obligor or any Subsidiary of any Loan Party is enjoined, restrained or
in any way prevented by court order, which has not been dissolved or
stayed within fifteen (15) business days, from conducting all or any
material part of its business affairs.
(a) OWNERSHIP. If Holdings shall own and control, beneficially
and of record, less than one hundred percent (100%) of the issued and
outstanding common stock of each Borrower.
(a) [INTENTIONALLY OMITTED].
(a) [INTENTIONALLY OMITTED].
(a) MATERIAL ADVERSE CHANGE. Lender shall have determined in
good faith that (i) a material adverse change has occurred in the
business, operations or financial condition of any Loan Party or any
other Obligor, (ii) Lender's interest in any material portion of
Collateral or Third Party Collateral has been adversely affected or
impaired, or the value thereof to Lender has been diminished to a
material extent or (iii) the prospect of payment or performance of any
obligation or agreement of any Loan Party or any other Obligor
hereunder or under any Related Agreement is materially impaired, and
the condition giving rise to such determination does not constitute an
Event of Default under any of the other subsections of this Section
6.1 and continues to exist after notice of such determination by
Lender to Holdings.
EFFECT OF EVENT OF DEFAULT; REMEDIES .
(a) In the event that one or more Events of Default described in
Section 6.1(f) shall occur, then Lender's commitments and the Credit
extended under this Agreement shall terminate and all Liabilities
hereunder and under any Notes shall be immediately due and payable
without demand, notice or declaration of any kind whatsoever.
(a) In the event an Event of Default other than one described in
Section 6.1(f) shall occur, then Lender's commitments shall terminate
and Lender may declare all Liabilities hereunder and under any Notes
immediately due
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and payable without demand or notice of any kind whatsoever, whereupon
the Credit extended under this Agreement shall terminate and all
Liabilities hereunder and under any Notes shall be immediately due and
payable. Lender shall promptly advise Holdings of any such
declaration, but failure to do so shall not impair the effect of such
declaration.
(a) In the event of the occurrence of any Event of Default, Lender
may exercise any one or more or all of the following remedies, all of
which are cumulative and non-exclusive:
(1) Any remedy contained in this Agreement or in any of
the Related Agreements or any Supplemental Documentation;
(1) Any rights and remedies available to Lender under the
UCC, and any other applicable law;
(1) To the extent permitted by applicable law, Lender
may, without notice, demand or legal process of any kind,
take possession of any or all of the Collateral (in addition
to Collateral which it may already have in its possession),
wherever it may be found, and for that purpose may pursue the
same wherever it may be found, and may enter into any
premises where any of the Collateral may be or is supposed to
be, and search for, take possession of, remove, keep and
store any of the Collateral until the same shall be sold or
otherwise disposed of, and Lender shall have the right to
store the same in any of Borrowers' premises without cost to
Lender;
(1) At Lender's request, Borrowers will, at Borrowers'
expense, assemble the Collateral and make it available to
Lender at a place or places to be designated by Lender which
is reasonably convenient to Lender and Borrowers; and
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(1) Lender at its option, and pursuant to notification
given to Borrowers as provided for below, may sell any
Collateral actually or constructively in its possession at
public or private sale and apply the proceeds thereof as
provided below.
ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.
NOTICE OF DISPOSITION OF COLLATERAL . Any notification of
intended disposition of any of the Collateral required by law shall be deemed
reasonably and properly given if given at least ten (10) calendar days before
such disposition.
APPLICATION OF PROCEEDS OF COLLATERAL . Any proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of reasonable expenses in connection with the taking possession of,
storing, preparing for sale, and disposition of Collateral, including
Attorneys' Fees and legal expenses, and any balance of such proceeds may be
applied by Lender toward the payment of such of the Liabilities, and in such
order of application, as Lender may from time to time elect.
CARE OF COLLATERAL . Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as either Borrower requests
in writing, but failure of Lender to comply with such request shall not, of
itself, be deemed a failure to exercise reasonable care.
PERFORMANCE OF BORROWERS' OBLIGATIONS . Lender shall have the
right, but shall not be obligated, to discharge any claims against or Liens,
and any Taxes at any time levied or placed upon any or all Collateral
including, without limitation, those arising under statute or in favor of
landlords, taxing authorities, government, public and/or private warehousemen,
common and/or private carriers, processors, finishers, dairymen, coopers,
dryers, mechanics, artisans, laborers, attorneys, courts, or others. Lender may
also pay for maintenance and preservation of Collateral. Lender may, but is not
obligated to, perform or fulfill any of Borrowers' responsibilities under this
Agreement which either Borrower has failed to perform or fulfill. Lender may
advance to Borrowers as a Revolving Loan any payment made or expense incurred
by Lender under this Section 7.4.
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LENDER'S RIGHT. None of the following shall affect the
obligations of the Loan Parties to Lender under this Agreement or Lender's
right with respect to the remaining Collateral or any Third Party Collateral
(any or all of which actions may be taken by Lender at any time, whether before
or after an Event of Default, at its sole and absolute discretion and without
notice to the Loan Parties):
(a) acceptance or retention by Lender of other property
or interests in property as security for the Liabilities, or
acceptance or retention of any Obligor(s), in addition to the
Loan Parties, with respect to any of the Liabilities; (b)
release of its security interest in, or surrender or release
of, or the substitution or exchange of or for, all or any
part of the Collateral or any Third Party Collateral or any
other property securing any of the Liabilities (including but
not limited to any property of any Obligor other than the
Loan Parties), or any extension or renewal for one or more
periods (whether or not longer than the original period), or
release, compromise, alteration or exchange, of any
obligations of any guarantor or other Obligor with respect to
any Collateral or any such property;
(a) extension or renewal for one or more periods (whether
or not longer than the original period), or release,
compromise, alteration or exchange of any of the Liabilities,
or release or compromise of any obligation of any Obligor
with respect to any of the liabilities; or
(a) failure by Lender to resort to other security or
pursue any Person liable for any of the Liabilities before
resorting to the Collateral.
CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
CONDITIONS PRECEDENT TO INITIAL REVOLVING LOANS, TERM LOAN,
INITIAL EQUIPMENT LOAN AND INITIAL LETTERS OF CREDIT. The obligations of
Lender to make the initial Revolving Loans, to issue the initial Letters of
Credit, to make the Term Loan and to make the initial Equipment Loans (and to
make each subsequent Revolving Loan, to issue each subsequent Letter of Credit
and to make each subsequent Equipment Loan) are subject to satisfaction of the
following conditions precedent (in addition to those
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provided in Section 8.2):
DUE DILIGENCE. Lender shall have completed such due
diligence as it shall reasonably deem appropriate concerning
the business, operations and assets of each Loan Party and
each other Obligor, the results of which shall provide Lender
with results and information which, in Lender's sole
determination, are satisfactory to permit Lender to enter
into the secured financing transaction described in this
Agreement and the Related Agreements. Lender's due diligence
examination may include but need not be limited to (i) a
field examination of each Loan Party's and each other
Obligor's books and records, (ii) a physical audit and
inspection of each Loan Party's and each other Obligor's real
and personal property including, without limitation, any Real
Property, (iii) an analysis of all of each Loan Party's and
each other Obligor's contingent liabilities, including but
not limited to those pertaining to environmental and health
and safety matters, employee benefit plans and pending or
threatened litigation, (iv) a review of such fair market
value and liquidation value appraisals of the assets of each
Loan Party and each other Obligor as Lender shall determine
to be necessary, in each case prepared by independent
appraisers and using such assumptions and methods of analysis
as Lender shall determine to be acceptable and (v) a review
of the each Loan Party's and each other Obligor's current
financial condition and any pro forma financial information
or cash flow projections required by Lender.
SECURITY INTEREST. The security interest in the
Collateral granted under this Agreement and the Related
Agreements, and in any Third Party Collateral, and all other
Liens granted to Lender to secure the Liabilities, shall be
senior, perfected Liens except as otherwise agreed by Lender,
and all financing statements, amendments to financing
statements filed under the Existing Loan Agreement and other
documents relating to Collateral and Third Party Collateral
shall have been filed or recorded, as appropriate.
SOLVENCY. After giving effect to the initial Loans
made hereunder, each Borrower shall have sufficient assets
(excluding goodwill and other intangible assets not
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capable of valuation) having a value, both at present fair
salable value and at fair valuation, greater than the amount
of such Borrower's liabilities (including trade debt and
Indebtedness to Lender). Lender shall be satisfied that all
of the assets supporting Lender's Loans under this Agreement
shall be sufficient in value to provide each Borrower with
sufficient cash flow and working capital to enable it to
profitably operate its business and to meet its obligations
as they become due.
BLOCKED ACCOUNTS; LOCK BOXES. Each Borrower shall
have entered into blocked account and/or lock box agreements
with Lender for the collection and remittance to Lender of
cash proceeds of Collateral; provided that CMC California
shall have until thirty (30) days after the Closing Date to
enter into such agreements.
EFFECT OF LAW. No law or regulation affecting
Lender's entering into the secured financing transaction
contemplated by this Agreement shall impose upon Lender any
material obligation, fee, liability, loss, cost, expense or
damage.
EXHIBITS; SCHEDULES. All Exhibits and Schedules to
this Agreement shall have been completed and submitted to
Lender, shall be in form and substance satisfactory to Lender
and shall contain no facts or information which Lender, in
its sole judgment, determines to be unacceptable.
FEES. If not funded with the proceeds of the initial
Revolving Loans, Lender shall have received the closing fee
referred to in Section 2.8.3 and any other fees due and
payable by Borrowers or any other Person on the funding of
the initial Loans.
DOCUMENTS. Lender shall have received all of the
following, each duly executed where appropriate and dated as
of the Closing Date (or such other date as shall be
satisfactory to Lender), in form and substance satisfactory
to Lender:
(a) LOAN PARTIES' RESOLUTIONS. A copy, duly certified
by the secretary or an assistant secretary of each Loan Party
of (1) resolutions of the Board of Directors of such Loan
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Party authorizing (A) in the case of each Borrower, the
borrowings by such Borrower hereunder, (B) the execution,
delivery and performance by such Loan Party of this Agreement
and each Related Agreement to which such Loan Party is a
party or by which it is bound, and (C) in the case of
Holdings, certain officers or employees of Holdings to
request borrowings on behalf of Borrowers by telephone and to
execute Borrowing Base Certificates on behalf of Borrowers,
(2) all documents evidencing any other necessary corporate
action with respect to this Agreement and the Related
Agreements, and (3) all approvals or consents, if any, with
respect to this Agreement and the Related Agreements;
(a) LOAN PARTIES' INCUMBENCY CERTIFICATES. A Certificate
of the secretary of each Loan Party certifying the names of
the officers of such Loan Party authorized to sign this
Agreement and each Related Agreement to which such Loan Party
is a party or by which it is bound, and all other documents
and certificates to be delivered by such Loan Party
hereunder, together with the true signatures of such
officers;
(a) HOLDINGS' CERTIFICATE. The certificate of the
President of Holdings certifying to the fulfillment of all
conditions precedent to closing and funding the secured
financing transaction contemplated by this Agreement and to
the truth and accuracy, in all material respects, as of such
date, of the representations and warranties of the Loan
Parties contained in this Agreement and each other Related
Agreement to which any Loan Party is a party or by which it
is bound;
(a) LOAN PARTIES' BYLAWS. A copy, duly certified by the
secretary or an assistant secretary of each Loan Party, of
such Loan Party's Bylaws;
(a) LOAN PARTIES' CERTIFICATE OF INCORPORATION. A copy,
duly certified by the Secretary of State of Delaware, of each
Loan Party Certificate of Incorporation;
(a) LOAN PARTIES' REGISTRATION; GOOD STANDING. A copy,
duly certified by the applicable Secretary of State of (i) a
certificate of good standing issued by the Secretary of
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State of the secretary of state of each state where any Loan
Party is qualified to do business or where, because of the
nature of its business or properties, qualification to do
business is required, and (ii) in any state in which any Loan
Party is doing business under an assumed name, a certificate
or other document issued by the Secretary of State of each
such state evidencing such Loan Party's authority to use such
name;
(a) LEGAL OPINIONS. Legal opinions from counsel for
each Obligor, in form and substance satisfactory to Lender;
(a) INSURANCE. Evidence satisfactory to Lender of the
existence of insurance on the Collateral, Third Party
Collateral and business of Borrower in amounts and with
insurers acceptable to Lender, together with evidence
establishing that Lender is named as a loss payee and/or
additional insured, as applicable, on all related insurance
policies; and
(a) OTHER DOCUMENTS. Such other documents as Lender
shall determine to be necessary or desirable, including but
not limited to documents of the same or similar type as
described in paragraphs (a) through (f) of this Section
8.1.11 for the Loan Parties with respect to each Obligor
other than a Loan Party.
CONTINUING CONDITIONS PRECEDENT TO ALL LOANS; CERTIFICATION.
The obligation of Lender to make any Loan, or to issue any Letter of Credit, is
subject to satisfaction of the following conditions precedent in addition to
those provided in Section 8.1:
(a) NO CHANGE IN CONDITION. No change in the condition
or operations, financial or otherwise, of any Loan Party, any
Subsidiary of any Loan Party or any other Obligor, shall have
occurred which change, in the reasonable credit judgment of
Lender, may have a material adverse effect on any Loan Party
or any other Obligor, or on any material portion of
Collateral or Third Party Collateral;
(a) DEFAULT. Before and after giving effect to such Loan
or such Letter of Credit, no Event of Default or Unmatured
Event of Default shall have occurred and be continuing;
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(a) WARRANTIES. Before and after giving effect to such
Loan or Letter of Credit, the warranties in Section 4 shall
be true and correct in all material respects as though made
on the date of such Loan, except for such changes as are
specifically permitted hereunder;
(a) NO MATERIAL TRANSACTION. None of Holdings, any
Subsidiary of Holdings or any other Obligor shall have
entered into any material (as determined by Lender)
commitment or transaction, including, without limitation,
transactions for borrowings and capital expenditures, which
are not in the ordinary course of their respective
businesses; and
(a) ACCOUNTING METHODS. Holdings shall not have made any
material (as determined by Lender) change in its accounting
methods or principles except as required by GAAP.
Each request for a Loan or Letter of Credit hereunder made or
deemed to have been made by Holdings on behalf of either Borrower shall be
deemed to be a certificate of the Loan Parties as to the matters set out in the
foregoing provisions of this Section 8.2.
INDEMNITY.
ENVIRONMENTAL AND SAFETY AND HEALTH INDEMNITY. Each Loan
Party hereby indemnifies Lender and agrees to hold Lender harmless from and
against any and all losses, liabilities, damages, injuries, reasonable costs,
reasonable expenses and claims of any and every kind whatsoever (including,
without limitation, court costs and Attorneys' Fees) (i) relating to or arising
under any Environmental Law; or (ii) which otherwise may be paid, incurred or
suffered by, or asserted against Lender for, with respect to, or as a direct or
indirect result of the violation by any Loan Party, any other Obligor or any
Related Party (excluding CSHC and Cortelco for purposes hereof), or any
immediate or remote predecessor of any of them, of any Environmental Law or
occupational Safety and Health Law; or (iii) with respect to, or as a direct or
indirect result of (A) the presence on or under, or the escape, seepage,
leakage, spillage, disposal, discharge, emission, threat of release, or release
of any Hazardous Material from, any property allegedly owned or
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operated by any Loan Party, any other Obligor or any Related Party (excluding
CSHC and Cortelco for purposes hereof) (or any immediate or remote predecessors
of any of them), or any property at which Hazardous Material allegedly
generated by any Loan Party, any other Obligor, or any Related Party (excluding
CSHC and Cortelco for purposes hereof), or any immediate or remote predecessors
of any of them, may have come to be located, or (B) the existence of any unsafe
or unhealthful condition on or at any premises utilized by any Loan Party, any
other Obligor, or any Related Party (excluding CSHC and Cortelco for purposes
hereof) or any immediate or remote predecessor of any of them. The provisions
of and undertakings and indemnification set out in this Section 9.1 shall
survive satisfaction and payment of the Liabilities and termination of this
Agreement.
GENERAL INDEMNITY. In addition to and without limitation of
the indemnity set forth in Section 9.1 and in addition to the payment of
expenses pursuant to Section 10.3, whether or not the transactions contemplated
hereby shall be consummated, each Loan Party agrees to indemnify, pay and hold
Lender and any holder of any Notes, and the officers, directors, employees,
agents, and affiliates of Lender and such holders (collectively, the
"Indemnitees") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
reasonable costs, reasonable expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto)
that may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement, any Related Agreement or
any other agreements executed and delivered by any Loan Party or any other
Obligor in connection herewith, the statements contained in any commitment
letter delivered by Lender, Lender's agreement to make the Loans or to issue
Letters of Credit hereunder, the use or intended use of any Letters of Credit,
or the use or intended use of the proceeds of any of the Loans hereunder (the
"indemnified liabilities"); provided that the Loan Parties shall have no
obligation to an Indemnitee hereunder with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of such Indemnitee. To
the extent that the undertaking to indemnify, pay and hold harmless set forth
in the
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preceding sentence may be unenforceable because it violates any law or public
policy, each Loan Party shall contribute the maximum portion that it is
permitted to pay under applicable law to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them. The
provisions of the undertakings and indemnification set out in this Section 9.2
shall survive satisfaction and payment of the Liabilities and termination of
this Agreement.
GENERAL.
LOAN PARTIES' WAIVER. Except as otherwise provided for in
this Agreement, each Loan Party, for itself and its successors and assigns, (i)
waives presentment, demand and protest and notice of presentment, protest,
default, non-payment, maturity, release, compromise, settlement, one or more
extensions or renewals of any or all commercial paper, accounts, contract
rights, documents, instruments, chattel paper and guaranties at any time held
by Lender on which such Loan Party may in any way be liable and hereby ratifies
and confirms whatever Lender may do in this regard; (ii) waives any bond or
security which might be required by any court prior to allowing Lender to
exercise any of Lender's remedies; (iii) waives the benefit of all valuation,
appraisement and exemption laws; and (iv) releases Lender from all liability
under any Environmental Law, and waives and agrees not to make any claim or
bring any cost recovery or contribution action against Lender under any
Environmental Law now existing or hereafter enacted. Each Loan Party
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement and the transactions evidenced by this Agreement.
POWER OF ATTORNEY. Each Borrower appoints Lender, or any
Person whom Lender may from time to time designate, as such Borrower's attorney
and agent-in-fact with power (which appointment and power, being coupled with
an interest, is irrevocable until all Liabilities under this Agreement are paid
and performed in full and this Agreement is terminated), without notice to such
Borrower, to:
(a) At such time or times hereafter as Lender or said
agent, in its sole and absolute discretion, may determine in
such Borrower's or Lender's name (i) endorse such Borrower's
name on any checks, notes, drafts or any other items of
payment relating to and/or proceeds of the Collateral which
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come into the possession of Lender or under Lender's control
and apply such payment or proceeds to the Liabilities; (ii)
endorse such Borrower's name on any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar
document or agreement in Lender's possession relating to
Accounts Receivable, Inventory or any other Collateral; (iii)
use the information recorded on or contained in any data
processing equipment and computer hardware and software to
which such Borrower has access relating to Accounts
Receivable, Inventory and/or other Collateral; (iv) use such
Borrower's stationery and sign the name of such Borrower to
verification of Accounts Receivable and notices thereof to
Account Debtor's and (v) if not done by such Borrower, do all
acts and things determined by Lender to be necessary, to
fulfill such Borrower's obligations under this Agreement; and
(a) At such time or times after the occurrence and during
the continuance of an Event of Default, as Lender or said
agent, in its sole and absolute discretion, may determine, in
such Borrower's or Lender's name: (i) demand payment of the
Accounts Receivable; (ii) enforce payment of the Accounts
Receivable, by legal proceedings or otherwise; (iii) exercise
all of such Borrower's rights and remedies with respect to
the collection of the Accounts Receivable and other
Collateral; (iv) settle, adjust, compromise, extend or renew
the Accounts Receivable; (v) settle, adjust or compromise any
legal proceedings brought to collect the Accounts Receivable;
(vi) if permitted by applicable law, sell or assign the
Accounts Receivable and/or other Collateral upon such terms
for such amounts and at such time or times as Lender may deem
advisable; (vii) discharge and release the Accounts
Receivable and/or other Collateral; (viii) prepare, file and
sign such Borrower's name on any proof of claim in bankruptcy
or similar document against any Account Debtor; (ix) prepare,
file and sign such Borrower's name on any notice of lien,
assignment or satisfaction of lien or similar document in
connection with the Accounts Receivable and/or other
collateral and (x) do all acts and things necessary, in
Lender's sole and absolute discretion, to obtain repayment of
the Liabilities and to fulfill such Borrower's other
obligations under this Agreement.
EXPENSES; ATTORNEY'S FEES. Each Loan Party agrees, whether
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or not any Loan is made hereunder, to pay upon demand all Attorneys' Fees and
all other expenses incurred by Lender in connection with (i) the preparation,
negotiation and execution of this Agreement, any Related Agreement and any
document required to be furnished in connection herewith or therewith, (ii) the
preparation of any and all amendments to this Agreement or any of the Related
Agreements requested by any Loan Party and all other instruments or documents
provided for therein or delivered or to be delivered thereunder or in
connection therewith, (iii) the collection or enforcement of any Loan Party's
's or any other Obligor's obligations hereunder or under any Related Agreement
and (iv) the collection or enforcement of any of Lender's rights in or to any
Collateral or Third Party Collateral. Lender may advance all such amounts to
Borrowers as Revolving Loans. Each Loan Party also agrees (i) to indemnify and
hold Lender harmless from any loss or expense which may arise or be created by
the acceptance of telephonic or other instructions for making Loans and (ii) to
pay, and save Lender harmless from all liability for, any stamp or other taxes
which may be payable with respect to the execution or delivery of this
Agreement, or any Related Agreement or Supplemental Documentation, or the
issuance of any Note or of any other instruments or documents provided for
herein or to be delivered hereunder or in connection herewith. Each Loan
Party's foregoing obligations shall survive any termination of this Agreement.
LENDER FEES AND CHARGES. Each Borrower agrees to pay Lender
on demand the customary fees and charges of Lender for maintenance of accounts
with Lender or for providing other services to such Borrower. Lender may, in
its sole and absolute discretion, provide for such payment by advancing the
amount thereof to such Borrower as a Revolving Loan.
LAWFUL INTEREST. In no contingency or event whatsoever shall
the interest rate charged pursuant to the terms of this Agreement 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 Lender has received interest hereunder in excess of the
highest applicable rate, Lender shall promptly refund such excess interest to
Borrowers.
NO WAIVER BY LENDER; AMENDMENTS. No failure or delay on the
part of Lender in the exercise of any power or right, and no
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course of dealing between any Loan Party and Lender shall operate as a waiver
of such power or right, nor shall any single or partial exercise of any power
or right preclude other or further exercise thereof or the exercise of any
other power or right. The remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to Lender at law or in equity.
No notice to or demand on any Loan Party not required hereunder shall in any
event entitle such Loan Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of Lender to
any other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or any Related Agreement shall in any event be effective
unless the same shall be in writing and signed and delivered by Lender. Any
waiver of any provision of this Agreement, and any consent to any departure by
any Loan Party from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for which
given.
TERMINATION OF CREDIT. If not sooner terminated pursuant to
the terms of this Agreement, the Credit shall terminate, and all Loans and
other Liabilities shall become due and payable, on the Credit Termination Date.
Borrowers may terminate the Credit at any time upon at least thirty (30) days
prior written notice by Holdings to Lender and payment in full of the
outstanding principal balance of the Loans and all other Liabilities under this
Agreement and the Related Agreements. All of Lender's rights and remedies, the
liens and security interests of Lender in the Collateral and all of the Loan
Parties' duties and obligations under this Agreement shall survive termination
of the Credit extended to Borrowers hereunder until all of the Liabilities
hereunder have been finally paid and performed in full. The termination or
cancellation of the Credit shall not affect or impair the liabilities and
obligations of any Loan Party or any one or more of the other Obligors to
Lender or Lender's rights with respect to any Loans and advances made and other
Liabilities incurred prior to such termination or with respect to the
Collateral or any Third Party Collateral.
NOTICES. Except as otherwise expressly provided herein, any
notice hereunder to any Loan Party or Lender shall be in writing (including
telegraphic, telex, or facsimile communication) and shall be given to such Loan
Party or Lender at
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its address, telex number or facsimile number set forth on the signature pages
hereof or at such other address, telex number or facsimile number as such Loan
Party or Lender may, by written notice, designate as its address, telex number
or facsimile number for purposes of notices hereunder. All such notices shall
be deemed to be given when transmitted by telex and the appropriate answerback
is received, transmitted by facsimile, delivered to the telegraph office,
delivered by courier, personally delivered or, in the case of notice by mail,
three (3) Business Days following deposit in the United States mails, properly
addressed as herein provided, with proper postage prepaid; provided, however,
that notice to Lender of Borrowers' intent to terminate the Credit shall not be
effective until actually received by Lender.
ASSIGNMENTS AND PARTICIPATIONS; INFORMATION. Lender may, with
the written consent of Holdings at all times other than during the existence of
an Event of Default, which consent shall not be unreasonably withheld, at any
time assign to one or more other commercial banks or financial institutions
(provided that no consent shall be required in the case of an assignment to any
commercial bank or commercial finance company which is a subsidiary of
BankAmerica Corporation), all or any ratable part of this Agreement and the
Related Agreement, or of any portion of any thereof, including without
limitation Lender's rights, titles, interests, remedies, powers and/or duties.
Lender may furnish any information concerning the Loan Parties in the
possession of Lender from time to time to assignees of the rights and/or
obligations of Lender hereunder and to participants in any Loan (including
prospective assignees and participants) and may furnish information in response
to credit inquiries consistent with general banking practice. Lender shall
promptly notify Holdings of Lender's grant of any assignment of this Agreement
or any Related Agreement, or of any portion of any thereof. Lender may at any
time sell to one or more commercial banks or financial institutions (a
"Participant") participating interests in any portion of this Agreement and the
Related Agreements; provided, however, that (i) Lender's obligations under this
Agreement and the Related Agreements shall remain unchanged, (ii) Lender shall
remain solely responsible for the performance of such obligations, (iii) the
Loan Parties shall continue to deal solely and directly with Lender in
connection with this Agreement and the Related Agreements, and (iv) Lender
shall not grant any participating interest under which a Participant has any
rights
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to approve any amendment to, or any consent or waiver with respect to, this
Agreement or any Related Agreement except for amendments, consents or waivers
relating to (a) increases in or extensions of the Credit, (b) a postponement or
delay in any date fixed for payment of principal, interest, fees or other
amounts due, (c) a reduction in the principal of, or the rate of interest on,
any Loan, any fees or any other amounts payable, or (d) any release of any
Obligor or of any material portion of the Collateral.
SEVERABILITY. Any provision of this Agreement 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 remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SUCCESSORS. This Agreement shall be binding upon the Loan
Parties and Lender and their respective successors and assigns, and shall inure
to the benefit of the Loan Parties and Lender and the successors and assigns of
Lender. No Loan Party shall assign its rights or duties hereunder without the
consent of Lender.
CONSTRUCTION. Each Loan Party acknowledges that this
Agreement shall not be binding upon Lender or become effective until and unless
accepted by Lender, in writing. If so accepted by Lender, this Agreement and
the Related Agreements and Supplemental Documents shall, unless otherwise
expressly provided therein, be deemed to have been negotiated and entered into
in, and shall be governed and controlled by the laws of, the State of Illinois
as to interpretation, enforcement, validity, construction, effect, choice of
law, and in all other respects, including, but not limited to, the legality of
the interest rate and other charges, but excluding perfection of security
interests and liens which shall be governed and controlled by the laws of the
relevant jurisdiction.
CONSENT TO JURISDICTION. To induce Lender to accept this
Agreement, each Loan Party irrevocably agrees that, subject to Lender's sole
and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED
AGREEMENTS, OR THE SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE
LITIGATED IN COURTS
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HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. EACH LOAN PARTY
HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL
COURT LOCATED WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON SUCH LOAN PARTY, AND AGREES THAT ALL SUCH SERVICE OF PROCESS
MAY BE MADE BY REGISTERED MAIL DIRECTED TO SUCH LOAN PARTY AT THE ADDRESS
STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON ACTUAL RECEIPT THEREOF.
SUBSIDIARY REFERENCE. Any reference herein to a Subsidiary or
Subsidiaries of any Loan Party, and any financial definition, ratio,
restriction or other provision of this Agreement which is stated to be
applicable to "any Loan Party and its Subsidiaries" or which is to be
determined on a "consolidated" or "consolidating" basis, shall apply only to
the extent any such Subsidiaries are consolidated with such Loan Party for
financial reporting purposes.
WAIVER OF JURY TRIAL. EACH LOAN PARTY AND LENDER EACH WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS (I) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (II) ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
ACCEPTANCE. This Agreement and each Related Agreement shall
not become effective unless and until delivered to, and executed or accepted by
Lender at, Lender's principal office in Chicago, Illinois as first inscribed
hereinabove.
EFFECT OF AGREEMENT. This Agreement and the Related
Agreements embody the entire agreement and understanding between the parties
hereto and thereto in respect of the transactions contemplated hereby and
thereby, and upon becoming effective on the Closing Date, shall supersede all
prior negotiations, understandings and agreements between such parties in
respect of such transactions, including, without limitation, those expressed in
the Existing Loan Agreement. Notwithstanding the foregoing, the security
interest granted by CMC Mississippi in its assets in the Existing Loan
Agreement and in the Related Agreements delivered in connection therewith shall
continue in full force
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and effect from and after the date hereof as security for the Liabilities. To
the extent of those advances outstanding under the Existing Revolving Credit
and Five Million Nine Hundred Forty-One Thousand Six Hundred Sixty-Six Dollars
and 73 cents ($5,941,666.73) outstanding under the Existing Term Loan, this
Agreement evidences the same indebtedness as the Existing Loan Agreement.
LOAN PARTY GUARANTIES.
GUARANTY. Each Loan Party hereby agrees that such Loan Party
is jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to Lender and its successors and assigns, the full and prompt
payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Liabilities owed or hereafter owing to Lender by each other
Loan Party. Each Loan Party agrees that its guaranty obligation hereunder is a
continuing guaranty of payment and performance and not of collection, and that
its obligations under this Section 11 shall be absolute and unconditional,
irrespective of, and unaffected by,
(a) the genuineness, validity, regularity, enforceability
or any future amendment of, or change in, this Agreement, any
other Related Agreements or any other agreement, document or
instrument to which any Loan Party is or may become a party;
(a) the absence of any action to enforce this Agreement
(including this Section 11) or any other Related Agreement or
the waiver or consent by Lender with respect to any of the
provisions thereof; (b) the existence, value or condition of,
or failure by Lender to perfect its Lien against, any
security for the Liabilities or any action, or the absence of
any action, by Lender in respect thereof (including, without
limitation, the release of any such security);
(a) the solvency of any Loan Party; or
(a) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor,
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<PAGE> 119
it being agreed by each Loan Party that its obligations under this Section 11
shall not be discharged until the payment and performance, in full, of the
Liabilities has occurred and the Lender's commitments hereunder have been
terminated. Each Loan Party shall be regarded, and shall be in the same
position, as principal debtor with respect to the Liabilities guaranteed
hereunder. Each Loan Party expressly waives all rights it may have now or in
the future under any statute, or at common law, or at law or in equity, or
otherwise, to compel Lender to marshall access or to proceed in respect of the
Liabilities guaranteed hereunder against any other Obligor or against any
security for the payment and performance of the Liabilities before proceeding
against, or as a condition to proceeding against, such Loan Party. It is agreed
among each Loan Party and Lender that the foregoing waivers are of the essence
of the transaction contemplated by this Agreement and the other Loan Documents
and that, but for the provisions of this Section 11 and such waivers, Lender
would decline to enter into this Agreement.
DEMAND BY LENDER. If the Liabilities under this Agreement are
declared to be immediately due and payable, then each Loan Party shall, without
demand, pay the entire outstanding Liabilities due and owing to the holders
thereof. Payments by any Loan Party shall be made to Lender, to be credited and
applied to the Liabilities, in immediately available funds.
BENEFIT OF GUARANTY. Each Loan Party agrees that the
provisions of this Section 11 are for the benefit of Lender and its successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between any other Loan Party and Lender, the obligations of such other Loan
Party under this Agreement and the Related Agreements.
SUBORDINATION OF SUBROGATION, ETC. Notwithstanding anything
to the contrary in this Agreement or in any other Loan Document, and except as
set forth in Section 11.7, each Loan Party hereby expressly and irrevocably
subordinates to payment of the Liabilities any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution,
indemnification or set off and any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Liabilities are indefeasibly
paid in full in cash. Each Loan Party acknowledges and agrees that this waiver
is intended to benefit Lender and shall not limit or otherwise affect such Loan
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<PAGE> 120
Party's liability hereunder or the enforceability of this Section 11, and that
Lender and its successors and assigns are intended third party beneficiaries of
the waivers and agreements set forth in this Section 11.4.
ELECTION OF REMEDIES. If Lender may, under applicable law,
proceed to realize its benefits under this Agreement or any of the Related
Agreements giving Lender a Lien upon any Collateral, whether owned by any Loan
Party or by any other Obligor, either by judicial foreclosure or by
non-judicial sale or enforcement, Lender may, at its sole option, determine
which of its remedies or rights it may pursue without affecting any of its
rights and remedies under this Section 11. If, in the exercise of any of its
rights and remedies, Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against any Loan Party or
any other Obligor, whether because of any applicable laws pertaining to
"election of remedies" or the like, each Loan Party hereby consents to such
action by Lender and waives any claim based upon such action, even if such
action by Lender shall result in a full or partial loss of any rights of
subrogation which each Loan Party might otherwise have had but for such action
by Lender. Any election of remedies which results in the denial or impairment
of the right of Lender to seek a deficiency judgment against any Loan Party
shall not impair any other Loan Party's obligation to pay the full amount of
the Liabilities. In the event Lender shall bid at any foreclosure or trustee's
sale or at any private sale permitted by law or this Agreement or any of the
Related Agreements, Lender may bid all or less than the amount of the
Liabilities and the amount of such bid need not be paid by Lender but shall be
credited against the Liabilities. The amount of the successful bid at any such
sale, whether Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Liabilities
shall be conclusively deemed to be the amount of the Liabilities guaranteed
under this Section 11, notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which Lender might otherwise be entitled but for such bidding at any
such sale.
LIMITATION. Notwithstanding any provision herein contained to
the contrary, each Borrower's liability under this Section 11
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(which liability is in any event in addition to amounts for which such Borrower
is primarily liable under Section 2 hereof) shall be limited to an amount not
to exceed as of any date of determination the greater of:
(a) the net amount of all Loans advanced to the other
Borrower under this Agreement and then re-loaned or otherwise
transferred to such Borrower; or
(a) the amount which could be claimed by Lender from such
Borrower under this Section 11 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or
similar statute or common law after taking into account,
among other things, such Borrower's right of contribution and
indemnification from the other Borrower under Section 11.7
hereof.
CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS.
(a) To the extent that either Borrower shall make a
payment under this Section 11 of all or any of the
Liabilities (other than Loans made to such Borrower for which
such Borrower is primarily liable) (a "Guarantor Payment")
which, taking into account all other Guarantor Payments then
previously or concurrently made by the other Loan Parties,
exceeds the amount which such Borrower would otherwise have
paid if each Borrower had paid the aggregate Obligations
satisfied by such Guarantor Payment in the same proportion
that such Borrower's "Allocable Amount" (as defined below)
(as determined immediately prior to such Guarantor Payment)
bore to the aggregate Allocable Amounts of each Borrower as
determined immediately prior to the making of such Guarantor
Payment, then, following indefeasible payment in full in cash
of the Liabilities and termination of the ---- commitments of
the Lender hereunder, such Borrower shall be entitled to
receive contribution and indemnification payments from, and
be reimbursed by, the other Borrower for the amount of such
excess, pro rata based upon their --- ---- respective
Allocable Amounts in effect immediately prior to such
Guarantor Payment.
(a) As of any date of determination, the "Allocable
Amount"
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of either Borrower shall be equal to the maximum amount of
the claim which could then be recovered from such Borrower
under this Section 11 without rendering such claim voidable
or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or
similar statute or common law.
(a) This Section 11.7 is intended only to define the
relative rights of Borrowers and nothing set forth in this
Section 11.7 is intended to or shall impair the obligations
of Borrowers, jointly and several together with Holdings, to
pay any amounts as and when the same shall become due and
payable in accordance with the terms of this Agreement,
including, without limitation, Section 11.1 hereof. Nothing
contained in this Section 11.7 shall limit the liability of
either Borrower to pay the Loans made directly or indirectly
to that Borrower and accrued interest, fees and expenses with
respect thereto for which such Borrower shall be primarily
liable.
(a) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute
assets of the Borrower to which such contribution and
indemnification is owing.
(a) The rights of the indemnified Borrower against the
other Borrower under this Section 11.7 shall be exercisable
upon the full and indefeasible payment of the Liabilities and
the termination of the commitments of Lender hereunder.
LIABILITY CUMULATIVE. The liability of the Loan Parties under
this Section 11 is in addition to and shall be cumulative with all liabilities
of each Loan Party to Lender under this Agreement and the other Related
Agreements to which such Loan Party is a party or in respect of any Liabilities
or obligations of the other Loan Parties, without any limitation as to amount,
unless the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary. 1.2
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
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<PAGE> 123
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and attested by their respective officers thereunto duly authorized
as of the date first written above.
CMC INDUSTRIES, INC.
Address for Notices to By: /s/ Lanny N. Lambert
any Loan Party: ---------------------------------
Name: Lanny N. Lambert
-------------------------------
Title: VP and Secretary
------------------------------
CMC Mississippi, Inc.
Box 831, Fulton Drive
Cornith, Mississippi 38834 CMC OF CALIFORNIA, INC.
Attention: President
Telecopier:601/287-1473
By: /s/ Lanny N. Lambert
---------------------------------
Name: Lanny N. Lambert
-------------------------------
with a copy to: Title: Assistant Secretary
-------------------------------
CMC Industries, Inc.
4950 Patrick Henry Drive CMC OF MISSISSIPPI, INC.
Santa Clara, California 95054
Attention: President By: /s/ Lanny N. Lambert
Telecopier: ---------------------------------
Name: Lanny N. Lambert
-------------------------------
Title: VP and Sec./Treas.
------------------------------
BANK OF AMERICA ILLINOIS
By: /s/ Randolph T. Kohlar
---------------------------------
Name: Randolph T. Kohlar
-------------------------------
Title: Senior Vice President
------------------------------
Address: 231 South LaSalle St.
Chicago, Illinois 60697
Attention: Middle Market II
Telecopier number: (312) 828-6647
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<PAGE> 124
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
October 21, 1997 (this "Amendment"), is by and among BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as successor by merger to Bank of America
Illinois ("Lender"), CMC INDUSTRIES, INC., a Delaware corporation ("Holdings"),
and each of CMC CALIFORNIA, INC., a Delaware corporation ("CMC California"),
and CMC MISSISSIPPI, INC., a Delaware corporation ("CMC Mississippi"); CMC
California and CMC Mississippi are sometimes referred to herein individually as
a "Borrower" and together as "Borrowers"; and Holdings and Borrowers are
sometimes referred to herein individually as a "Loan Party" and together as the
"Loan Parties".
W I T N E S S E T H:
WHEREAS, the Loan Parties and Lender are parties to that certain Loan
and Security Agreement, dated as of September 26, 1996, (and as further
amended, restated, supplemented or otherwise modified and in effect from time
to time, collectively, the "Loan Agreement"), pursuant to which the Lender has
provided to Borrowers credit facilities and other financial accommodations; and
WHEREAS, the Borrowers have requested that the Lender amend the Loan
Agreement in certain respects as set forth herein, and the Lender is agreeable
to the same, subject to the terms and conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein have the meanings assigned to such terms in the
Loan Agreement.
SECTION 2. Amendments to the Loan Agreement. The Loan Agreement is, as
of the Effective Date (as defined below), hereby amended as follows:
(a) The following new definition shall be inserted between the
definitions of "Margin Stock" and "Multiemployer Plan" appearing in Section 1.1
of the Loan Agreement:
""Mexico Facility" means that certain manufacturing facility to be built
in Hermosillo, Mexico by Holdings."
(b) The following new definition shall be inserted between the
definitions of "Supplemental Documentation" and "Tangible Net Worth" appearing
in Section 1.1 of the Loan Agreement:
<PAGE> 125
""Taiwan Subsidiary" means the Subsidiary established by Holdings in
Taiwan solely for the purpose of serving as a purchasing office for Holdings."
(c) Section 5.18 of the Loan Agreement is hereby amended by deleting the
word "and" at the end of Section 5.18(f) and the period at the end of Section
5.18(g) and adding the following new clauses (h) and (i) at the end of Section
5.18(g):
"; (h) Investments in the Taiwan Subsidiary; and (i) Investments in one
or more Subsidiaries relating to the construction and start-up costs incurred
in connection with the Mexico Facility; provided that the aggregate Investments
related to the Mexico Facility shall not exceed Four Million Dollars
($4,000,000)."
(d) Section 5.19 of the Loan Agreement is hereby amended by deleting it
in its entirety and substituting in lieu thereof the following:
"5.19 Subsidiaries. Not, and not permit any Subsidiary of its
Subsidiaries to, acquire any stock or similar interest in any Person, and not,
and not permit any of its Subsidiaries to, create, establish or acquire any
Subsidiary other than (i) those, if any, existing on the date of this
Agreement, (ii) the Taiwan Subsidiary and (iii) Subsidiaries established in
connection with the Mexico Facility."
(e) Annex A to the Loan Agreement is hereby amended by deleting such
Annex in its entirety and inserting Annex A attached hereto in lieu thereof.
SECTION 3. Amendment Fee. In consideration of the execution of this
Amendment by the Lender, the Borrowers hereby agree to pay a fee of $15,000
(the "Amendment Fee") to Lender.
SECTION 4. Representations and Warranties of the Borrower. The Loan
Parties represent and warrant to the Lender:
(a) the representations and warranties contained in the Loan
Agreement and the other Related Agreements and Supplemental Documentation
are true and correct in all material respects at and as of the date hereof
as though made on and as of the date hereof;
(b) no Event of Default or Default has occurred and is continuing;
(c) the execution, delivery and performance of this Amendment has
been duly authorized by all necessary action on the part of, and duly
executed and delivered by, the Loan Parties, and this Amendment is a
legal, valid and binding obligation of the Loan Parties enforceable
against the Loan Parties in accordance with its terms, except as the
enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights
2
<PAGE> 126
generally and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law); and
(d) the execution, delivery and performance of this Amendment does
not conflict with or result in a breach or violation by the any of the
Loan Parties of any term of any material contract, loan agreement,
indenture or other agreement or instrument to which the Loan Parties are a
party or are subject or the certificate or articles of incorporation or
by-laws of any Loan Party.
SECTION 5. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall become effective as of June 30, 1997 (the "Effective Date")
once each of the following conditions precedent is satisfied:
(a) the Lender shall have received a duly executed counterpart of
this Amendment signed by each of the Loan Parties;
(b) the Loan Parties shall have paid in full the Amendment Fee to
Lender;
(c) After giving effect to this Amendment, all of the warranties and
representations of the Loan Parties contained in the Loan Agreement and the
other Related Agreements (including, without limitation, this Amendment) shall
be true and correct in all material respects on and as of the date hereof to
the same extent as though made on and as of the date hereof (except those
representations and warranties made expressly as of a different date).
(d) After giving effect to this Amendment, no Default or Event of
Default shall have occurred and be continuing as of the date hereof.
(e) No litigation, investigation, proceeding, injunction, restraint
or other action shall be pending or threatened against, or any officer,
director, or executive of any thereof, which restrains, presents or imposes
adverse conditions upon, or which otherwise relates to, the execution, delivery
or performance of this Amendment.
(f) The Loan Parties shall have obtained all consents, approvals and
acknowledgments which may be required with respect to the execution, delivery
and performance of this Amendment.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page to
this Amendment shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
3
<PAGE> 127
THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO THE INTERNAL CONFLICTS OF
LAWS PROVISIONS THEREOF.
SECTION 8. Effect of Amendment; Reaffirmation of Loan Documents. The
parties hereto agree and acknowledge that (i) nothing contained in this
Amendment in any manner or respect limits or terminates any of the provisions
of the Loan Agreement or the other Related Agreements or Supplemental
Documentation other than as expressly set forth herein and (ii) the Loan
Agreement (as amended hereby) and each of the other Related Agreements and
Supplemental Documentation remain and continue in full force and effect and are
hereby ratified and reaffirmed in all respects.
SECTION 9. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purposes.
[SIGNATURE PAGE FOLLOWS]
4
<PAGE> 128
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
CMC INDUSTRIES, INC.
By: /s/ Lanny N. Lambert
--------------------------------
Name: Lanny N. Lambert
------------------------------
Title: VP and Secretary
-----------------------------
CMC CALIFORNIA, INC.
By: /s/ Lanny N. Lambert
--------------------------------
Name: Lanny N. Lambert
------------------------------
Title: Assistant Secretary
-----------------------------
CMC MISSISSIPPI, INC.
By: /s/ Lanny N. Lambert
--------------------------------
Name: Lanny N. Lambert
------------------------------
Title: VP and Secretary
-----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Steven Kessler
--------------------------------
Name: Steven Kessler
------------------------------
Title: Vice President
-----------------------------
5
<PAGE> 129
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
December 23, 1997 (this "Amendment"), is by and among BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as successor by merger to Bank of America
Illinois ("Lender"), CMC INDUSTRIES, INC., a Delaware corporation ("Holdings"),
and each of CMC CALIFORNIA, INC., a Delaware corporation ("CMC California"),
and CMC MISSISSIPPI, INC., a Delaware corporation ("CMC Mississippi"); CMC
California and CMC Mississippi are sometimes referred to herein individually as
a "Borrower" and together as "Borrowers"; and Holdings and Borrowers are
sometimes referred to herein individually as a "Loan Party" and together as the
"Loan Parties".
W I T N E S S E T H:
WHEREAS, the Loan Parties and Lender are parties to that certain Loan and
Security Agreement, dated as of September 26, 1996, and parties to that certain
First Amendment to Loan and Security Agreement, dated as of October 21, 1997
(and as further amended, restated, supplemented or otherwise modified and in
effect from time to time, collectively, the "Loan Agreement"), pursuant to
which the Lender has provided to Borrowers credit facilities and other
financial accommodations; and
WHEREAS, the Borrowers have requested that the Lender amend the Loan
Agreement in certain respects as set forth herein, and the Lender is agreeable
to the same, subject to the terms and conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all capitalized
terms used herein have the meanings assigned to such terms in the Loan
Agreement.
SECTION 2. Amendments to the Loan Agreement. The Loan Agreement is, as of
the Effective Date (as defined below), hereby amended as follows:
(a) Section (b) of Annex A to the Loan Agreement is hereby amended by
deleting such Section in its entirety and inserting Section (b) attached hereto
in lieu thereof.
SECTION 3. Representations and Warranties of the Borrower. The Loan
Parties represent and warrant to the Lender:
(a) the representations and warranties contained in the Loan
Agreement and the other Related Agreements and Supplemental Documentation
are true and correct in all material respects at and as of the date
hereof as though made on and as of the date hereof;
<PAGE> 130
(b) no Event of Default or Default has occurred and is continuing;
(c) the execution, delivery and performance of this Amendment has
been duly authorized by all necessary action on the part of, and duly
executed and delivered by, the Loan Parties, and this Amendment is a
legal, valid and binding obligation of the Loan Parties enforceable
against the Loan Parties in accordance with its terms, except as the
enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law); and
(d) the execution, delivery and performance of this Amendment does
not conflict with or result in a breach or violation by the any of the
Loan Parties of any term of any material contract, loan agreement,
indenture or other agreement or instrument to which the Loan Parties are
a party or are subject or the certificate or articles of incorporation or
by-laws of any Loan Party.
SECTION 4. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall become effective as of October 1, 1997 (the "Effective Date")
once each of the following conditions precedent is satisfied:
(a) the Lender shall have received a duly executed counterpart of
this Amendment signed by each of the Loan Parties;
(b) After giving effect to this Amendment, no Default or Event of
Default shall have occurred and be continuing as of the date hereof.
SECTION 5. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page to
this Amendment shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 7. Effect of Amendment; Reaffirmation of Loan Documents. The
parties hereto agree and acknowledge that (i) nothing contained in this
Amendment in any manner or respect limits or terminates any of the provisions
of the Loan Agreement or the other Related Agreements or Supplemental
Documentation other than as expressly set forth herein and (ii) the Loan
Agreement (as amended hereby) and each of the other Related Agreements and
2
<PAGE> 131
Supplemental Documentation remain and continue in full force and effect and are
hereby ratified and reaffirmed in all respects.
SECTION 8. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purposes.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE> 132
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
CMC INDUSTRIES, INC.
By: /s/ Lanny N. Lambert
------------------------------------
Name: Lanny N. Lambert
----------------------------------
Title: VP and Secretary
---------------------------------
CMC CALIFORNIA, INC.
By: /s/ Lanny N. Lambert
------------------------------------
Name: Lanny N. Lambert
----------------------------------
Title: Assistant Secretary
---------------------------------
CMC MISSISSIPPI, INC.
By: /s/ Lanny N. Lambert
------------------------------------
Name: Lanny N. Lambert
----------------------------------
Title: VP and Sec./Treas.
---------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Steven Kessler
------------------------------------
Name: Steven Kessler
----------------------------------
Title: Vice President
---------------------------------
4
<PAGE> 133
REVISED SECTION (B) TO ANNEX A
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 26, 1996
"(b) Total Liabilities to Tangible Net Worth. Not permit the ratio
of Holdings' total liabilities on a consolidated basis to Holdings' Tangible
Net Worth to exceed the ratio set forth below at any time during each such
applicable period:
<TABLE>
<CAPTION>
Period Ratio
-------------------------------- -----
<S> <C>
October 1997 2.55:1.00
November 1997 2.55:1.00
December 1997 2.55:1.00
January 1998 2.55:1.00
Third 1998 Fiscal Quarter 2:00:1:00
Fourth 1998 Fiscal Quarter 2:00:1:00"
</TABLE>
<PAGE> 134
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of July 20,
1998 (this "Amendment"), is by and among BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as successor by merger to Bank of America Illinois
("Lender"), and CMC INDUSTRIES, INC., a Delaware corporation ("Holdings"),
individually, and as successor by merger to each of CMC CALIFORNIA, INC., a
Delaware corporation ("CMC California"), and CMC MISSISSIPPI, INC., a Delaware
corporation ("CMC Mississippi"); Holdings, CMC California and CMC Mississippi
are sometimes referred to herein individually as a "Loan Party" and together as
the "Loan Parties".
W I T N E S S E T H:
WHEREAS, the Loan Parties and Lender are parties to that certain Loan and
Security Agreement, dated as of September 26, 1996, which was subsequently
amended by that certain First Amendment to Loan and Security Agreement, dated
as of October 21, 1997, and by that certain Second Amendment, dated as of
December 23, 1997 (and as further amended, restated, supplemented or otherwise
modified and in effect from time to time, collectively, the "Loan Agreement"),
pursuant to which the Lender has provided to Borrowers credit facilities and
other financial accommodations;
WHEREAS, Holdings has guaranteed all obligations of Borrowers to Lender
under the Loan Agreement;
WHEREAS, Holdings has merged Borrowers into Holdings (the "Merger") and
has assumed all of the Liabilities of the Borrowers under the Loan Agreement;
and
WHEREAS, Holdings and Borrowers have requested that the Lender consent to
the Merger and amend the Loan Agreement in certain respects as set forth
herein, and the Lender is agreeable to the same, subject to the terms and
conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein have the meanings assigned to such terms in the
Loan Agreement.
SECTION 2. Consent and Waiver. Lender hereby consents to the consummation
of the Merger and hereby waives any Default or Event of Default that may arise
as a result of the consummation of the Merger.
<PAGE> 135
SECTION 3. Amendments to Loan and Security Agreement.
Except as provided in paragraph (d) below, the definitions of
"Borrower" and "Borrowers" contained in the preamble to the Loan Agreement are
hereby deemed hereafter to mean Holdings. The definitions of "Loan Party" and
"Loan Parties" contained in the preamble to the Loan Agreement are hereby
deemed hereafter to mean Holdings only. In addition, each reference to
"Borrower" or "Borrowers" in any Related Agreement is hereby deemed hereafter
to mean Holdings.
By its execution of this Amendment, Holdings agrees, from and after
the date hereof, to be the Borrower under the Loan Agreement, to assume all of
the direct obligations of CMC Mississippi and CMC California, as Borrowers,
including but not limited to their Letter of Credit Obligations, thereunder,
and acknowledges and reaffirms all of the representations and warranties,
covenants, indemnities, terms and conditions thereof.
Notwithstanding consummation of the Merger and anything contained in
paragraph (a) to the contrary, Holdings reaffirms all of its existing
obligations as a Loan Party under the Loan Agreement including, without
limitation, the provisions of Section 11 therein, and agrees that such
obligations of Holdings would not be limited or diminished in any manner even
if Holdings had not executed this Amendment.
Notwithstanding the Merger and the assumption by Holdings of all
obligations of CMC Mississippi and CMC California, for purposes of Sections
2.1, 2.4, 2.6, 2.8.2, 5.1.1, 5.1.2, 5.1.3, 5.5, 5.18 and 5.27 of the Loan
Agreement (and all defined terms referenced therein and all other related
defined terms), the provisions of such Sections, as amended hereby, shall
continue to be effective as to CMC Mississippi and CMC California as divisions
of Holdings to the same extent as applicable to such Persons as Borrowers and
Subsidiaries of Holdings prior to the Merger and Holdings shall maintain the
business, operations, books and records and internal funding of CMC Mississippi
and CMC California as divisions in a manner consistent with such Sections.
Holdings acknowledges the existing perfected Liens of Lender on the
Collateral and further acknowledges that Holdings is acquiring the Collateral
through the Merger subject to such Liens of Lender. In addition to and not in
replacement or substitution of such existing perfected Lien, as security for
the payment of all Loans whether now assumed by Holdings or hereafter made by
Lender to Holdings under the Loan Agreement or under any Note, and as security
for the payment or other satisfaction of all other Liabilities (including,
without limitation, all reimbursement obligations under any Letters of Credit),
Holdings hereby grants to Lender a security interest in and to all of Holdings
property consisting of Collateral as described in the Loan Agreement, whether
now owned or existing, or hereafter acquired or coming into existence, wherever
now or hereafter located.
2
<PAGE> 136
Section (a)(ii) to the Loan Agreement is hereby amended by deleting
such Section in its entirety and inserting the following in lieu thereof:
"(ii) Not permit CMC California's Tangible Net Worth as of the end of
each applicable Fiscal Quarter set forth below to be less than the greater of
(x) fifty percent (50%) of CMC California's consolidated net income (without
reduction for any net loss) for such Fiscal Quarter plus the amount of CMC
California's Tangible Net Worth required to be maintained as of the end of the
preceding Fiscal Quarter, increasing on a cumulative basis, and (y) the amount
set forth below opposite such Fiscal Quarter end for such Borrower:
<TABLE>
<CAPTION>
CMC
Fiscal Quarter End California
------------------------------ ----------
<S> <C>
First 1998 Fiscal Quarter End $1,100,000
Second 1998 Fiscal Quarter End $1,300,000
Third 1998 Fiscal Quarter End $1,300,000
Fourth 1998 Fiscal Quarter End $1,300,000"
</TABLE>
SECTION 4. Representations and Warranties of the Borrower. The Loan
Parties represent and warrant to the Lender:
(a) After giving effect to this Amendment and the consent and
waiver set forth in Section 2 hereof, the representations and warranties
contained in the Loan Agreement and the other Related Agreements and
Supplemental Documentation are true and correct in all material respects
at and as of the date hereof as though made on and as of the date hereof;
(b) After giving effect to this Amendment and the consent and
waiver set forth in Section 2 hereof, no Event of Default or Default has
occurred and is continuing;
(c) the execution, delivery and performance of this Amendment has
been duly authorized by all necessary action on the part of, and duly
executed and delivered by, the Loan Parties, and this Amendment is a
legal, valid and binding obligation of the Loan Parties enforceable
against the Loan Parties in accordance with its terms, except as the
enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law);
(d) the execution, delivery and performance of this Amendment does
not conflict with or result in a breach or violation by the any of the
Loan Parties of any term of any material contract, loan agreement,
indenture or other agreement or instrument
3
<PAGE> 137
to which the Loan Parties are a party or are subject or the certificate
or articles of incorporation or by-laws of any Loan Party; and
(e) no consent, approval or authorization of, or declaration or
filing with, any governmental authority, and no consent of any other
Person, is required in connection with any Loan Party's execution,
delivery and performance of this Amendment, except for those already duly
obtained or made.
SECTION 5. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall become effective as of the date of the consummation of the
Merger (the "Effective Date") upon the satisfaction of each condition set forth
in this Section 4 and the delivery of the following documents to Lender on or
prior to the date hereof (unless another date shall be specified) and
consummation of all of the transactions contemplated by each such document, all
in form and substance acceptable to Lender in its sole and absolute discretion:
(a) the Lender shall have received a duly executed counterpart of
this Amendment signed by each of the Loan Parties;
(b) to the extent necessary to reflect the Merger, the Lender shall
have received revised Schedules to the Loan Agreement;
(c) the Lender shall have received duly executed UCC-1s by Holdings
for filing in the appropriate jurisdictions as deemed necessary by the
Lender;
(d) the Lender shall have received a certificate of the President
of Holdings certifying to the fulfillment of all conditions precedent to
closing contemplated by this Amendment and to the truth and accuracy, in
all material respects, as of such date, of the representations and
warranties of the Loan Parties contained in the Loan Agreement and each
other Related Agreement or Supplemental Documentation to which any Loan
Party is a party or by which it is bound;
(e) the Lender shall have received a copy, duly certified by the
secretary or an assistant secretary of Holdings of (1) resolutions of the
Board of Directors of Holdings authorizing the execution, delivery and
performance by Holdings of this Amendment, (2) all documents evidencing
any other necessary corporate action with respect to this Amendment, and
(3) all approvals or consents, if any, with respect to this Amendment;
(f) the Lender shall have received a certificate of the secretary
of Holdings certifying the names of the officers of Holdings authorized
to sign this Amendment, and all other documents and certificates to be
delivered by Holdings hereunder, together with the true signatures of
such officers;
(g) the Lender shall have received a copy, duly certified by the
secretary or an assistant secretary of Holdings, of Holdings' Certificate
of Incorporation and Bylaws;
4
<PAGE> 138
(h) the Lender shall have received a certificate of good standing
issued by the Secretary of State of each state where Holdings is
qualified to do business or where, because of the nature of its business
or properties or the effect of the Merger, qualification to do business
is required;
(i) after giving effect to this Amendment and the consent and
waiver set forth in Section 2 no Default or Event of Default shall have
occurred and be continuing.
(j) the Loan Parties shall have obtained all consents, approvals
and acknowledgments which may be required with respect to the execution,
delivery and performance of this Amendment and the Merger.
(k) the Lender shall have received evidence satisfactory to Lender
that the Loan Parties have consummated the Merger on terms and conditions
satisfactory to the Lender and its counsel, and shall have furnished to
the Lender a certified copy of all agreements and documents executed with
respect to the Merger, and a certificate signed by the President of
Holdings certifying that (i) the Merger has been consummated and (ii) any
documents required to be filed to effect the Merger have been filed in
accordance with applicable law.
(l) legal opinions from counsel to Holdings in form and substance
satisfactory to the Lender.
SECTION 6. Further Assurances. Each Loan Party hereby agrees, at its
expense, to duly execute, acknowledge and deliver to Lender all agreements
(including, without limitation, blocked account and lockbox agreements),
certificates, instruments, opinions and other documents, and to take all such
other actions as the Lender may request in order to further effectuate the
purposes of this Amendment and to carry out the terms hereof.
SECTION 7. No Novation; No Consent or Waiver. This Amendment is not, and
shall not be construed as, a novation, consent, waiver, release or modification
with respect to any of the terms, provisions, conditions, representations,
warranties, covenants, rights, powers or remedies set forth in the Loan
Agreement or any of the Related Agreements or Supplemental Documentation,
except for the specific instance and purpose for which it is granted as
expressly specified herein.
SECTION 8. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page to
this Amendment by telecopy shall be effective as delivery of a manually
executed counterpart of this Amendment.
5
<PAGE> 139
SECTION 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 10. Effect of Amendment; Reaffirmation of Loan Documents. The
parties hereto agree and acknowledge that (i) nothing contained in this
Amendment in any manner or respect limits or terminates any of the provisions
of the Loan Agreement or the other Related Agreements or Supplemental
Documentation other than as expressly set forth herein and (ii) the Loan
Agreement (as amended hereby) and each of the other Related Agreements and
Supplemental Documentation remain and continue in full force and effect and are
hereby ratified and reaffirmed in all respects.
SECTION 11. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purposes.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 140
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
CMC INDUSTRIES, INC.,
individually, and as successor by merger to
each of CMC California, Inc. and CMC
Mississippi, Inc.
By: /s/ Lanny N. Lambert
-----------------------------------
Name: Lanny N. Lambert
---------------------------------
Title: Vice President and Secretary
--------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Steven Kessler
-----------------------------------
Name: Steven Kessler
---------------------------------
Title: Vice President
--------------------------------
<PAGE> 141
FOURTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of August
21, 1998 (this "Amendment"), is by and among BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as successor by merger to Bank of America Illinois
("Lender"), and CMC INDUSTRIES, INC., a Delaware corporation ("Industries"),
individually, and as successor by merger to each of CMC CALIFORNIA, INC., a
Delaware corporation ("CMC California"), and CMC MISSISSIPPI, INC., a Delaware
corporation ("CMC Mississippi");
W I T N E S S E T H:
WHEREAS, Industries and Lender are parties to that certain Loan and
Security Agreement, dated as of September 26, 1996, which was subsequently
amended by that certain First Amendment to Loan and Security Agreement, dated
as of October 21, 1997, by that certain Second Amendment, dated as of December
23, 1997, and by that certain Third Amendment, dated as of July 20, 1998 (and
as further amended, restated, supplemented or otherwise modified and in effect
from time to time, collectively, the "Loan Agreement"), pursuant to which the
Lender has provided to Industries credit facilities and other financial
accommodations;
WHEREAS, Industries has requested that the Lender waive a certain
financial covenant and amend the Loan Agreement in certain respects as set
forth herein, and the Lender is agreeable to the same, subject to the terms and
conditions hereof;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein have the meanings assigned to such terms in the
Loan Agreement.
SECTION 2. Waiver. As of the Effective Date, the Lender hereby waives
compliance with the tangible net worth covenant contained in Section (a)(ii) of
Annex A of the Loan Agreement solely for the Fiscal Quarter ending July 31,
1998.
SECTION 3. Amendment to Loan and Security Agreement. As of the Effective
Date, Section 1.1 of the Loan Agreement is hereby amended by deleting the
definition of "Credit Termination Date" in its entirety and inserting the
following definition in lieu thereof:
"Credit Termination Date' means October 31, 1998."
<PAGE> 142
SECTION 4. Representations and Warranties of the Borrower. Industries
represents and warrants to the Lender:
(a) After giving effect to this Amendment and the waiver set forth
in Section 2 hereof, the representations and warranties contained in the
Loan Agreement and the other Related Agreements and Supplemental
Documentation are true and correct in all material respects at and as of
the date hereof as though made on and as of the date hereof;
(b) After giving effect to this Amendment and the waiver set forth
in Section 2 hereof, no Event of Default or Default has occurred and is
continuing;
(c) the execution, delivery and performance of this Amendment has
been duly authorized by all necessary action on the part of, and duly
executed and delivered by, Industries, and this Amendment is a legal,
valid and binding obligation of Industries enforceable against Industries
in accordance with its terms, except as the enforcement thereof may be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law);
(d) the execution, delivery and performance of this Amendment does
not conflict with or result in a breach or violation by Industries of any
term of any material contract, loan agreement, indenture or other
agreement or instrument to which Industries is a party or are subject or
the certificate or articles of incorporation or by-laws of Industries;
and
(e) no consent, approval or authorization of, or declaration or
filing with, any governmental authority, and no consent of any other
Person, is required in connection with Industries' execution, delivery
and performance of this Amendment, except for those already duly obtained
or made.
SECTION 5. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall become effective (the "Effective Date") upon the satisfaction
of each condition set forth in this Section 5 and the delivery of the following
documents to Lender on or prior to the date hereof (unless another date shall
be specified) and consummation of all of the transactions contemplated by each
such document, all in form and substance acceptable to Lender in its sole and
absolute discretion:
(a) the Lender shall have received a duly executed counterpart of
this Amendment signed by Industries;
(b) the Lender shall have received a certificate of the Chief
Financial Officer or a Vice President of Industries certifying to the
fulfillment of all conditions precedent to closing contemplated by this
Amendment and to the truth and accuracy, in all material respects, as of
such date, of the representations and warranties of Industries contained
in
2
<PAGE> 143
the Loan Agreement and each other Related Agreement or Supplemental
Documentation to which Industries is a party or by which it is bound;
(c) the Lender shall have received a copy, duly certified by the
secretary or an assistant secretary of Industries of (1) resolutions of
the Board of Directors of Industries authorizing the execution, delivery
and performance by Industries of this Amendment, (2) all documents
evidencing any other necessary corporate action with respect to this
Amendment, and (3) all approvals or consents, if any, with respect to
this Amendment;
(d) the Lender shall have received a certificate of the secretary
of Industries certifying the names of the officers of Industries
authorized to sign this Amendment, and all other documents and
certificates to be delivered by Industries hereunder, together with the
true signatures of such officers;
(e) after giving effect to this Amendment and the waiver set forth
in Section 2 no Default or Event of Default shall have occurred and be
continuing.
SECTION 6. Further Assurances. Industries hereby agrees, at its expense,
to duly execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, to Lender all agreements (including, without limitation, blocked
account and lockbox agreements), certificates, instruments, opinions and other
documents, and to take all such other actions as the Lender may request in
order to further effectuate the purposes of this Amendment and to carry out the
terms hereof.
SECTION 7. No Novation; No Consent or Waiver. This Amendment is not, and
shall not be construed as, a novation, consent, waiver, release or modification
with respect to any of the terms, provisions, conditions, representations,
warranties, covenants, rights, powers or remedies set forth in the Loan
Agreement or any of the Related Agreements or Supplemental Documentation,
except for the specific instance and purpose for which it is granted as
expressly specified herein.
SECTION 8. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page to
this Amendment by telecopy shall be effective as delivery of a manually
executed counterpart of this Amendment.
SECTION 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
3
<PAGE> 144
SECTION 10. Effect of Amendment; Reaffirmation of Loan Documents. The
parties hereto agree and acknowledge that (i) nothing contained in this
Amendment in any manner or respect limits or terminates any of the provisions
of the Loan Agreement or the other Related Agreements or Supplemental
Documentation other than as expressly set forth herein and (ii) the Loan
Agreement (as amended hereby) and each of the other Related Agreements and
Supplemental Documentation remain and continue in full force and effect and are
hereby ratified and reaffirmed in all respects.
SECTION 11. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purposes.
[SIGNATURE PAGE FOLLOWS]
4
<PAGE> 145
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
CMC INDUSTRIES, INC.,
By: /s/ Lanny N. Lambert
----------------------------------
Name: Lanny N. Lambert
--------------------------------
Title: Lanny N. Lambert
-------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Steven Kessler
----------------------------------
Name: Steven Kessler
--------------------------------
Title: Vice President
-------------------------------
5
